Parliament

Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search

 

Significant Increases To Defence Funding

This paper outlines the significant changes to the NZDF¡¦s operating baselines which the Government has made as part of the 2001 Budget. The increase in defence expenditure will not be immediately apparent in the 2001 Budget documentation, due to Government-wide decrease in the rate of capital charge, the continuation of the East Timor deployment, and one-off expenses in 2000/01.

Changes to Defence Baselines

Decisions incorporated in the 2001 Budget increase the net operating funding available for the NZDF (ie excluding capital charge and one-off expense appropriations) by over $300 million over the next five years and around $700 million over the next ten years. As the NZDF¡¦s baseline funding does not cover deployments, the 2001 Budget (as in 99/00 and 00/01) will also provide additional funding in 2001/02 for the East Timor deployment.

The following table itemises the significant decisions incorporated in the 2001 Budget that increase the net operating funding available for the NZDF.


New baseline funding ¡V excluding East Timor funding
($million, GST inclusive)
2001/02 2002/03 2003/04 2004/05 2005/06 Annually in outyears
Service personnel remuneration 18.45 18.45 18.45 18.45 18.45 18.45
Sustainable capability baseline 25 37 24 16 16 16
Light Armoured Vehicles 0 3 31 39 39 39
Total 43.45 58.45 73.45 73.45 73.45 73.45


In addition to the above new funding, the Government¡¦s decision to disband the Air Combat Force frees up around $400 million over the next five years and $870 million over the next ten which has been retained within NZDF and applied to upgrading the quality of the other defence capabilities.

The 2001 Budget also incorporates a number of significant technical changes to the NZDF operating baseline as follows. (These changes do not affect the net operating funding available to the NZDF to deliver its defence outputs).


Technical changes to NZDF baseline ($million) 2000/01 2001/02 2002/03 2003/04 2004/05
Government-wide Capital Charge reduction (10% to 9%) 0 (37) (37) (37) (37)
Capital charge reduction due to ACF write-down 0 (35) (35) (35) (35)
Other expense appropriation for write-down of Air Combat Force aircraft 104 - - - -
Total 104 (72) (72) (72) (72)


2001 Main Estimates

The information in the following trend table will appear in the 2001 Main Estimates for Vote Defence Force.


Appropriation Type ($million, GST inclusive)
1996/97
Actual 1997/98
Actual 1998/99
Actual 1999/00
Actual 2000/01
Actual 2001/02
Projection
Operating Flows
Classes of Outputs to be supplied 1,558 1,577 1,577 1,597 1,666 1,598
Other Expenses - - 5 77 104 -
Capital Flows
Purchase or
Development of
Capital Assets 39 39 41 - 2 -
Total Appropriations 1,597 1,616 1,623 1,674 1,772 1,598


The decrease in total appropriations between 2000/01 and 2001/02 is largely due to changes in capital charge reducing total appropriations in 2001/02, and a one-off ¡§other expense¡¨ increasing total appropriations in 2000/01. This ¡§other expense¡¨ is a technical adjustment. It is the cost of writing-down the remaining book value of the Skyhawk and Aermacchi fleets and their associated assets.

Capital Injections

Implementing the Government¡¦s decisions on the future force structure of the NZDF will involve a series of capital acquisitions across all three armed services to achieve the required capability upgrades. Although the capital acquisition plan has yet to be finalised, it is anticipated that capital injections of around $1 billion over the next ten years may be necessary, with the bulk of it likely to be required within the next 5 years. The actual amount will depend on the specification and timing of individual projects, the contracted prices, and the prevailing exchange rate at the time of purchase.


Funding Implications of the Air Combat Force

The table below compares the NZDF funding increases (excluding capital charge and funding for the East Timor deployment) set in the 2001 Budget with those that would have been required if the Air Combat Force had been retained.


New Baseline Funding to maintain Sustainable Capability (excluding Capital Charge and Deployments)


$million, GST Inclusive 01/02 02/03 03/04 04/05 05/06

Without Air Combat Force

43.5
58.5
73.5
73.5
73.5

With Air Combat Force

98.5
158.5
184.5
190.5
190.5

Further increases that would have been required to retain the Air Combat Force
55
100
111
117
117


Consequently, had the Air Combat Force been retained, the Government would have been required to find an extra $500 million over the next five years (or $1.2 billion over 10 years) for operating expenses. The operating savings available for redistribution within the NZDF as a result of disbanding the ACF ($400 million over the next five years or $870 million over 10 years) however are less than this because funding for the Air Combat Force is currently at a basic level that could not be sustained on a long term basis.

In addition, by disbanding the Air Combat Force, the Government will avoid the significant capital costs involved in replacing the current A4 Skyhawks. It is unlikely that this capital could have been completely funded off the NZDF balance sheet, and therefore would have required a substantial capital injection from the Government.


2001 Budget and Economic Fiscal Update

The Budget and Economic Fiscal Update (BEFU) contains a breakdown of government expenditure into 14 ¡§functional groups¡¨, one of which is Defence expenditure, and includes forecasts out to 2004/05 (unlike the trend table that appears in the estimates that only goes out to 2001/02). The Defence expenditure functional group is further broken down into ¡§NZDF Core expenditure¡¨ and a number of other expenses lines.

The total of the NZDF expenditure lines do not directly compare to the NZDF¡¦s total appropriations (as in the main estimates) as the series contained in the BEFU are exclusive of capital charge, excludes departments GST expenses and make adjustments for inter-departmental activity.

Defence Expenses BEFU Table -

($million) 1997/98
Actual 1998/99
Actual 1999/00
Actual 2000/01
Projection 2001/02
Projection 2002/03
Projection 2003/04
Projection 2004/05
Projection
NZDF Core expenditure 955 986 996 1055 1055 1065 1078 1080
NZDF Other expenses - 5 77 104 - - - -
NZDF East Timor deployment - - 22 26 30 - - -
WINZ East Timor deployment 17 22 19
Other Departments Defence expenses 34 31 51 32 35 34 34 32
GST on Defence Acquisitions 76 8 84 41 14 52 39 -
Total Defence Expenses 1065 1030 1247 1280 1153 1151 1151 1112

The NZDF Core expenditure line shows an overall upward trend, while the Total Defence Expenses line is affected by the inclusion of one-off expenses. By adding together the two lines ¡§NZDF core expenditure¡¨ and ¡§Other Departments Defence expenses¡¨, however, a truer picture of the underlying trends in overall defence expenses is seen as this excludes:

„h One-off expenses such as NZDF Other expenses, GST payments on Acquisitions and the East Timor deployment; and

„h changes in capital charge expenses.

© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

General Assembly: Ardern Rejects Trump Call For War On Drugs

New Zealand will not be signing the United States' document calling for global action on the war on drugs, Prime Minister Jacinda Ardern says.

Ms Ardern is in New York for the United Nations General Assembly this week, along with about 140 other world leaders.

US President Donald Trump is kicking off his week at the UN by holding an event to promote the US document called the Global Call to Action on the World Drug Problem. More>>

 

Hunting v Pest Control: Tahr Control Needed To Protect Alpine Habitats

A cull of introduced Himalayan tahr browsing conservation land in Kā Tiritiri o Te Moana/ the Southern Alps is needed to protect special alpine plants and their habitats, Conservation Minister, Eugenie Sage said. More>>

ALSO:

Protest At Sea: Judge Discharges Greenpeace Activists

The judge today discharged Norman and Howell without conviction, saying the cumulative consequences of a conviction would be out of proportion to what was “low level” offending off the Wairarapa coast in April 2017. More>>

ALSO:

Meth Testing Report: Housing NZ "To Right Wrong"

Phil Twyford “Housing NZ acknowledges that around 800 tenants suffered by either losing their tenancies, losing their possessions, being suspended from the public housing waiting list, negative effects on their credit ratings or, in the worst cases, being made homeless.” More>>

ALSO:

No Reshuffle: Meka Whaitiri Removed As A Minister

Meka Whaitiri will be removed as a Minister with immediate effect... The decision was made after receiving a report into an incident that occurred on 27 August in Gisborne, involving Meka Whaitiri and one of her staff. More>>

ALSO:

Pay Equity Bill: Making History For Women’s Pay

The Equal Pay Amendment Bill, introduced to the House today, will make it easier for workers to make a pay equity claim , using a more simple and accessible process within New Zealand’s existing bargaining framework. More>>

ALSO:

Asylum: Refugee Quota Increasing To 1500

“The quota increase will take place from July 2020. In the meantime, we will work to increase the number and spread of refugee resettlement and support services. We need to make sure we’re prepared for this change in policy.” More>>

ALSO:

 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels