Wellington, May 29 NZPA - Legislation to scrap tax cuts has been passed in Parliament.

The cuts planned for 2010 and 2011 had been estimated to cost $900 million in revenue per year and Finance Minister Bill English said they were no longer unaffordable in the current economic environment.

The Taxation (Budget Tax Measures) Bill, as well as repealing the cuts, also closes the mortgage diversion facility of KiwiSaver.

It passed on a voice vote after Parliament convened in urgency this morning.

Labour supported the repeal of the cuts though it attacked National for promising them in the first place, saying voters were deceived in the run-up to the election.

National argued that no one had foreseen just how bad the economy would get, with the first global recession in 60 years.

Revenue Minister Peter Dunne said the repeal was prudent.

"As minister of revenue, I'm acutely aware of the need to ensure that our tax revenue remains sufficient to finance government spending on the essential services that New Zealanders expect."

Labour MP Clayton Cosgrove said his party supported the bill as it had consistently said tax cuts were "unaffordable, inequitable and wrong".

However, that did not detract from the fact National had broken its word.

"The great crime ... is not actually the fact that these tax cuts are going to be cancelled. The great crime is the great deception created by a government who used an election and bribed the people of this country and said over and over and over again that they would get their full tranche of tax cuts."

The move to end diversion of payments into KiwiSaver on to first mortgages was also criticised by Labour MPs.

Mr Dunne said only 600 account holders had taken up the option and it was too expensive to administer.

Labour MPs argued that in the current recession it could be an option that would help many mortgage owners keep up with their payments.

NZPA