Michael Cullen

Michael Cullen

The political heat is back on Labour to cut personal tax rates after the Government racked up an $8.7 billion surplus - leaving Finance Minister Michael Cullen with plenty of money to woo voters at next year's election.

The latest in a string of big fiscal surpluses was revealed in the Treasury's final accounts for the 2006/07 financial year. The $8.7 billion operating surplus was well ahead of previous forecasts because of unexpected strength in the economy, which brought higher tax revenues not only from workers and companies but through GST.

Dr Cullen - who has resisted cutting personal tax rates or raising the thresholds at which they apply during his eight-year tenure as Finance Minister - now sounds more open to the possibility in next year's Budget.

"As I've been indicating, I do expect to address those issues in next year's Budget," he said. "But no formal consideration has been given to the size or shape of any tax cuts, and therefore there's not much point in asking me a lot of detailed questions."

Later, to goading in Parliament from National Party deputy leader Bill English about the absence of personal tax cuts, Dr Cullen said Mr English "may well have to eat his words".

Decisions on any future personal tax cuts would be made in the context of next year's Budget and not before, Dr Cullen said.

United Future leader Peter Dunne said today that when it came to tax cuts, neither of the main parties had a record to be proud of.

"National last cut personal taxes in 1996, when it was in coalition with United, only to reverse most of them the following year because of its deal with New Zealand First," he said.

"The first thing Labour did when coming to office in 1999 was put taxes up."

Mr Dunne, Minister of Revenue, said National voted against business tax cuts in this year's budget.

"That makes its current lament that tax cuts are overdue look a little pathetic."

Mr Dunne said his party believed personal tax cuts were overdue and there was scope for that in next year's budget.

The Government has healthy accounts and a large surplus that will give it many options as it goes into the election campaign.

The operating balance may have been lower than the $11.5 billion recorded in the 2005/06 fiscal year but it was higher than any other under Dr Cullen's management. It was accompanied by a cash surplus of $2.6 billion that was a huge turnaround from what the Treasury originally projected for the 2006/07 year - a cash deficit of $1.5 billion.