Finance Minister Bill English says tax cuts will begin taking effect from 2017 - conditions allowing - by which time a National Government will have $1.5 billion a year free cash to allocate both to those cuts and also to debt repayment.
Mr English this afternoon released details of National's fiscal plan including how intends allocating the operating allowance which increases by $1.5 billion a year from next year.
Mr English said $1 billion of that would go towards new spending including between $600 million and $700 million a year on additional cash for health and education.
The remaining $500 million would be earmarked for "modest tax reductions and further debt repayment, as economic and fiscal conditions permit".
"This portion of the allowance will be moved between Budgets and accumulated as necessary. Therefore by the third year there will be around $1.5 billion available for tax cuts and debt repayment."
National's first three fiscal priorities for the next three years were to return to surplus this year and maintain surpluses thereafter, reduce net government debt to 20 per cent of GDP by 2020, and to reduce ACC levies further from April 2016.
"A National Government will cut levies on all ACC accounts by an average of 30 per cent," Mr English said. That amounted to a reduction in levies by $700 million to $900 million a year.
Income taxes would begin to fall from April 2017 "providing economic and fiscal conditions allow, and if the first three priorities have been achieved".
Mr English again emphasized those cuts would be modest and targeted at low to middle income earners.
Details of tax cuts would be considered closer to that date, he said.
Any further fiscal headroom would be used to pay down debt faster, Mr Key said.
Of the $1.5 billion set aside by 2017, Mr Key said about $1 billion would go to tax cuts, while the rest would go towards debt reduction.
Mr English told reporters the increased government spending was consistent with previous increases by his Government and was in stark contrast with the $18 billion Labour and the Greens were planning to spend over the next four years.
A National Government would begin paying down net debt by 2017-18.
That would put New Zealand in a much better position to withstand any future economic shocks or natural disasters, he said.
''We believe that this approach will help keep interest rates lower for longer for new Zealand families.''
Asked to give detail on what any tax cut package might look like, Mr Key said ''it's not our intention to do that today, we'll cross that bridge when we come to it''.
Mr Key said whatever the level of tax cuts a National Government settled on, whether it amounted to $500 or $1000 a year for low to middle income earners, ''most would say that would make a difference''.
Mr English said the Government was not considering any changes to the tax treatment of savings.
Asked about the timing of the cuts - immediately before the next election, Mr Key said given the short electoral cycle, ''the long and short of it is that's just the way things go''.
Mr Key said his Government was making ''a stark and clear choice'' to spend less so it could pay off debts and cut taxes while Labour was proposing to spend an additional $18 billion over four years and add five new taxes.
Mr English rejected suggestions National was only talking about tax cuts now to counter negative perceptions around Nicky Hager's Dirty Politics.
Labour leader David Cunliffe said the proposed cuts were a "joke".
"I thought John Key was going to deliver a block of cheese. Turns out that it's only half of that.
"It's in three years' time, maybe, if you're lucky, and if ... the economy doesn't fall in a hole. This is a joke."
He added: "The National Party's dance of the veils ended up with a big reveal. And what it revealed is the hole in Government policy."
Waving a $10 note, he said: "So I say to New Zealanders - do you reckon half of this note was worth all of that wait?"
Mr Cunliffe said it was ironic that the new policy lacked detail.
"The same Prime Minister that's been challenging Labour on incredible levels of detail over the last week can't even tell us for sure what tax rates or thresholds he would change in three years' time."