The National Party will fast-track a second round of tax cuts - and is likely to increase borrowing to pay for some of its spending promises, says party leader John Key.
At his party's annual conference in Wellington yesterday, Key said borrowing would pay for new infrastructure projects rather than tax cuts, which would be "hermetically sealed" from the debt programme.
He told about 700 of the party faithful National would keep Labour's October 1 tax cuts and bring forward second and third rounds to April next year and April 2010, both a year earlier than Labour planned.
Economists spoken to by the Herald on Sunday supported the cuts in theory but felt the plans were thin on detail. Bernard Hickey, of interest.co.nz, said National was making policy announcements with little detail that made the party's plans "difficult to see on the radar".
But the tax cuts were needed earlier than the surplus-operating Labour Government was planning and National's plan to borrow if it won the election was acceptable to a point. "The question becomes, how much are they going to borrow? If you're borrowing to invest in a road or broadband or a hospital you could argue they will create value and provide services for decades."
Auckland University professor in taxation law Craig Elliffe said the announcement was a "compelling incentive" for voters.
"It certainly is sensible and I would have thought achievable."
But economist Brian Easton said the true nature of National's plans would not be revealed until next year's Budget, if it won the election. Then the extent of its spending on services such as health and education would be revealed. He added the tax cuts could drive up interest rates.
Deputy leader and finance spokesman Bill English told the conference the party was prepared to borrow more to fund infrastructure.
"Additional borrowing" for infrastructure would boost economic growth.
Finance Minister Michael Cullen said National was playing word games and would be borrowing to fund its larger tax cuts.
But Key said increased borrowing overall - ostensibly to fund infrastructure - could be separated from National's tax cuts.
Calls are mounting for the party to explain how it will pay for its promises, which include the larger, faster tax cuts, a $1.5 billion broadband plan and a new prison in its first term.
Law and order spokesman Simon Power said the party would axe the Government's sentencing council, freeing up $6 million over four years. National would put that money into services for victims.
- ADDITIONAL REPORTING: NZPA