Labour leader Andrew Little says Budget has 'changed the landscape' - can't rule out tax hikes

Labour leader Andrew Little says the Budget has changed the landscape and he cannot rule out increasing taxes after saying two months ago no tax hikes were planned.

Little said the Budget had changed things and Labour was going back to the drawing board to look at the numbers before it set out its full policy in "some weeks".

Asked if that meant he was now considering tax increases, Little said he did not want to discuss details until Labour had worked out its policy package and how to fund it.

"What we have said is that before the Budget, every pledge, every promise we've made we can fund out of existing tax revenue. That landscape has changed. We now have to go back and have a look."

He said Labour and the Greens had also signed up to fiscal responsibility rules: "We are not going to write cheques we cannot cash.

"There is more revenue, but we have a set of priorities that we are totally committed to doing."

He said Labour's fiscal plan would mean Labour could achieve its social goals but also be responsible.

In March, Little said Labour did not intend to raise taxes in its first term, telling the nation tax revenue was higher than expected and Labour could fund its commitments from that.

However, he also said Labour would "finely calibrate" its tax policy after the Budget to take into account National's tax changes.

He said Labour's priorities were in housing, health and education.

"You will see what our plan is for a Government led by Labour to raise the revenue that it needs to do those things that are restoring those social foundations."

Labour does not support National's tax cuts which are due to come into effect next April. Those are secured by changes to the bottom two tax thresholds and will deliver up to $20 a week to workers on more than $14,000.

Little said they were poorly targeted.

"It favours far too many people on high incomes and doesn't do enough for those on low and middle incomes. So we will work away on our fiscals and come up with any alternative that we've got."

Labour has previously said it would hold off on major tax changes until after a Tax Working Group in its first term. Little said Labour was still committed to that and did not believe in "tinkering" with the system.

The only tax policy it has announced so far is to increase the "bright line" test on capital gains on property to cover properties bought and sold within five years - up from the current two.

Little also brushed off questions about the different position Labour and the Greens took on the legislation to introduce the "Family Incomes Package" in the Budget, saying both were critical of the Budget.

He said that did not undermine the Memorandum of Understanding between the two parties, or signify they could not work together in Government.

However, he said Labour "broadly supported" the Working for Families changes and the Accommodation Supplement increase.