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Setting new priorities frees up $2 billion

Hon Bill English

Minister of Finance

28 May 2009

Setting new priorities frees up $2 billion

Line-by-line departmental reviews have freed up $2 billion over the next four years that will be put back into Government priorities such as boosting frontline services, Finance Minister Bill English says.

A combined $454 million has been identified in the remainder of this financial year and 2009/10, rising to over $500 million by 2012/13.

“That is a big boost for this year’s Budget and will make a real difference at a time when the Government’s books are under pressure from the global recession.

“It is an extra $454 million the Government has put into key policies like more police, more probation officers and training more doctors and nurses. It is on top of the $1.45 billion increase in operating spending announced in Budget 2009, meaning New Zealanders are effectively getting $1.9 billion in new initiatives. “

One of the National Government’s key election commitments was to slow the rate of government spending increases and focus on frontline public services.

“We want better, smarter public services with little or no extra funding. This is the first step in an ongoing process to ensure government spending is effective and goes on the right things,” Mr English says.

As part of the line-by-line reviews, ministers asked departmental chief executives to identify low priority spending. The savings have been put back into new initiatives, including enhanced frontline services.

The biggest areas of reprioritisation are in education, social development, Overseas Development Assistance and the Ministry of Foreign Affairs and Trade. Many of the changes have already been announced.

“The savings come from an array of areas, ranging from big, yet to be implemented policy promises of the previous government, to low quality spending.

“As well as the immediate savings which were reprioritised in the Budget, the reviews have started the process of improving the quality of our spending – delivering better, smarter services with little more money,” Mr English says.

“The real gains will come from making sure that there’s a continual focus on innovating and finding better ways of delivering public services right across Government.

“The average annual saving of $500 million a year over the next four years represents less than one per cent of total government spending of $65 billion. This Government will ensure that budgets are about getting the most for taxpayers out of that spending.”

Reprioritisation - at a glance

Vote Education

  • Net new spending of about $1 billion (operating and capital) allocated in Budget 2009 over the years 2008/09 to 2012/13.
  • Reprioritisation of $661.8 million of existing planned spending over the years 2008/09 to 2012/13, lifting total new spending to $1.68 billion over this period.
  • This reprioritisation has freed up funding for high priority initiatives such as:

  • $325.6 million of capital and $197.7 million operating funding new schools and upgrading and maintaining existing ones.
  • An additional $80.1 million schools operational funding.
  • $36 million more to help students meet national standards in literacy and numeracy.
  • $51 million for more special education students to access support.
  • Reprioritised spending includes:
  • Reducing the funding subsidy for hobby courses in adult community education - $54 million.
  • Combining the “Team-Up and Te Mana” information campaigns - $20 million.
  • Reducing “support function expenditure” for Ministry of Education overheads $18 million.
  • Keeping early childhood education adult-child ratios at their current level rather than proceeding with a planned reduction. This was announced in January - $275 million.
  • Reducing tertiary tripartite funding – $55 million.
  • Ministry of Social development

  • Reprioritisation of $428 million of existing planned spending with most of this recycled back through Vote Social Development.
  • This reprioritisation has freed up funding for high priority initiatives such as:
  • $18.6 million to maintain National Superannuation at 66 percent of the average wage.
  • $81.6 million over the next four years for the government’s Fresh Start initiatives for young offenders.
  • Reprioritised spending includes:

  • Productivity and efficiency gains from things such as improved business processes, digitisation of records reducing archiving costs and technology upgrades that reduce the level of administration and contact staff needed - $354 million.
  • Ending enterprising communities subsidies - $32.3 million.
  • Vote Foreign Affairs and Trade

  • Reprioritisation of $105 million planned additional spending over four years into higher priority areas such as health, education and law and order.
  • Despite the change Vote Foreign Affairs and Trade spending increases by $282 million over the next four years compared with the 2008/09 funding level agreed in Budget 2008.
  • Overseas Development Assistance

  • Reprioritising $166 million planned additional spending over four years into higher priority areas such as health, education and law and order. This change to the overseas development assistance budget was announced on May 1.
  • Despite the change overseas development assistance spending increases by $287 million over the next four years compared with the 2008/09 funding level agreed in Budget 2008.
  • Vote Economic Development

  • Reprioritising $180 million over four years into higher priority areas such as health, education and law and order. Major savings items include:

  • Reconfiguring the Market Development Assistance Fund - $101 million. This was announced on April 20.
  • New Zealand Innovation Centre - $15 million.
  • Efficiencies and productivity gains - $14 million.
  • This is offset by a $35 million injection for Rugby World Cup stadia.
  • Housing

  • $90 million of existing spending (operating and capital) reprioritised over the years 2008/09 to 2012/13.
  • Spending of $40 million on new initiatives over four years
  • Conservation

  • Savings of $54 million ($13.5 million a year) over four years which has been reprioritised into higher priority areas such as health, education and law and order.
  • Overall funding for Vote Conservation will be 374.3 million in 2009/2010.
  • ENDS

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