Key dangles tax cuts

John Key. Photo Getty
John Key. Photo Getty
Prime Minister John Key said one of the choices that today's Budget surplus would present was the possibility his party could promise tax cuts in the campaign for the September 20 election.

He even suggested any tax cuts could be aimed at middle New Zealand which "pays a fair bit of tax and often doesn't get a lot in return".

Finance Minister Bill English wanted his first surplus Budget to be seen as one that was about "maintaining growth in the economy and sharing the benefits".

"It is a Budget from a Government that knows what it is doing for a country that knows where it is going."

Mr English will unveil his first surplus at 2pm when he delivers his sixth Budget and further surpluses into the future.

Mr Key said the surpluses, which were "not enormous", could be spent on other areas of need, and National had not yet made any calls on that.

"As we go into the campaign we will want to think about what we are campaigning on if we are in the position to have a third term, so all decisions will have to be in the next four and a half months."

A Budget surplus has been forecast since Mr English's first Budget in 2009 in the midst of the global financial crisis but it was a very distant goal. In 2011 it was brought forward to 2014-15.

The last forecast in December put it at $86 million, with a $1.6 billion surplus in the following year, then growing to $3.1 billion, and $5.6 billion.

When Mr Key talked last month about the possibility of tax cuts in future years, he said "little is the operative word" and yesterday he described them as "conservative". He confirmed that it remained the Government's goal to get debt to under 20 per cent of GDP by 2020.

That has also been National's trigger point for resuming contributions to the Superannuation Fund started by Sir Michael Cullen.

Other claims on the Government's discretionary spending will be for pay rises for public servants, and extra funding for government services, especially health and education.

Mr English yesterday said the tens of thousands of public servants who had provided greater services to New Zealand in a time of restraint could take credit for the surplus.

Labour leader David Cunliffe said any headroom the surpluses created for National could be used by Labour.

He would not rule out tax cuts. Labour plans to increase the top tax rate of 33c on income over $70,000 and plans to introduce a capital gains tax, exempting the family home.

He said today's Budget was the sixth opportunity for Mr Key and National to show they have a "plan to provide opportunities for all, not just for big business, big noters and the big end of town". "To date it has been politics as usual for the National Government, delivering tax cuts for the top few per cent, redistributing public assets to the privileged and doing special deals with foreign corporates and wealthy donors."

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