By Ian Llewellyn of NZPA

Wellington, Feb 9 NZPA - Prime Minister John Key has signalled an increase in GST, across-the-board tax cuts and getting more tax out of property investors.

In his opening statement to Parliament Mr Key ruled out land and capital gains taxes, but said he was "carefully considering" increasing GST up to 15 percent to fund personal income tax cuts.

The GST increase would raise about $2 billion to fund the cuts and tax structure reform.

Mr Key said debate had focused on the top personal tax rates, but the Government had always been looking at the entire personal tax structure.

The new revenue would also pay for increases to benefits, superannuation and Working for Families to compensate for the price increases that would follow the GST hike.

There will also be changes to the way property investment is taxed so that it pays tax to the Government instead of the current situation where it is effectively subsidised.

There was no indication of how much revenue would be raised from the changes, but the Government has long said that increased tax in one area would be offset with decreases in others.

Mr Key said details would be outlined in the budget, but the aim was to get a more balanced tax system.

"We have a tax system that taxes labour and investment income at relatively high rates, taxes consumption at a relatively low rate and generally gives money back to people when they invest in residential property," Mr Key said.

While signalling change and reform to be funded from a GST hike, Mr Key also gave the Government an out clause saying no decisions were set in stone and more work had to be done.

"The Government would not embark on a policy of increasing GST unless it would benefit the New Zealand economy in the long term and unless it saw the vast bulk of New Zealanders better off," Mr Key said.

There would not be major changes to Working for Families but there would be work done to make it fairer as too many high income people were getting subsidised incomes.

Mr Key said before the speech that he believed changes to the tax system could lead to the Government losing some of its popularity.

"Whether people support our vision for New Zealand will be determined at the next ballot box. But in the end I've got to do what I think is right -- and this is what I think is right."

Mr Key said preliminary discussions had been held with support parties about the reforms and while their votes had not been "signed in blood", he did not anticipate problems, including final decisions in the May budget and implementing them shortly after.

The wide-ranging statement outlined the Government's wider policy programme with Mr Key signalling that any new spending in the budget would be spent on boosting research and science capability.

The Government would also shortly release a list of areas of Crown land it believed should be opened up to mining and there was likely to be "significant changes".

Some of the money earned from this would be used to set up a conservation fund.

There would be more scrutiny of government spending in tertiary education and experts would be asked to look at ways to reduce long term welfare dependency.

Mr Key said last year had not been easy for many people, but the economy was starting to pick up and this year's "comprehensive" policy programme would result in New Zealand being a better place to live.