Key in family scheme U-turn

Families on up to $100,000 a year and getting Working for Families top-ups can expect generous tax cuts as well after National executed a U-turn over Labour's flagship scheme.

Party leader John Key promised yesterday not to eat into Working for Families to pay for tax cuts and said the scheme would be retained under a National government, with tax cuts on top.

National is yet to roll out its tax cut package but last election offered tax cuts worth up to $90 a week on income over $100,000 a year.

Mr Key said yesterday that he continued to hold concerns about the system - which he previously labelled "middle-class welfare" - but people needed certainty.

He said one of the concerns had been how far up the income scale Working for Families stretched, but it was not worthwhile making changes at those higher income levels.

"National acknowledges that Working for Families payments are an important part of the income of many families. Despite concerns we hold about the system, I consider that offering people certainty is much more important in these tough economic times."

Prime Minister Helen Clark said Key's turnaround on Worlking for Families was "simply incredible".

"While National has long been concerned about how far up the income scale Working for Families stretches, a careful analysis of possible changes at the higher income levels showed it was not worth making them," Mr Key said. Miss Clark said he had previously strongly opposed it.

"Mr Key denounced this policy, he's called it middle class welfare, he's called it making all New Zealand families beneficiaries, he's called it a waste of money and he's said he wouldn't keep it," she said today on TV One's Breakfast programme.

"It comes back to the point – we do not know what this man stands for, if anything, except desperation to win an election.

"I don't think he can be taken seriously."

Miss Clark questioned the affordability of big tax cuts, coupled with Working for Families.

From October 1, the Government will start rolling out tax cuts worth between $12 and $28 a week, rising to between $22 and $55.

National has consistently foreshadowed bigger tax cuts.

Miss Clark warned that National would either have to borrow or slash spending to pay for bigger tax cuts.

Finance Minister Michael Cullen said there was no way to pay for bigger tax cuts without cutting Working for Families or KiwiSaver, taking on more debt or cutting basic services.

But Mr Key insisted yesterday that the package was affordable and said National had shown that at the last election, when it devised a package that kept Working for Families largely intact, though payments were at a slightly lower rate.

- with NZPA

- © Fairfax NZ News