Middle class welfare capture in Treasury’s sights

Middle class welfare capture in Treasury’s sights

by Pattrick Smellie

August 19 (BusinessDesk) – Middle income earners have done best out of social welfare spending over the last 25 years, the head of the New Zealand Treasury, John Whitehead said in a major speech to public sector chief financial officers today.

“The implication of adjusting public spending to ensure we get the most benefit is that some sectors of society that previously received taxpayer funded services will miss out in future,” Whitehead said.

“Preliminary results of a recent Treasury analysis suggest that households towards the middle of the income distribution have benefitted most from increased social services expenditure over the past 25 years.”

While he was “not signalling the targeting of any sector for cuts”, Whitehead said it was important that public servants be “clear and open about the overall impact of policies”, in a sign that the Treasury is likely to advise the government against policies that deliver further disproportionate benefit to middle-income earners.

“Analysis such as this is useful to public servants when advising about what scope exists to focus spending towards the government’s priorities,” he said.

Moves in this direction have already occurred with the reduction of childcare subsidies announced in the May Budget, in part because they were judged to be overly assisting middle income families.

Meanwhile, Whitehead praised public sector leaders for their commitment to belt-tightening since the global financial crisis punched a hole in government finances to produce the largest forecast Budget deficit, excluding debt servicing costs, in 40 years.

One tangible sign of this restraint was that bids for new funds in the next Budget had fallen from 700 in 2008 to just 30 this year.

However, controlling new spending was not enough, said Whitehead. “The most valuable scrutiny doesn’t focus on marginal new spending but gets into the more complex and much more significant areas of our core spending and our stewardship of assets.”

Whitehead called on public servants to bring a new urgency to their work, and stop engaging in such long consultation processes. Warning of “difficult trade-offs” yet to come, Whitehead named three areas where major changes in public service behaviour were starting to appear, but where more was needed.

“If we want quicker decisions, we’ll need shorter, more focused consultation within and between departments,” said Whitehead. “If we want greater consistency and economies of scale, we can’t have customised systems and processes for every area in every department.

“If we want less duplication and more seamless service delivery, we’ll need to stop habits and behaviours such as working in silos.

“The biggest risk I can see for the public sector is carrying on as we are. The last thing anyone … wants is short-term or indiscriminate cutting of services, but we do need to pick up the pace of what we do and we need to drive significant changes.”

(BusinessDesk) 17:54:06

© Scoop Media