National leader John Key is refusing to say how his party will pay for tax cuts after he removed one possible source at the weekend -- ruling out changes to Labour's Working For Families package.

Before yesterday's U-turn, Mr Key had said National would exclude higher income earners from the package, compensating them with a tax cut.

That would have freed up cash to top up Labour's tax cuts, which National has promised to better.

National has outlined few parts of Labour's programme it would cut, but Mr Key today said his party would not borrow to pay for its tax cuts.

The Government spent about $2.2 billion on Working for Families tax credits in the year ending in March and more than 370,000 families are claiming the benefits.

Prime Minister Helen Clark today released an evaluation report on the package which says 371,300 families were getting Working for Families tax credits.

  It had been estimated that 360,000 families would be receiving the Working for Families tax credit by the end of the March 2008 year.