Key would now keep Working for Families

John Key has pledged to retain the Working For Families scheme. Photo / Martin Sykes

National is still outwardly confident its election-year tax-cut package will impress voters, despite the fact that it has adopted another Labour policy - this time Working For Families - and further restricted the amount of money it has to spend.

National leader John Key yesterday pledged his party would keep the Working For Families tax credit scheme intact if it wins power.

He said the commitment extended to keeping inflation-adjusted increases to Working For Families payments and included the October 1 rises that were announced in May's Budget.

It is quite a turnaround for Mr Key, who has previously labelled the tax credit scheme "a giant welfare package" and criticised the idea of families who earn more than $100,000 a year getting extra government payments.

Prime Minister Helen Clark said today the policy change was "simply incredible".

"Mr Key denounced this policy, he's called it middle class welfare, he's called it making all New Zealand families beneficiaries, he's called it a waste of money and he's said he wouldn't keep it," she said today on TV One's Breakfast programme.

"It comes back to the point - we do not know what this man stands for, if anything, except desperation to win an election. I don't think he can be taken seriously."

National's position on Working For Families had been to commit to the initial stage of it but to try to substitute with tax cuts the second stage Labour announced in the 2005 election campaign.

As recently as last year, Mr Key said he was confident that could be done without making anyone who received Working For Families worse off.

However, it is likely that it would have been extremely difficult for National to design an affordable tax-cut programme that ensured nobody was worse off.

Now questions are being asked about how National will be able to afford bigger tax cuts than the ones Labour delivered in May's Budget as well as everything else, as the Government's books tighten.

"I think this is getting a bit ridiculous," Prime Minister Helen Clark told the Herald yesterday.

"Where does money for much bigger tax cuts come from? Either you've got to borrow for the tax cuts - which we've always said is crazy - or you are heavily pruning existing Labour Government spending."

Mr Key said he was confident that National's tax-cut programme would be well received and "is going to meet our objectives".