Fiscal repair job underway
The coalition Government is taking decisive action to repair the Government books and support income tax relief in next year’s Budget, Finance Minister Nicola Willis says.
“Government spending is expected to have increased by around 80% between 2017 and 2024, with far too few results to show for it. Our Government is determined to restore respect for taxpayer money by stopping wasteful spending, improving value for money and driving resources out of the back-office and into frontline services.
“Today’s mini-Budget sets out a series of decisions we have already made which deliver an initial down-payment of $7.47 billion in operating savings and additional revenue over the forecast period.
“This includes $2.61 billion of savings that have been delivered by stopping work on a series of costly Labour programmes including Let’s Get Wellington Moving, the FPA regime and Industry Transformation Plans.
“In some cases, these decisions have also removed significant fiscal risks from the Government books: such as the potential $15 billion liability for Auckland Light Rail, up to $16 billion associated with building a pumped hydro scheme at Lake Onslow, and the risk of further Crown funding being required in future to balance the cost of Clean Car Discount rebates with the level of fee revenue received from high-emissions vehicles.
“Our decisions ensure that $2.047 billion of forecast cash proceeds from the Emissions Trading Scheme can be used as a ‘climate dividend’ to support income tax reduction, including by closing the Government Investment in Decarbonising Industry Fund (GIDI), which has been subsidising already profitable businesses to reduce emissions.
“This work is just the beginning. The Coalition Government has started an ongoing Fiscal Sustainability Programme to embed a culture of responsible spending across Government.
“The first step in this programme is an Initial Baseline Exercise for government agencies designed to find around $1.5 billion per annum in savings to deliver on our policy commitments and fund critical cost pressures.
“This exercise brings together the $500 million per annum baseline savings exercise initiated – but not completed – by the outgoing government, along with our previously pledged commitments to reduce consultancy and departmental spending.
“I have written to Ministers asking that their agencies find savings ahead of Budget 2024, with individual agency targets informed by headcount growth since 2017. All savings proposals will be subject to an assurance process and final agreement by Cabinet at Budget 2024. In agencies with significant frontline cost-pressures, savings could be used to help offset these costs.
“I have also asked Ministers to undertake a ‘health-check’ on medium and high-risk capital projects in the investment pipeline for their agencies, to understand and respond to under-funding, cost-blow outs and delivery risks that may exist.
“As the Auditor General’s recent report showed, government infrastructure spending under Labour lacked rigour. A much more disciplined approach is needed.
“The coalition has further work underway to put New Zealand on a firmer financial footing, including:
- Enabling full cost-recovery for immigration visa processing,
- Taxing online casino gambling operations
- Stepping-up the audit activities of the IRD
- Replacing the fees-free policy with a final-year fees-free policy from 2025
- Improving the cost-effectiveness of the school lunch programme
“Our Government is committed to getting the books back in order and effectively managing taxpayers’ money. We have found billions of dollars’ worth of savings within weeks of being elected, and we intend to continue this savings-drive to deliver a better deal for all New Zealanders.”