Leaders debate: Tax cut in spotlight

Prime Minister John Key and Labour Leader David Cunliffe go head to head at the TV3 leader's debate. Photo / TV3

Labour leader David Cunliffe last night made a personal pledge to make ending child poverty his first priority if he becomes Prime Minister, focusing on the 260,000 children currently living in poverty in work- and benefit-based households.

And during the TV3 leaders' debate he also challenged the affordability of John Key's figure of a $1500 tax cut per household, but he got his numbers wrong.

He said it would cost $3.4 billion, but afterwards clarified that he should have said $2.4 billion - still more than twice the $1 billion that National wants to put aside for tax cuts by 2017, if conditions allow.

After the debate Mr Key said he was confident of delivering a $500 to $1500 tax cut to households and not go over $1 billion.

He hinted the package would benefit lower and middle income families only, with no flow through to higher income families, but would not say how National would achieve that.

"And that's our target - low to middle income New Zealanders ... There's all these different families that don't fit in that category for a variety of different reasons."

During the debate's discussion on child poverty, Mr Cunliffe said as Prime Minister he would return to Campbell Live every year with "hard data" on how many children had been lifted out of poverty.

"We've got 100,000 children in New Zealand growing up in working families that just don't earn enough to feed them. This will be my personal number one priority ... I will not stand by and see kids hungry when they go to school."

Mr Key said Mr Cunliffe was overstating the problem, and only 11 per cent of the 260,000 children were living in working families. He said employment was therefore the best way to lift them out of poverty, and Labour's policies - including lifting the minimum wage by $2 an hour by early next year, and scrapping youth wages and 90-day trail periods - would just send people to the dole queue.

The leaders were mostly held in check by host John Campbell as they answered questions on the minimum wage, taxes, home-ownership, and those below the poverty line. Nicky Hager's book Dirty Politics did not get a single mention.

Mr Key sought to portray National as the party for tax cuts, while Labour was the party of new taxes.

National's tax package would only go ahead if three conditions were met first: run and maintain surpluses, reduce net government debt to 20 per cent of GDP by 2020, and reduce ACC levies.

Mr Key said the chances of a tax cut in 2017 were "extremely high" and repeated his figure of $1500 per household a year.

Mr Cunliffe grilled Mr Key: "How much does $1500 per family add up to, John?"

He said there was a "good chance" that Labour would cut income taxes in a second term, if debt was also reduced to 3 per cent of GDP and unemployment down to 4 per cent.

Mr Cunliffe said National's tax cut was more like "$5 a week, maybe, if you're lucky, perhaps ... and that's underwhelming."

Mr Key responded by calling Labour's capital gains tax a "dog" that was too complex, and sought to remind viewers of Mr Cunliffe's failure to grasp the detail of the tax in the previous leaders' debate.

Mr Cunliffe stressed again that Labour's capital gains tax would not apply to a family home, regardless of whether it was held in a trust.

Earlier the leaders argued over the impact of lifting the minimum wage. Labour wants to raise it by $2 to $16.25 an hour by early next year.

Mr Key said such an increase would hurt the "hairdressers in Levin or in Foxton" who would either have to push up their prices or let workers go.

"It's simply farcical to argue there are no consequences."

Mr Cunliffe said this was "scare-mongering", saying the amount of increase was modest and would not adversely affect the job market.

Next week on Wednesday is the final leaders' debate on TVNZ at 7pm.