KEY POINTS:
Politicians are becoming anxious that hopes over the size of personal tax cuts may be too high.
National and Labour will offer cuts in the election campaign, but both sides want to keep a lid on voters' expectations.
National finance spokesman Bill English said yesterday his party had no intention of engaging in a bidding war, and would instead do what was best for taxpayers and the economy.
Asked if voters should expect something similar to what National offered in 2005 ($32 a week for people earning $45,000 year and $51 a week for those on $65,000), Mr English said his party had "the same sort of commitment to tax reductions, and we'll announce the policy when it's ready".
"We will be driven more by our view that tax cuts are a part of a longer-term effort to lift the underlying growth rate of the economy, or lift the potential of the economy," Mr English said.
Asked if he was worried about expectations on personal tax cuts getting out of hand, Mr English admitted to being a bit concerned.
Finance Minister Michael Cullen has been cautious about expectations over the past week, and United Future leader and Revenue Minister Peter Dunne said yesterday he also felt there was a risk of expectations being too high.
"Listening to what some of the vox pops have been saying, people do seem to have expectations that are, I think, higher than can be attained," Mr Dunne said.
That was in part because of the size of the cuts that National offered in 2005, he said.
As Revenue Minister, Mr Dunne will be closely involved in designing the personal tax cut package that Dr Cullen will unveil in May's Budget.
Both main parties want to frame the debate in a way that suits them.
Dr Cullen said this week that he had a clear view about what he wanted to do, but it would be a couple more months before he knew if he could do it.
He will be closely watching updated revenue forecasts and inflation figures to see how much room he has to manoeuvre.
The Treasury has put aside $1.5 billion in the Government's books for personal tax cuts but that figure is being widely viewed as a minimum.
Dr Cullen has been pointing to his "four tests" - ensuring that tax cuts do not result in additional Government borrowing, cause cuts to services, increase inflationary pressures or create new inequalities.
National is arguing the tests mean nothing because Prime Minister Helen Clark has already announced there will be tax cuts.
WHAT THEY SAY
Labour
* Is committed to a three-year programme of personal tax cuts.
* Has $1.5 billion set aside in the Government's books for the cuts, but that figure looks to be a minimum.
* Is likely to come up with a plan that affects a large number of taxpayers, because it wants to ensure tax cuts do not lead to "greater inequality".
* Will argue National cannot credibly offer more than Labour does in tax cuts.
* Wants to keep a lid on voter expectations.
National
* Is committed to a multi-year programme of personal tax cuts.
* Is wary of discussing whether it will match the large scale of the cuts it offered in 2005.
* Is likely to offer a bigger overall tax-cut package than Labour.
* Will argue Labour has taken too long to cut taxes, and in doing so has missed opportunities to improve growth rate and income levels.
* Wants to keep a lid on voter expectations.
