We'll double Labour's tax deal, says National

National finance spokesman John Key

National has budgeted $3.9 billion a year in three years' time to pay for the tax cuts it will unveil on Monday.

That is more than double the amount Labour would spend that year on its Working for Families tax relief package.

National finance spokesman John Key released his alternative budget yesterday, setting out broadly how the party's tax cuts and family assistance package would be paid for.

National plans to cut waste from Government spending, get tough on welfare, axe Labour initiatives, borrow more and run a lower surplus.

But Mr Key refused to reveal details of what would be cut in personal tax rates and any possible increases to income thresholds before Monday's announcement in Auckland.

National would phase in its "tax and family package" over three years. It would cost $2.2 billion in 2006-07, $3.3 billion in 2007-08 and $3.9 billion in 2008-09.

The alternative budget follows Labour's pre-emptive strike on Thursday when it expanded Working for Families - now labelled "family tax relief" - by more than $400 million a year to $1.5 billion by 2008-09.

Labour's package is aimed at lower and middle-income families with children. National is offering tax cuts to a wider group of workers, as well as businesses.

National's budget includes $500 million in annual savings by 2008-09 from cutting "low-quality" spending, including some economic and regional development grants, as well as axing Labour's KiwiSaver scheme and indexation of tax thresholds.

It is also budgeting a lower amount for new spending.

Mr Key said among things to go in planned reviews of departmental spending would be bureaucrats. Under Labour the number of core public servants had risen from 30,000 to 40,000, he said.

Also for the chop is $700 million the Reserve Bank was to be given to build up reserves in case it had to intervene to stabilise the dollar.

Mr Key said education and health savings would be redirected to frontline services.

The tax package includes $600 million to pay for cutting company tax from 33c to 30c and $360 million for axing the carbon tax, leaving about $2.9 billion for personal tax cuts and Family Support payments.

Mr Key refused to say how much of Working for Families, launched by Labour in the 2004 Budget, would be kept.

Finance Minister Michael Cullen attacked the alternative budget as a "couple of scrappy sheets of paper which simply don't add up properly".

He said it was amateurish in its presentation and unconvincing because it would require savage cuts to so-called low-quality spending.

It began to show the price ordinary New Zealanders would pay for National's tax cuts.

He said National planned cutting the $1.9 billion he had allowed for new spending in the 2006, 2007 and 2008 Budgets to $750 million in 2006, $1.16 billion in 2007 and $1.15 billion in 2008.

"There are going to have to be savage cuts to core services in health and education for the blind pursuit of across-the-board tax cuts."

He said all of the remaining Working for Families package would go.

Act leader Rodney Hide praised National's plan as a "decent cut" that would see the top personal rate and company tax fall below 30 per cent.

United Future leader Peter Dunne is due to offer tax cuts at his campaign launch in Auckland today.