10 July 2008 Media Statement

ANZ analysis on govt spending ignores the facts

A report by an ANZ bank economist has decided frontline spending at the Ministry of Social Development, Child Youth and Family and education services for children with special needs is "non-productive" or back-office spending, Associate Finance Minister Trevor Mallard said today.

"The economist's analysis is unfortunately very lightweight and shows a lack of understanding of what departments' budgets actually pay for. He claims more funding is going into administrative or non productive functions rather than the frontline," Trevor Mallard said.

"However, in Mr Bagrie's analysis, defence spending, police, corrections and courts spending is "back-office" as are school property costs, special education front line services, Work and Income front line services, Child Youth and Family front line services, and IRD call centre staff. This type of spending alone accounts for more than $6 billion or over 60 per cent of all the departmental output spending which Mr Bagrie says is back-office. This is a lot more than the degree of overlap between frontline and back-office acknowledged in the report.

"This Labour-led government believes in strong public services and in investing for the future.

"We made a choice when we came into office to reinvest and rebuild public services after the Nats ran them down during the 1990s - just as they are planning to do again. Since 2002 the public sector has not grown faster than other sectors in the economy; in fact public sector growth is slightly behind growth in the overall labour market.

"Mr Bagrie’s analysis ignores some pretty basic facts. He talks of the growth in departmental spending and yet totally ignores the effects of the shifts of the Health Funding Authority into the Ministry of Health and the Special Education Service into the Ministry of Education.

"As well as overstating the increases in departmental spending, this presentation on a percentage basis conveniently hides the fact that the absolute increases in these areas are simply dwarfed by the massive investments this government has made in front line services.

"This government is investing for the future. For instance, we have introduced the New Zealand Superannuation Fund, the primary health strategy, Kiwisaver, 20 hours free early childhood education, Kiwibank, and we have bought back the railways for the future benefit of the country," Trevor Mallard said.

"I agree that it is important to focus on the quality of public spending – and this government has put in place a number of changes to do just that. In 2004 we enacted the Public Finance Amendment Act. Accountability documents for the Budget changed this year to improve the quality of performance information. The government has also introduced an improved capital asset management regime to ensure greater value for money across all investment decisions."

ENDS

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