By Lynn Grieveson
Prime Minister John Key has left open the possiblity the National-led Government could propose middle-class tax cuts in its platform for re-election on September 20.
Asked by reporters in Parliament if National would campaign with a tax cut promise, he said: "We are not going to rule that out, and you'll see tomorrow (in Budget 2014 due at 2 pm) what the indications of how much extra sort of spending we believe we could undertake without putting pressure on interest rates and maintaining our desire to see debt levels below 20% of GDP. "
"So there are options for that additional expenditure, and they would obviously be spending by the Government, or alternatively returning that through some sort of tax programme," Key said.
"It's a possibility, but when you see the number tomorrow, what you will see is that there is some extra room over and above the billion dollars in broad terms we have spent for the last couple of years, but it's not a massive amount, so we will have to consider and weigh all that up as to how it could be allocated," Key said.
Asked who was most in need of tax relief, he said: "It's pretty obvious I think that middle New Zealand pays a fair bit of tax and often doesn't get a lot in return."
"As you move up the income levels they get less of things like Working for Families, probably don't get Accomodation Supplements and the likes because our system is heavily dependent effectively on a redistribution system for those most in need, and that happens through programmes like Working For Families," Key said.
"I think when you see the numbers tomorrow what you will see is not only a surplus for the next financial period, but actually increasing surpluses over the years, off I think quite conservative numbers by the Treasury. The driving factor of course is the government wants to get debt below 20% of GDP by 2020 and what the numbers show is that with this extra free, we will well and truly achieve that objective, all things being equal," Key said.
Asked if the net debt target was achieveable with tax cuts, Key said: "That's included in that additional area if that's where we wanted to go, but you know I just caution you to just wait and see the number tomorrow because it's not enormous. When you see the number tomorrow you'll be able to draw an assessment of what you think the options available to both us and effectively the other political parties are, but that's our best guess of what's available without overstimulating the economy and maintaining our desire to see debt held at low levels."
He was then asked if tax cuts meant income tax cuts.
"I suppose if that's was where we ultimately decide to go, then yes. But then again it's just so early, we haven't really made any call like that, whether we might just spend it on areas of need, those decisions haven't been made yet," he said.
Key said he did not know yet when a decision would be made about whether National would offer tax cuts.
"Obviously as we go into the campaign we'll want to think about what we are campaigning on if we are in the position to have a third term. So all of those decisions will have to be made sometime in the next four and a half months."