Finance Minister Nicola Willis has confirmed the total dollar savings target from public sector cuts has been met, but the reductions have not been felt evenly across public agencies.
Government departments were told to make savings set at 6.5 percent or 7.5 percent where headcount had grown by more than 50 percent since 2017 levels, in an effort to save $1.5 billion.
The call came after a range of projects and policies in pieces of legislation were slashed post-election, trimming expenditure by about $7.4b.
Today Willis confirmed, as a whole, the $1.5b target had been met, with some agencies below or over the initial targets set.
“It’s taken a lot of work to get there. We set every government agency its own target and tasked chief executives with putting forward proposals they thought made sense and that could be delivered without compromising quality public services.
“We then reviewed their proposals line by line. We said no to several of them. In other cases, agencies who went line by line through their programmes were able to uncover even greater opportunities for savings than we’d initially targeted.”
Willis confirmed she “had the spreadsheets”, while giving today’s pre-Budget speech to members of the Hutt Valley Chamber of Commerce in Upper Hutt.
She later confirmed some agencies had not been required to make cuts if, by doing so, core services would be impacted.
“The New Zealand police, they were able to convince us that reaching the target would involve potentially making changes that would undermine the frontline service provision so we just weren’t prepared to go through with that.
“That means they didn’t reach their target but at the same time, as I say, there are other agencies who went above and beyond the target.
She also confirmed Whaikaha Ministry of Disabled People did not reach the target, but had made “some” contributions to savings via contractor and consultant spend. However Willis was coy on where savings had landed at the Ministry of Foreign Affairs and Trade.
“The Ministry of Foreign Affairs and Trade has delivered some savings.”
“I never said [the target] was an absolute. Some people, when they put forward the proposals that we needed to meet that target, our judgment was actually we don’t want to progress.”
Willis said a number of agencies would see their savings reprioritised.
“Earlier this week we announced savings of just over $440 million over four years found in Corrections through our savings exercise.
“That’s $110 million each year that is now working harder for New Zealanders, contributing to 685 new frontline staff, extending rehabilitation programmes to support more remand prisoners to turn away from a life of crime, and keeping New Zealanders safe by extending Waikeria prison.”
She said the Ministry of Education would also see its savings go back to it, for a different purpose.
“They have done significant work to identify consultancy spend that they could reduce, to identify programmes of activity, that while they were well intended, were not delivering maximum value, to find back-office savings.
“And every single dollar of that is now going to be reinvested in the frontline. And that means more money for our early childhood services, or money for our schools or money for our tertiary providers.”
When asked if this was the extent of the cuts, Willis said more changes were possible.
“What I’ve always said is that our focus is on delivering better frontline services … Of course, we will make changes to government agencies if we think they needed to deliver better results for New Zealand.
“You can expect our Government to have an ongoing focus on making the most of every taxpayer dollar.”
The minister also announced nearly everyone – 83 percent of New Zealanders over the age of 15 and 94 percent of households – would see an increase in their take-home pay following the soon to be announced tax package.
She maintained the tax cuts would not be debt-funded or contribute to inflation.
“Our tax relief will be funded from within the operating allowance through a mixture of savings, reprioritisation, and additional revenue sources. This means funding our tax package will not add to net core Crown debt.
“Second, Treasury modelling indicates that fiscally neutral tax relief – financed through reduced government consumption – reduces inflationary pressure and nominal interest rates. This is mainly because there is generally a lower multiplier on tax relief than for general government consumption. This means our decision to fund tax relief in the Budget will not add to inflation.”
Willis has yet to confirm what operating allowance the Government has set for itself, however still says it would be less than $3.5 billion.
National’s pre-election target was $3.2 billion.
Social investment
Willis, who is also the Social Investment Minister, confirmed the Social Wellbeing Agency would be allocated $50.5 million in new funding to transform back into the Social Investment Agency, and operate as a standalone entity from July 1.
The current chief executive of the Wellbeing Agency would manage this transition and act as interim head of the new agency.
All staff would also transfer.
The new agency would be tasked with setting up a Social Investment Fund, setting cross-agency standards for social investment practice, data and evidence infrastructure and leading an ongoing review of social sector spending to measure outcomes.
There would also be a ministerial advisory committee made up of ministers from 16 portfolios to provide advice and guidance.
The portfolios include Disability Issues, Police, Whānau Ora and Education.
