Budget frees up $5.2b for higher priorities

Budget 2011 has freed up $5.2 billion out to 2014/15 – including $700 million in 2011/12 - to invest in improving frontline public services and reducing debt, Finance Minister Bill English says.

“At a time when the Government's finances are constrained as it deals with ongoing costs from the global financial crisis and two Canterbury earthquakes, these savings provide significant funding for better frontline services in areas like health, education, and law and order,” Mr English says.

“About $4 billion of these savings will be redirected into higher priority spending – with about $3 billion going into health and education alone.

“The balance of the savings - $1.2 billion out to 2014/15 – will go into reducing growth in Government debt, which is forecast to rise in the short term as the Government meets its share of the costs of the Canterbury earthquakes.”

Total core Crown expenses are still forecast to increase by over $200 million to $73 billion in 2011/12, due to a number of costs that fall outside the Budget operating allowance, including adjustments to welfare benefits, New Zealand Superannuation and interest costs on Government debt.

“This Government is strengthening frontline public services, but we are committed to spending taxpayers' money wisely, keeping debt under control and playing our part in lifting New Zealand's rate of national savings.

“Trimming lower priority spending, or spending that is no longer affordable in today's circumstances, plays a key role in meeting these goals and helping rebalance our economy towards more savings, investment and exports.”

The savings come from a broad range of areas, including back office savings in the public service and changes to large and expensive schemes like KiwiSaver, Working for Families and Student Loans to ensure they remain affordable.

In addition to the $5.2 billion of savings, another $1.5 billion has been reprioritised within portfolio areas including health, education and social development to higher value initiatives in those portfolios.

“Public service chief executives have had two years to prepare their agencies to provide high-quality public services with little or no new money and they are now well positioned to deliver those savings,” Mr English says.

“KiwiSaver, Student Loans and Working for Families, which are together expected to cost $4.3 billion this year, have substantial future cost increases built into their structure. The Government is making changes to those schemes to restrain these cost increases and ensure they are sustainable into the future.

“In the case of ACC, improving rehabilitation rates and cost control in the Non-Earners Account, combined with better than forecast investment returns, mean the scheme's cost to the Crown is lower than previously expected.

“At a time when many governments overseas are undertaking radical measures to get their books in order, finding these savings while maintaining high-quality frontline public services and income support to the most vulnerable is an achievement.

“The Government will ensure future Budgets continue to focus on improving frontline public services and getting better value for money out of the over $70 billion of public spending every year,” Mr English says.