Labour wants GST on fruit and veges ditched

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A Labour-led Government would scrap GST from fresh fruit and vegetables to encourage healthy eating and help New Zealanders as higher GST on other goods is imposed.

Opposition leader Phil Goff is expected to make the announcement today, the first in a three-week campaign about the rising cost of living that will see Labour MPs pushing the message in their electorates.

National MPs are also spreading the word about the Government's tax switch, which Finance Minister Bill English has said will leave most people better off.

On Friday, GST will increase from 12.5 per cent to 15 and across-the-board tax cuts will kick in.

Labour Party finance spokesman David Cunliffe said exempting fresh fruit and vegetables from GST would cost about $250 million in lost Government revenue, much less than the $450 million the Government has quoted.

"I think it's only Slovenia in the Western world that has a high GST rate that doesn't exempt some kind of food," Mr Cunliffe told TVNZ's Q+A programme.

He said the criticisms levelled at Maori Party MP Rahui Katene's bill exempting "healthy foods" from GST would not apply to the Labour policy.

"By defining it narrowly like that ... that would certainly remove the need for an army of bureaucrats."

Ms Katene's bill was voted down this month by National, Act and United Future.

Mr Goff said the party was not looking at throwing money around, but giving families a bit of a boost while also helping fight the high rate of obesity.

The Government has said exempting items from GST would complicate the tax system and has questioned how much difference it would make to actual prices.

Mr English said despite the rise in GST, the tax switch will deliver an extra $25 a week to the average family and $15 a week to the average worker.

"There's no free lunch here. This is not a lolly scramble. It was never meant to be," the minister said.

"It's about changing the incentives in the economy so in the long run we've got more savings and exports and investing and less property speculation and excessive borrowing."

Labour has been trying to show that most people - taking into account other matters including inflation, electricity price rises and early childhood education fees - will be worse off despite the tax cuts, which it says heavily favour those on higher incomes.

It pointed to a New Zealand Institute of Economic Research paper which estimates half of households will see their tax cuts gobbled up by rising costs of living. Mr English said there had not been a big spend-up before the GST changes, as some predicted.

HEALTHY EATING

*Party wants fresh fruit and vegetables exempt from goods and services tax.

*Cost in lost tax revenue put at $250 million to $270 million.