Hon Bill English
Minister of Finance

26 November 2009
Media Statement

Budget spending jumps 45 per cent in five years

The Government’s Half-Year Economic and Fiscal Update next month will highlight the legacy of Labour's relentless spending increases over recent years, Finance Minister Bill English says.

Mr English today confirmed the half-year update, along with the 2010 Budget Policy Statement, will be released on December 15.

“Baseline Budget spending has jumped 45 per cent since 2005 – at a time when inflation and the economy only grew by about 15 per cent.

"More than a third of all Budget vote areas received funding increases of over 50 per cent in the past five years and over two thirds received increases of more than 30 per cent.

"This kind of rampant spending growth is unsustainable and cannot continue.”

The fiscal update would also confirm the impact of the recession would be felt on the Government’s books for many years, Mr English says.

"On behalf of taxpayers, we are already borrowing an average $250 million a week, every week, over the next four years to ensure we can continue providing public services and maintain welfare entitlements.

"The baseline Budget figures for the past five years, which exclude direct payments like benefits or Working for Families, show the scale of the spending momentum built up under Labour. That will take time to turn around.

"No business or household can continue operating this way – and nor can the Government. That's why this Government is taking steps to slow future spending increases and get debt under control.

"If we are to fund new priorities without pushing Government debt to unsustainable levels, then finding savings in existing spending will be critical.

"We believe these large recent spending increases provide ample room for reprioritisation. This will be a feature of Budget 2010 as the Government delivers its priorities within the $1.1 billion cap it has set out for new operating spending," Mr English says.
Examples of baseline spending increases over the past five years include:

• Education: from $7.7 billion in 2004/05 to $10.7 billion in 2009/10 – an increase of 39 per cent.

• Health: from $9.3 billion in 2004/05 to $12.6 billion in 2009/10 – an increase of 35 per cent.

• Corrections: from $538 million in 2004/2005 to $1.07 billion in 2009/10 – an increase of 98 per cent.

• Police: from $942 million in 2004/2005 to $1.39 billion in 2009/10 – an increase of 48 per cent.

• Housing: from $40 million in 2004/05 to $134 million in 2009/10 – an increase of 234 per cent.

A table showing baseline increases in each vote area is attached. The table includes most departmental and non-departmental expenses. However some expenses, such as benefits and Working for Families payments, the purchase of KiwiRail and loan write-offs, are not included as they are not a fair reflection of underlying spending growth.

ENDS

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