Finance Minister Nicola Willis has confirmed that the overall dollar savings target from public sector cuts has been met, but the cuts are not being felt equally across all government agencies.
Government departments were told to make cuts of 6.5 percent or 7.5 percent while workforces had grown by more than 50 percent since 2017, in a bid to save $1.5 billion.
The call came after a series of projects and policies were cut in pieces of legislation after the election. a reduction in expenditures of approximately $7.4 billion.
Today, Willis confirmed that the $1.5 billion target had been met in its entirety, with some agencies falling below or above initial targets.
“It took a lot of work to get there. We set each government agency its own target and tasked top executives with proposals that they believed made sense and could be implemented without compromising the quality of public services.
“We then reviewed their proposals line by line. We said no to some of them. In other cases, agencies that went through their programs line by line were able to discover even greater savings opportunities than we originally intended.”
Willis confirmed she “had the spreadsheets” as she delivered the pre-Budget speech to members of the Hutt Valley Chamber of Commerce in Upper Hutt today.
She later confirmed that some agencies were not required to make cuts if core services were affected.
“The New Zealand Police were able to convince us that achieving the target would potentially involve changes that would undermine frontline services, so we were simply not prepared to go ahead with that.
“That means they haven't achieved their goal, but at the same time, as I said, there are other agencies that have gone beyond their goal.
She also confirmed that the Whaikaha Ministry of Disability had not achieved the target but had made “some” contributions to savings through contractor and consultant expenditure. However, Willis was coy about where the savings had ended up at the Department of Foreign Affairs and Trade.
“The Ministry of Foreign Affairs and Trade has provided some savings.”
“I never said [the target] was an absolute. When some people put forward the proposals that we needed to achieve that goal, our judgment was basically that we didn't want to make any progress.”
Willis said a number of agencies would see their savings reprioritized.
“Earlier this week, through our savings exercise, we announced savings of just over $440 million over four years, found in Corrections.
“That's $110 million a year, now working harder for New Zealanders, contributing 685 new frontline workers, expanding rehabilitation programs to help more remand prisoners turn away from a life of crime, and New -Keeps Zeelanders safe by expanding the Waikeria prison.”
She said the Ministry of Education would also see his savings returned to the ministry for another purpose.
“They did a lot of work to identify consulting expenses they could reduce, to identify activity programs that, while well-intentioned, were not delivering maximum value, to find back-office savings.
“And every dollar of that is now being reinvested in the front lines. And that means more money for our early childhood services, or money for our schools or money for our tertiary providers.”
When asked if this was the extent of the cuts, Willis said more changes were possible.
“What I have always said is that our focus is on delivering better frontline services… Of course we will make changes to government agencies if we believe they need to deliver better outcomes for New Zealand.
“You can expect our government to continue to focus on making the most of every taxpayer dollar.”
The minister also announced that almost everyone – 83 percent of New Zealanders over the age of 15 and 94 percent of households – would see an increase in their take-home pay as a result of the soon-to-be announced tax package.
She claimed the tax cuts would not be financed by debt or contribute to inflation.
“Our tax credit will be funded from the operating fee through a combination of savings, reprioritization and additional revenue sources. This means that financing our tax package will not contribute to the Crown's net core debt.
“Second, Treasury modeling suggests that budget-neutral tax cuts – financed by reduced government consumption – reduce inflationary pressures and nominal interest rates. This is mainly because there is generally a lower multiplier for tax relief than for government consumption. This means that our decision to finance tax cuts in the budget will not contribute to inflation.”
Willis has yet to confirm what operating fee the government has imposed on itself, but still says it would be less than $3.5 billion.
National's target before the election was $3.2 billion.
Social investments
Willis, who is also Minister for Social Investment, confirmed that the Social Wellbeing Agency would receive $50.5 million in new funding to transform back into the Social Investment Agency, and would operate as a standalone entity from July 1.
The current CEO of the Wellbeing Agency would guide this transition and act as interim head of the new agency.
All staff would also transfer.
The new agency would be tasked with setting up a Social Investment Fund, setting standards for social investment practice, data and evidence infrastructure for various agencies and leading an ongoing review of social sector spending to measure the results.
There would also be a ministerial advisory committee, made up of ministers from sixteen portfolios, to provide advice and guidance.
The portfolios include Disability Issues, Policing, Whānau Ora and Education.