Labour said last night it had forced the Government to admit low income workers would be worse off under its tax cuts than they would have been if the previous government's long-range package had been left alone.

During an evening of parliamentary manoeuvres, former finance minister Michael Cullen put up an amendment to the Taxation (Urgent Measures and Annual Rates) Bill which proposed a new tax credit to make up the difference between the Government's and Labour's tax packages.

That provoked Finance Minister Bill English to issue a financial veto notice, a device which is used to quash an opposition amendment on the grounds that it would cost the Government money.

The financial veto notice said Dr Cullen's amendment would cost the Government at least $730 million over the next five years in lost revenue.

Labour seized the notice as proof that low income workers would be worse off under the Government's plan.

"National would have New Zealanders believe that there are no losers under their plans," Labour's finance spokesman David Cunliffe said.

"If that were true, the cost of this amendment would be zero and no financial veto could apply."

However, soon after the financial veto had been issued Parliament was told it had been withdrawn.

Assistant Speaker Rick Barker told MPs he had a withdrawal notice signed by Mr English but no explanation was given.

That meant Dr Cullen's amendment was back on the table and Parliament voted on it.

It was defeated 68-52.

Mr Cunliffe said the Government had been afraid the Maori Party would vote for the amendment and had used the veto to kill it, but had then persuaded the Maori Party to oppose it and had withdrawn the veto.

The amendment would have been defeated even if the Maori Party had supported it because National and the ACT have a majority on their own.

The Taxation (Urgent Measures and Annual Rates) Bill enacts the Government's tax cuts package. It is being debated under urgency.