Tax moves in today's Budget to crack down on the wealthy who rent out their holiday homes and yachts for part of the year will make the tax system fairer, according to Finance Minister Bill English.

The extra revenue will help to reduce the deficit over the next three years and get the Government's books back to a small surplus within three years in the Budget's main scenario forecasts.

It is likely that a worse-case downside scenario in the books, factoring in a potential global down on the back of protracted recession in Europe, will show a delay getting back to surplus.

Much has been made of the fact it is Mr English's second "Zero Budget".


The overall spend is expected to be several billion higher than last year's Budget, accounting for such things as rising costs of superannuation.

But there will be no "new" money for new initiatives. They will be funded from cuts to existing programmes.

Labour leader David Shearer said he could not believe the Government was proud of producing a zero Budget.

"A zero Budget means zero growth. Zero growth means zero hope. And zero hope means 53,000 people going to Australia."

Today's Budget deficit for the current year is expected to come in well under the $12 billion forecast in February, perhaps even less than $9 billion, but that would be down to a timing issue of expenditure on the Christchurch earthquake recovery rather than a dramatic underlying improvement.

Mr English would not say yesterday what he expected to make from the extra tax but said there would be no dramatic changes in this Budget.

"We have no big steps but we continue each year to patch some holes, improve fairness, keep the revenue base broad.

"We continue to focus on improving fairness in the tax system so that people who should be paying tax are paying tax - not finding ways around it - and keeping a broad tax base so that we can keep the rates relatively low."

Quite a few MPs could be affected by the tax squeeze. About 30 MPs in the Register of MPs' Pecuniary Interests published yesterday listed holiday homes or baches or second homes.

Under tax rules people who rent out assets such as homes, yachts or planes for just part of the year can claim tax deductions for some expenditure relating to the time when the asset is not in use at all.

The move to tighten the law regarding "mixed-use assets" was foreshadowed in last year's Budget and Inland Revenue issued a discussion document about it last year.

The Government also introduced measures this year to crack down on people who arranged their affairs to minimise their income in order to qualify for social assistance such as working for families, student allowances and community services cards.

And further extensions of that could be foreshadowed today.

IRD is already undertaking work in that area with the aim of recognising salary trade-offs that assist household expenses such as accommodation as income for the purposes of eligibility for social assistance.

Legislation is expected to be introduced to Parliament this year.

A rise in the price of cigarettes has already been indicated.

Mr English said the theme of today's Budget is "confidence in uncertain times".


* Prescription charges rise from $3 to $5 per item with a cap at 20 items. Raises $20m in first year and $40m in subsequent years.

* Extra $101m for specific health services over four years. $12m a year to fund more elective surgery. $6m to $7m every year for four years on faster services for cancer patients. DHBs to provide some of the money through savings made by Pharmac.

* Student loans to be paid back more quickly; freeze of the parental income threshold for allowances for four years; masters and PhD students no longer have access to allowances. Saves about $60m to $70m a year.

* $288m over four years for welfare reforms, with $66m in next financial year. Pays for more childcare, extra Winz staff and more for teenagers. All but $82m will be found from existing Social Development spending.

* $144m extra over next four years to help disabled - $133m in new money and $11m from cuts elsewhere.

* Extra $512m for education over next four years, including $60m to boost new teacher recruitment and training. Class sizes to increase, to make a saving of $43m a year.

National-Maori Party initiatives

* $10m in first year for expanded drug and alcohol treatment in prisons, education and employment training for prisoners. Total $65m spending over four years. Money to come from "reprioritisation" of existing Corrections spending.

* Extra $12m over four years for combating rheumatic fever.

* $1.9m a year for next four years to continue "Enviroschools" programme.