Politics

$1b foreign affairs boost against Treasury advice

The Government’s billion-dollar Budget boost for the Ministry of Foreign Affairs and Trade came despite Treasury officials warning the ministry did not have a clear plan for how it should spend the money, reports Sam Sachdeva.

Budget documents released by Treasury highlight the complex negotiations between Finance Minister Grant Robertson and Foreign Affairs Minister Winston Peters, with discussions over the final dollar figure for MFAT funding going down to the wire.

A nearly $1 billion increase for foreign policy and international aid, including $715 million for New Zealand’s official development assistance (ODA) budget, was one of the Government’s major pre-Budget announcements.

However, Treasury documents show Peters initially wanted upwards of $1.5b, while Treasury recommended almost none of it be funded.

'Lack of strategic cases'

A Treasury briefing provided to Robertson in March ahead of his first Budget bilateral with Peters said the minister wanted an extra $1.2b over four years for the ODA budget.

He also wanted an extra $280m for MFAT’s capital budget, with the requested increase for operational spending redacted.

Although MFAT had not received a budget increase to meet inflationary costs since 2008, Treasury said many other departments were in the same position and the ministry could manage cost pressures for at least another year.

The ministry did not have a clear idea of the full cost of their capital projects or what strategic choices needed to be made, and was preparing on a long-term investment plan which would give the Government a better idea of what was needed.

Treasury said the ODA funding bid was based on a top-down view, rather than a bottom-up analysis of how much assistance New Zealand should provide and where it should go.

It recommended MFAT carry out a strategic assessment so any ODA increase was based on an “informed assessment” of opportunities and outcomes, while ensuring the ministry had the capacity to keep pace with growing aid.

Finance Minister Grant Robertson was told by Treasury officials there was a weak strategic case for much of the foreign affairs Budget bid. Photo: Lynn Grieveson.

The Treasury advice said a request for an extra 60 full-time staff was not backed up with evidence of its value, while there was a “weak strategic case” for reopening the Stockholm embassy, given the low level of trade links and the ability to manage the relationship within MFAT’s existing network.

“Given the recent establishment (2008) and subsequent closure of this post (2012), careful consideration of the long-term relative priority of reopening is needed given the potential reputational impacts.”

The only part of Peter’s Budget bid that Treasury supported was funding to host APEC in 2021, as it was an event New Zealand committed to in 2012 but had not allocated any money towards.

After Robertson’s first meeting with Peters, he indicated to Treasury that he supported a “cash injection” for ODA, as well as funding some of MFAT’s cost pressures.

Treasury also recommended providing capital funding for the new Stockholm post and money for an additional 12 staff - some way short of the 60 Peters asked for and the 50 he eventually received.

Discussions over the final foreign affairs package came down to the wire, with an email sent on April 4, days before Robertson had to sign off on a final version of the Budget Cabinet paper, noting he was still locked in discussions with Peters and Prime Minister Jacinda Ardern.

A few days later, Robertson’s office contacted Treasury saying there had been a late agreement to move money out of the APEC hosting budget and put it towards the ODA funding.

Wrong priorities - National

National’s foreign affairs spokesman Todd McClay told Newsroom Treasury had raised valid concerns about the MFAT funding and whether it would be spent well, showing the Government had its priorities wrong.

“At a time when they’re cutting funding for cochlear implants for children, the Prime Minister can’t say no to Winston Peters...the question must be asked, what does the taxpayer get out of this?”

McClay said it was also worrying that the Government was “juggling figures” by moving money from the APEC budget to keep Peters happy.

Now that the Government had committed the funding against Treasury advice, it was important that it had a robust process in place to monitor how the money and overseas aid was spent, he said.

“There will only be so many high-quality projects that can be run successfully at the same time.”

“Treasury’s concerns haven’t gone away - if anything I’m sure they’re more concerned now.”

In addition to concerns over MFAT’s ability to oversee the distribution of extra aid, there were question marks over whether Pacific countries could absorb a large increase in New Zealand money, McClay said.

“There will only be so many high-quality projects that can be run successfully at the same time.”

Peters said Treasury’s argument against the funding was “frankly not in the interests of our country”, given an effective 10-year funding freeze for MFAT.

“The underfunding had started to bite, undermining our ability to maintain New Zealand’s independence as an international actor projecting our distinct values.”

It was “shocking” that New Zealand’s ODA had dropped as a share of gross national income from 0.3 percent to 0.23 percent, Peters said, weakening the country’s hand in the Pacific “at the very time the region has become a more crowded and contested strategic space”.

The Government's funding boost would take that figure to 0.28 percent of GNI, he said.

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