POST-BUDGET SPEECH TO BDO HOGG YOUNG CATHIE

Introductions

Coming to the BDO Hogg Young Cathie post-Budget is becoming such a regular thing I am beginning to wonder what life would be like without it. I have a good collection of BDO Hogg Young Cathie roller ball pens.

It has changed over the years. My first year with you was 1991 - the Mother of All Budgets year. I suppose a few here will remember the Mother of All Budgets.

We did many things, and amongst those we increased excise. I was then Minister of Revenue and Customs - Customs is responsible for excise taxes - and to give effect to the policy change we had taken Extraordinary Urgency. Under Extraordinary Urgency the House runs all night - so I had to sit in the Chair from 2 to 5.30 - A.M. that is. After being relieved of the Chair I went back up to my office, had a shower, and feeling as tired as it is possible to feel I came to the Hogg Young Cathie breakfast to explain the Budget. I have no real idea if I succeeded - but I have been invited each year since!

The logic of coming here in earlier years was that I was Minister of Revenue, and being Chartered Accountants you are pretty interested in tax. In those days tax policy changed pretty dramatically in the Budget - remember the international regime, dividends on preference shares, the intercompany dividend exemption, consolidation rules, Non Resident Withholding Tax and Foreign Dividend Withholding Payments? - even, dare I say it, the disallowance of entertainment expenditure and livestock valuation rules?

Taxes were very much part of Budgets so each breakfast there was another round of taxes to explain. There no longer are. Last year you shifted over to an evening function and I shifted over to education.

Today's Budget is the first delivered in the MMP era by a coalition Government. It's developed in the way that under MMP Governments - as they say at the marriage ceremony "for better or worse" - Budgets will be delivered from here on.

It's important for New Zealand. It focuses on strengthening the core social areas of the community, while sustaining and promoting economic growth.

Building confidence is a strong theme of 1997 - confidence in the business sector, confidence in the consumer sector, and confidence in the education sector. The latest information gives increasing justification for emerging confidence. The NZIER report last week supported our internal advice that an export-led recovery can be expected.

The Budget shows that over the next three years the Government will resource the commitments flowing from the Coalition Agreement without incurring further debt and without resorting to tax changes. The economy remains on track. Budget '97 should begin the process of restoring confidence.

Increased spending is often cited as a driver for falling confidence. But this increase in spending - $5 billion over three years - is, in spite of the economic circumstances, still well within our means. We can do this without upsetting any fundamental aspect of our economy. And we can still deliver tax reductions next year.

To some extent it a drop in confidence was inevitable with the change to MMP.

The shift to MMP - and I for one did not support this shift - but regardless of anyone's view, the shift to MMP was going to force New Zealand to have coalition governments. That was an inevitable reality, with all it implied in terms of political arrangements.

Given that MMP has failed to live up to expectations, it is little wonder that public enthusiasm for it is waning. But with this waning has gone some of the broader confidence that should be there.

I trust that we can now, in the light of improving forecasts, see a strengthening in confidence in the future of New Zealand.

Remember we have a surplus and have had a surplus all through the downturn.

We have low inflation, and have at some political cost kept it low.

We have had growth - it bottomed out at what, by historic standards, is a high level for New Zealand.

Interest rates are now down; the stockmarket has risen a little in the wake of that fall; unemployment is still very low by international standards and debt continues to fall. All these factors should be noted.

Many of our spending decisions will be welcomed. We're providing more for health services, more for education and more to begin the process of strengthening families and communities.

I've been going several minutes already and I haven't mentioned one figure yet, so I'll get a few out of the way now!

The Budget surplus is lower than forecast at Christmas, but it is still firmly a surplus. It is the fifth surplus in a row, and positive in spite of very difficult economic conditions. We're forecasting surpluses of $1.5 billion this year; rising to $1.9 billion in 1998-99 and $2.6 billion in 1999-2000.

Health spending has been increased to over $5 billion this year. Education will reach almost $7 billion. Millions go into making safer communities and stronger families.

New Zealand's public debt is continuing to go down. Net public debt is forecast to fall from 25.5% of GDP in 1997-98 to 20.5% in 1999-2000.

Though economic growth is now at the bottom of the business cycle, the economy is still projected to grow by 2.4 percent this year which, by historic standards, is still pretty healthy. It's forecast to rebound again later this year and reach 4.2 percent in 1998-99.

Growth in New Zealand is the key to delivering more for education, health, social spending, employment, agriculture - in fact, almost everything that affects the way New Zealanders live and work.

Before I don my Minister of Education hat - perhaps a mortar board? - I'll run through the Budget's major features.

Health is the other area of big spending, as our population grows and new technologies extend life in all directions. The next three years will see an additional $1.5 billion going into health.

Mental health has been a particular area of community concern - that gets an additional $40 million over 3 years. Another $93 million over 3 years will help to reduce hospital waiting lists. Children under 6 are getting free doctor's visits and prescriptions.

Strengthening families and creating safer communities will see us bring the various agencies together to provide a coordinated approach. We will be putting $30 million more into CYPFS - the rather under-siege CYPFS - and providing another 200 frontline police.

A new "Green Package" includes 'biosecurity' measures, and is targeted towards preserving and enhancing our environment and heritage.

The surcharge on superannuation is abolished from April 1 next year.

Tariffs will be cut to benefit exporters and consumers.

We'll investigate the sale of two non-strategic assets - Government Property Services and Vehicle Testing New Zealand.

I said earlier that building confidence is a theme of this budget. Ever since I became Minister of Education I have been trying to build confidence amongst education sector groups. I want to ensure that all young people are able to make the most of their opportunities in education; and that learning, in one form or another, becomes life-long.

As I said, almost $7 billion dollars is going into Education in the 1997-98 financial year.

I'm sure you've all seen publicity about pressures on schools. This Budget begins a solid effort to address those concerns. Teacher workloads, for instance, arise from many different sources. Higher population in schools. Social changes and different standards of behaviour. New technology. Administrative and curriculum changes. There's no one, simple answer, but this Budget has a number of 'packages' to help.

Over the next 3 years we have set aside at least $150 million dollars more - it could be up to $200 million - for the second phase of Special Education 2000. This is on top of the $55 million in last year's Budget.

This new money includes guaranteed resourcing for students with very high and high on-going special education needs throughout their school years, regardless of where they go to school. This covers students with various disabilities. The trial of this on-going resourcing scheme finishes in September, and funding will be finalised then.

Special Education 2000 also covers students with behavioural difficulties, learning difficulties and speech or language difficulties, being reported more often these days. It means relief for teachers and classes facing difficult or disruptive students.

And, as early recognition of problems is the key in many cases, the funding is also available in early childhood education.

We are currently working our way through issues surrounding a unified pay system for teachers; and workload concerns. This Budget sets aside a contingency to fund solutions. The unified pay system will remove the distinction between primary and secondary salary levels that has been the base of a longstanding primary sector grievance.

Many more teachers are needed over the next decade. We will spend $36.2 million extra over the next 3 years to recruit the quality teachers we need to meet increased roll growth and reduced teacher:pupil ratios. This will pay for more teachers to be trained and retrained; to ensure relievers are available, and to encourage teachers into the sorts of schools that are traditionally hard to staff.

We also need to ensure that teachers in the classroom are kept up-to-date and given the right support and resources for the job. Budget 97 commits $40.8 million over the next three years for teacher professional development - that's on-going training, specialist courses, training in new areas of the curriculum and training in school leadership and management.

There's a further $6 million additional spending to increase classroom resources to help teachers deliver the curriculum. Another $13.3 million will give teachers further training in the National Qualifications framework and its implementation.

The Operations Grant is always a talking point in education - it's a major area for building confidence. School Operations Grants basically fund the running of a school, for everything except teacher salaries. Last year's Budget put $75 million extra into Operations grants; this Budget there's an additional $61.7 million over three years on top of that, to provide schools with another 5 percent more per-pupil funding.

This includes $10.5 million more in 'TFEA' as they call it - that's Targeting Funding for Educational Achievement, an extra grant for schools in low socio-economic areas.

New Zealand's population is continuing to grow, with over 53,000 new students entering primary schools over the next 5 years. To make sure they all have a school to go to we're investing an additional $120 million this year alone to build new schools, new classrooms, add school facilities and buy land for new schools. There will be more in following years.

Budget 97 takes innovative steps to ensure all New Zealand children get a good education, wherever they live. We're funding a new scheme to help small schools pool their talents to reduce administration and management pressures. The schools themselves decide on arrangements that best suit them - for instance, a common Board of Trustees, or perhaps joint administration to save replication. There's $5.8 million of new money over the next 3 years to encourage this 'clustering'.

A few weeks ago I announced initiatives for troubled schools in the Mangere and Otara areas. This is part of a programme for school improvement and support that will be funded to the tune of $30 million over the next 3 years. The funding is designed to get to the heart of problems and turn them around. These schools will be helped to work out solutions for their own particular needs, on a case-by-case basis. As well as the schools in Mangere and Otara there are 5 other clusters of schools which need this sort of help.

And while we're talking troubles we can't ignore truancy and drug problems in schools. This Budget puts another $9.7 million over three years into expanding truancy initiatives. District Truancy Services will be extended to all 2,700 state schools; and the successful new NETS programme which finds non-enrolled young people, will be extended.

Drug abuse is a problem of society that's mirrored in schools. We're putting a further $3 million into drug education, so schools can both educate students about the perils of drug use, and identify and help existing users.

Reading for pleasure is one of the keys to education - and that's recognised by the Books in Homes Scheme run by the Alan Duff Charitable Foundation. It puts books into the hands and homes of young children, particularly from low-income families. Reports are showing that children treat the books they're given as a proud possessions and, backed by their families, start developing good reading habits.

The Budget expands the Government's contribution, by putting a further $900,000 over the next three years into Books in Homes.

This Budget also signals the development of a focused education strategy for Maori. Statistics continually show that Maori students do less well than non-Maori at school. We have to change that. The strategy will include a Maori Education Commission and increased funding for recruiting Maori teachers. There will also be more money for development and extension of a parent education programme developed specifically for Maori.

I've spent most of my time so far on the compulsory sector. There's also news in this Budget for early childhood education and tertiary institutions.

We will invest an extra $55.3 million over three years in the early childhood sector. We recognise the importance of a good start - and I'm not talking healthy breakfasts here! Children who have quality pre-school education move into school and other learning more easily. We want to make early childhood education more accessible and affordable to more people, and improve the quality of services.

$37 million goes into a 5 percent increase in the funding subsidy for licensed and chartered early childhood services - which should see an increase in pay for kindergarten and other early childhood teachers. There's $10 million for professional development and training in this area, and $4.7 million to increase the subsidy for children at Playcentres.

In tertiary education we're putting more into supporting students with disabilities; reducing next year's planned funding cut and improving training opportunities.

$9.9 million over 3 years will give tertiary students with disabilities extra support to undertake studies.

I'm sure you're all familiar with the recommendations of the Todd Consultative Group on tertiary funding in 1994 - that taxpayers fund 75 percent of a student's costs, with students meeting the remainder. We've been moving towards that level through average 1% funding cuts to tertiary institutions each year. However we have been advised that next year's full reduction would drop the Government's contribution below 75%. Therefore the 1998 tertiary cut has been reduced - at a cost of $12.5 million over the next 3 years.

As more people recognise the need for life-long and second-chance learning, industry training is expanding. This Budget invests another $8 million over 3 years to help subsidise the growth in training. And the new Te Ararau training initiative will provide up to a thousand improved training opportunities targeted towards young and low-skilled Maori.

There is much more in Budget 97, which will be extensively dissected, and variously condemned or approved of over the next few weeks - but I imagine everybody's head is well-stuffed with figures by now. Fortunately, I'm not asking questions - and you have till tomorrow to recover!

Thank you for your attention.