Labour plan for GST-free fruit tipped amid tax-cut letdown

16:00, Sep 26 2010

Labour leader Phil Goff is tipped to announce today plans to axe GST on fresh fruit and vegetables as household budgets come under pressure amid signs that few are banking on this week's tax cuts offering them much relief.

Finance Minister Bill English has admitted the experts have been proven wrong after predicting that households would splash out ahead of a rise in GST this week, comforted by the prospect of tax cuts which kick in this Friday.

Households have instead cut spending, contributing to a slower economic recovery than predicted.

The tax package, worth $14 billion over four years, will deliver whopping rises to the likes of Telecom boss Paul Reynolds, who is set to get an extra $4800 a week, while the lowest income earners get less than $10 a week – nearly all of which is swallowed up by the rise in GST from 12.5 per cent to 15 per cent.

The Government says the average worker will be about $15 a week better off, but Labour disputes that. Finance spokesman David Cunliffe said three-quarters of the tax package went to the top income earners while at least 70 per cent of earners would be worse off under the tax cut package, once GST and other cost-of-living increases were taken into account, such as ACC levies, rates, childcare and insurance premiums.

Mr Goff is expected to announce a new policy axing GST on fresh fruit and vegetables as he launches a campaign today against cost-of-living rises.

Labour says the policy will cost about $250 million a year – not much more than the amount going into the Government's coffers from a rise in tobacco tax.

But the Government says the cost could be as high as $400m and a nonsense to implement: Labour would have to explain why parts of a McDonald's burger, such as the salad, should be GST free.

Labour is counting on the campaign providing a circuit breaker in the polls, which continue to favour National by a big majority, despite its decision to raise GST.