Budget frees up $4.4 billion for higher priorities
Hon Bill English
Minister of Finance
24 May 2012
Budget frees up $4.4 billion for higher priorities
Budget 2012 has freed up $4.4 billion to invest in improving frontline public services and getting better results, while running a zero Budget, Finance Minister Bill English says.
“At a time when the Government’s finances are constrained, these savings provide significant funding to put into new initiatives aimed at improving frontline public services and getting better results for New Zealanders,” Mr English says.
“At the same time, they allow the Government to run a zero Budget, ensuring a return to surplus in 2014/15, based on Budget forecasts.
“The Government is committed to getting better results with limited resources. Redirecting lower priority spending and raising some extra revenue by closing tax loopholes plays a key role in meeting this goal.”
In total, Budget 2012 includes new spending initiatives worth $4.42 billion in the current year and over the next four years, paid for by $4.39 billion in savings and new revenue initiatives. Savings and revenue initiatives include:
• Tax and excise changes that net an extra $1.36
billion over four years.
• Reprioritisation of $1.28
billion to new spending initiatives within budget
votes.
• Reprioritisation of $982 million of savings
from across budget votes into significant new spending
initiatives in areas like health, education, welfare reform,
and science and innovation.
• $772 million from
contingencies.
“These savings are consistent with the Government’s approach across the past three Budgets, which have included reprioritising about $9 billion of spending.
“This Government is focused on getting better results rather than just increasing inputs. If something works, we’ll keep on doing it. If it doesn’t, then we will stop it and put the money into an area that yields better results,” Mr English says.
“At a time when many governments overseas are undertaking radical measures to get their books in order, finding these savings while maintaining high-quality frontline public services and income support to the most vulnerable is an achievement.
“The Government will ensure future Budgets continue to focus on improving frontline public services to deliver better results for New Zealanders, at the same time as improving value for money from more than $70 billion of public spending every year,” Mr English says.
Savings – at a glance
Revenue initiatives
•
Extra revenue of $1.36 billion over four years, which goes
towards new spending initiatives in priority areas like
health, education, science and innovation, and welfare
reform. Changes include:
o Increasing tobacco excise by
10 per cent a year on 1 January in each of the next four
years ($528 million over four years).
o Increasing tax
compliance activity, debt collection, and following up on
unfiled returns ($423.8 million gross savings over four
years).
o Tightening the tax deductibility rules for
mixed-use assets ($109 million over four years).
o
Tightening livestock valuation rules ($184 million over four
years).
o Removing three tax credits that are generally
no longer used for their original purpose ($117.1 million
over four years).
Student support
• The student support
changes in Budget 2012 will provide operating savings of
$240.3 million in 2011/12. A further $65 to $74 million a
year of operating savings over the next four years will be
largely re-invested across the wider tertiary system, while
the remainder goes towards new initiatives in other priority
areas. Changes include:
o Increasing the student loan
repayment rate from 10 per cent to 12 per cent (operating
savings of $184.2 million over the next four years).
o
Repealing the student loan voluntary repayment scheme
(operating savings of $43.5 million over four years).
o
Holding the student allowance parental income threshold at
its current level for four years (operating savings of $12.7
million over four years).
o Removing student allowance
eligibility for more than four years of study (operating
savings of $33 million over four years).
Welfare reform
• Reprioritisation of $193.5 million
in Vote Social Development to help fund the Welfare Reform
package. This includes:
o Reprioritising the Youth
Transition Services for Youth Services, including
wrap-around support ($58.8 million over four years).
o
Changes to Work and Income employment assistance ($96.4
million over four years).
o Part of the funding
reprioritised from the Quality Services Innovation Fund
($38.3 million across the current year and the next four
years).
Education
• Reprioritisation which goes to
other priority initiatives within education, including:
o
Using contingency funding from previous budgets ($274.9
million over four years).
o More consistent
teacher:student ratios ($173.9 million over four years).
Justice sector
• Reprioritisation within Vote
Corrections, most of which will go into higher priorities
within Corrections and across the wider justice sector. For
example:
o $65 million of funding will go towards new
and expanded rehabilitation programmes to help meet the
Government’s Better Public Services results target of
reducing reoffending by 25 per cent by 2017.
o $87
million will go towards the new Justice Sector Fund to give
the justice sector flexibility to invest in areas that
deliver the best results to New Zealanders.
•
As a result of the Expenditure Review, the department is
able to meet its cost pressures through reprioritisation
over the next four years.
Housing
•
Reprioritisation of $123.1 million funding into other
priorities within Housing, such as the Social Housing Fund
to support third-party social housing groups to provide more
community housing. Savings include:
o Housing New
Zealand efficiency savings ($70 million over five
years).
o Weathertight Services under-spend ($34
million in the current year).
o Changes to the Welcome
Home Loans Mortgage Insurance Scheme ($19.1 million over
five years).
ENDS