Having won ten seats in the 1999 election, the Alliance went into coalition with Labour, forming a government with Anderton as deputy prime minister.

The causes of the problems are debated by the various actors, but a significant factor appears to be a claim by McCarten's faction that the Alliance was giving too much away to the Labour Party.

In addition, McCarten's faction claimed that Anderton's leadership style was "autocratic", and that the parliamentary wing was failing to heed the concerns of the party's membership.

[4] Anderton rejected the latter charge, and he claimed that criticism of the Alliance's ties to Labour were "extremist" and would nullify the party's ability to influence government policy.

However, because of an electoral law, Anderton did not officially leave the Alliance's parliamentary wing, even if he had left the party itself – doing so would have required his resignation from parliament, a step he was unwilling to take.

[8] As such, the party gained entry to parliament with two seats, including deputy leader Matt Robson, who had been a member of Anderton's faction of the Alliance.

Shortly before the 2005 election, the official name of the party was changed again, this time to "Jim Anderton's Progressive", to facilitate voter recognition on ballot papers.

[9] In those elections, the Progressives' vote tailed off slightly to 1.2 percent, but this decline was enough to keep Robson from returning to Parliament even though Anderton easily won his seat.