KEY POINTS:
John Key was right the first time on the subject of welfare for the quite well off: it makes no sense to tax people at the top rate, then invite them to enrol for a family support payment. So why has he changed his tune? "National wants to offer certainty about the Working for Families system," he said, announcing that this is yet another Labour policy he will not change.
If he is not very careful he will bring voters to the point that they reasonably ask, why change the Government. One of the distinguishing principles that normally divides National from Labour is the attitude to social welfare. Most people, especially if they receive it, regard welfare as an unfortunate necessity. Labour traditionalists regard it as quite a good thing, reinforcing mutual dependency, giving people a stake in a collective organisation, a social glue.
Hence, Labour is quite willing to take income tax with one hand and give the same money back with the other in the form of welfare payments. That is what is happening at the upper end of the Working for Families scheme. Large families with incomes of $60,000 or more are taxed at Labour's top rate, 39c, and can apply to get some of the money back as a Working for Families tax credit.
Reasonable people would think it easier all around to lower their tax in the first place, and cheaper since it would save on the cost of passing the money through the Inland Revenue system. Reasonable people would have been thinking that is exactly what a non-Labour government would do.
Not so, National says now. Taxes will be lowered, but even in the higher earning brackets, families receiving the present tax credit will continue to receive their benefit in that form. Last year, there were about 1000 large families on annual incomes of more than $100,000 receiving payments totalling $1.1 million. National's finance spokesman, Bill English, says the savings would be small if National removed them from the scheme.
"In this uncertain economic climate, we want to give all families certainty about their incomes," he said. Presumably this means their net income will be the same after National's programme of tax cuts, which it says it will announce in the first week of the election campaign. National's promise to keep Working for Families extends to retaining the increases budgeted by the present Government from October 1.
Truly National is reducing its room for tax reductions beyond those threshold changes Labour has scheduled for October. It becomes doubtful that even the top rate might be brought back to 33c if not lower. Labour was quick yesterday to suggest Mr Key is painting himself into a fiscal corner, unless he intends the unthinkable - to finance tax cuts from borrowing.
If he dares go into the election with an admitted deficit after promised tax cuts, he will need very good arguments during the campaign. On performance so far he will instead play safe, claim the tax cuts can be afforded from unspecified savings in government spending and pretend nothing else need change.
Mr Key is well ahead in the polls - our latest today finds National's margin wider even than it was - and should be preparing the voters for some rigorous steps, not all of which would be popular. Instead, he seems too anxious to nullify any policy that might be unpopular. He wants to offer the election policies that are pleasant and painless and barely distinguishable from the present.
He is making a rod for his own back if he is elected and wants to move the country in a more enterprising direction. These reassuring noises will not be forgotten, and breaches will not be forgiven. He should already be looking beyond election day.
