KEY POINTS:
The Government would have room to deliver personal tax cuts as well as fund the newly enhanced KiwiSaver scheme, Finance Minister Michael Cullen said yesterday - but any tax changes would have to be quite modest.
Speaking as Labour and National went into fierce battle over the merits of last week's savings-themed Budget, Dr Cullen said there would be some capacity for personal tax cuts in the long term.
But unless a Finance Minister wanted to "hack into" spending on health, welfare and education, the tax cuts would have to be modest, he argued.
The National Party has not yet said if it would keep the enhancements added to KiwiSaver in the Budget if it won next year's election, and yesterday it came under attack from Labour for refusing to commit to the scheme.
Prime Minister Helen Clark said post-Budget reaction to the KiwiSaver changes had been positive, and she warned National not to water the scheme down.
"I think anyone who says they are thinking of tampering with that is going to be on shaky ground," she said.
Dr Cullen also weighed in, saying National's indecision meant it was clear that to secure KiwiSaver, "you need to vote Labour at the next election".
But National is, according to leader John Key, "not in any great rush" to outline its position on KiwiSaver despite the scheme's start date of July 1.
National has already said it would keep the original KiwiSaver in place, but it wants more time to assess the changes, which it says has made the retirement scheme much more complex.
Mr Key said Labour had put all its money on one horse with its big savings push, but many people would not get any benefit from the move.
Asked if National saw enough room in the Government's books to keep KiwiSaver in its new form and deliver personal tax cuts, Mr Key said it was too early to tell. "But we are committed to a credible programme of tax cuts," he said.
The National Party has attacked the Budget as offering little for lower income people who cannot afford to save, and the ongoing political argument over personal tax cuts appears set to loom large during the election campaign.
In Parliament's first question time since the Budget, National zeroed in on the growing proportion of income earners who now pay the top 39 per cent tax rate. That figure has grown from 5 per cent when Labour introduced the 39 per cent rate to just over 14 per cent.
Helen Clark replied that people's incomes had risen and so they had gone into the higher bracket.
"But I agree with Bill English, who said barely two months ago that now is not the time to be giving out extensive tax cuts," she said.
National also attempted to turn back on to Dr Cullen his argument that National would slash public spending to fund tax cuts.
Mr English, National's finance spokesman, asked Dr Cullen how many doctors and teachers would be cut in order to fund the corporate tax cut announced in the Budget - a question that did not draw a clear answer from Dr Cullen.
Mr English later argued that Dr Cullen had for years "hysterically claimed that tax reductions would inevitably result in mass sackings of police, nurses and teachers".
But he had then delivered $1 billion of corporate tax cuts and $1 billion in KiwiSaver sweeteners in the Budget.
"Now, Dr Cullen has had to confess that his argument is nonsense - he can no longer expect to be taken seriously when he argues that his tax cuts have no impact on public services, but other parties' tax policies do."
Savings timetable
* All member contributions to KiwiSaver accounts will get a tax credit of up to $20 a week from July 1 this year.
* Legislation making it compulsory for employers to contribute to an employee's KiwiSaver account from April next year is in a bill that has been sent to a select committee. Public submissions will be heard in coming months.
