Budget frees up $1.8 billion for higher priorities

Budget 2010 has freed up another $1.8 billion over the next four years to put into high priority areas such as healthcare, education, law and order and scientific innovation, Finance Minister Bill English says.

“That is a big boost for this year's Budget and will make a real difference at a time when the Government's books remain under pressure from the aftermath of the global recession,” Mr English says.

The money is in addition to the $1.1 billion annual operating allowance for new spending – effectively pushing spending on new Budget initiatives to $1.55 billion a year over the next four years.

“It means an extra $450 million a year can be spent in priority areas like health, education, law and order, and scientific innovation.”

Total core Crown expenses are forecast to increase by $5.9 billion to $70.7 billion in 2010/11 – including adjustments to welfare benefits, New Zealand Superannuation, and Government interest costs on its rising debt, which all fall outside the operating allowance.

“This Government is strengthening frontline public services, but we are committed to spending taxpayers' money wisely and keeping debt under control. Weeding out lower priority spending plays a key role in meeting these goals,” Mr English says.

It follows Budget 2009 redirecting $2 billion of lower priority spending into better frontline services in health, education and law and order.

“I expect this process to continue over the next three or four years, as we work hard to move back to Budget surplus as soon as possible,” Mr English says.

“Public service chief executives are coming to terms with this reality. The Government has given them time to prepare their agencies to provide better public services with little or no new money over the next three or four years.

“It's clear from the work we've done so far there is considerable scope to provide better public services by improving processes, removing duplication and reallocating resources from lower quality spending to frontline public services.”

Areas receiving the largest amounts of reprioritised money include student loans, early childhood education, social development, primary healthcare and corrections.

“The reprioritised money comes from an array of areas, ranging from the tightening of interest-free student loans eligibility criteria, to savings on administration in health and corrections. We have also put under-spending in some areas to better use,” Mr English says.

Average reprioritised spending of $450 million a year over the next four years represents less than 1 per cent of the Government’s $70.7 billion in total annual spending.

“This Government will ensure future Budgets also get the most value for taxpayers out of that spending,” Mr English says.

Media contacts: Craig Howie 04 817 9895 or 027 755 5809

Grant Fleming 04 817 9869 or 021 277 9869

Reprioritisation – at a glance

Education (includes all sectors)

• New initiatives of $1.9 billion over four years. This includes reprioritisation of $1 billion towards high priority initiatives such as:
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o A 4 per cent increase in operational funding for schools worth $155.9 million over four years.
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o $349.3 million in new operating and capital funding into school infrastructure over four years.
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o $91.8 million over four years to raise Early Childhood Education participation for families in areas under-represented in ECE.
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o $48.1 million for the Youth Guarantee over four years.
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o $527 million over four years for tertiary education, including purchasing extra provision and increasing the tuition subsidy per student
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• Money freed up from reprioritised spending includes:
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o Changes to the Student Loan Scheme, including requiring students to pass more than half their courses and increasing administration fees - $296 million over four years. Despite this change, the scheme's annual operating costs are still projected to rise by $46 million to $799.9 million by 2013/14.
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o Changes in tertiary education capability funding - $222 million over four years.
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o Aligning ECE funding rates with the Government’s target of 80 per cent registered teachers – $449 million over four years. Despite this change the Government's total annual spending on ECE will increase by $222 million to $1.39 billion by 2013/14.
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Health

• New Budget initiatives of $1.95 billion over four years. This includes reprioritisation of $186 million towards high priority initiatives such as:
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o $1.4 billion extra funding for District Health Boards.
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o $27.9 million for new mental health services.
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o $51 million more to meet pressure for the Very Low Cost Access programme and other primary healthcare services.
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o $40 million more for breast screening and treatment.
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o $59.5 million more for elective surgery, including breast reconstruction surgery.
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• Money freed up from reprioritised spending includes:
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o Health Ministry staff reductions – $20 million.
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o Redirection of mental health funding into new mental health initiatives - $12.1 million.
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o Reduced Primary Healthcare Organisation (PHO) management fees - $8 million.
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o Lower than expected uptake of immunisations - $24.2 million.
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o Lower than expected demand for oral health - $17.7 million.
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Social Development and Youth Development

• New Budget initiatives of $252.7 million over four years. This includes reprioritisation of $403.7 million towards high priority initiatives. Despite the changes, total annual spending on Vote Social Development and Vote Youth Development is still projected to increase by $2.83 billion to $23.18 billion by 2013/14. Reprioritised spending includes:
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o $91 million for a new NGO Quality Services Fund.
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o $86.6 million for a Ring-Fenced Fund for Family Support Services.
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o $14.9 million in additional support for teen parents.
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o $21.8 million to boost Work and Income frontline services.
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• Money freed up from reprioritised spending includes:
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o Redirection of unallocated Pathway to Partnership funding into other initiatives (including Whānau Ora in vote Maori Affairs) - $347.9 million.
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o Savings from a review of the Ministry of Social Development's contracted services - $44.3 million.
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Corrections

• New Budget operating initiatives of $225 million over four years. This includes reprioritisation of $130.5 million towards high priority initiatives such as:
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o $49 million to fund pressures in the Community Probation and Psychological Service.
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o $45.3 million to build new capacity at Mt Eden Prison.
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o $11.2 million for prisoner literacy and numeracy.
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• Money freed up from reprioritised spending includes:
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o $112 million in internal efficiencies, reducing offender costs and savings from greater economies of scale.
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ACC

• In the 2008/09 year the Government allocated about $1.2 billion over four years to cover a hole in ACC's Non-Earners' Account left by the previous Government. As a result of the latest baseline update, $175 million of that extra funding is no longer needed and has been reprioritised into other high-priority initiatives.
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ENDS

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