Audrey Young

Audrey Young is the New Zealand Herald’s political editor.

Budget 2013: Careful on spending, bold on housing

THE BUDGET: WHAT YOU NEED TO KNOW:

* A hold-the-line Budget, with no new big-ticket spending, but the lure of $1 billion cuts to ACC bills before the next election.
* Urgent legislation for 'special housing areas' to speed residential building in Auckland and to fund 'social' as well as 'state' houses. Agreement with Reserve Bank on measures to control house-price bubble. Inland Revenue will target $45m more tax from property investors.
* Government books move back into black in 2014 - ending years of big deficits.
* Proceeds of Mighty River Power sale go to Christchurch hospitals, KiwiRail and schools. Meridian Energy share sale by year's end.
* The economy should grow by an average 2.5 per cent over the next five years, unemployment falling from 6.7 per cent to 5.2 per cent.

Click here for our full Budget coverage.

BILL THE BUILDER

Bill English's fifth Budget keeps a tight rein on Government spending to meet its goal of a surplus in the next Budget, but it makes a significant move towards a redesign of the welfare state.

The Government is still on track to have a surplus by June 2015 - but it is still forecast to be a small one, $75 million. Net debt by then would be about $70 billion.

It is relying on the new house-building target in Auckland - 39,000 over three years - as well as the gathering pace of the $40 billion Christchurch earthquake rebuild to provide momentum to the economy, increase its revenue and boost job numbers.

Mr English described his set of books as "a remarkable turnaround", going from a record deficit of $18.39 billion three budgets ago to a forecast $75 million surplus in the next one.

Prime Minister John Key described Mr English as "the envy of the Western world".

Opposition leader David Shearer said the Government had lifted expectations but had not delivered for first-home buyers or for children living in poverty.

The most significant changes in yesterday's Budget were in the provision of social housing.

Private sector groups will be allowed to replace Housing New Zealand as providers of social housing.

Their tenants will receive the same taxpayer subsidies as state housing tenants, who pay no more than 25 per cent of their incomes in rent.

The Government will pay the rest of the rent to the private providers, who will also be helped to buy houses for their portfolios.

The job of assessing housing need is being moved from Housing NZ to the Ministry of Social Development.

Mr English suggested that possible private providers would include organisations such as the Salvation Army, iwi groups and the Presbyterian Church.

He said it was better to integrate housing provision with organisations that also provided support for people with disabilities and social problems such as drug and alcohol problems and family dysfunction.

The new system will start small, and the cost will be capped at $30 million over four years. But once it is established, it will be able to be easily expanded.

The changes may not meet much opposition from housing activists - many are part of community housing groups and support having more control over social housing.

Among the welfare reform measures is a provision to hire 354 new staff for more intensive case management of beneficiaries - work which could be contracted to out to private services.

The plan to improve housing affordability by building 39,000 homes in Auckland was foreshadowed in last week's accord with the Auckland Council, but Mr English said a bill introduced last night under urgency would give the Government the power to award resource consents if it could not reach agreement on what qualified.

One of the harshest measures in the Budget targets overseas debtors who refuse to respond to requests to repay student loans.

The worst of them could be arrested at the border if they try to re-enter the country.

Mr English said Meridian Energy would be the next power company to be partially privatised, but headed off Opposition attacks by saying the proceeds of the asset sales did not count against operating balance - in other words, the Government was not selling assets to get a surplus.

Pre-Budget publicity on extending food-in-schools programmes turned out to be based on nothing but Mr Key's non-committal responses to questions. An announcement on plans would be made within a couple of weeks, Mr English said, but it is understood nothing had been planned before the pre-Budget media hype.

Mr English did loosen the purse strings after two Budgets without new spending.

Measures that could be described as addressing poverty include $100 million more over three years for home insulation, and a trial "warrant of fitness" for rental homes, starting with state houses.

Net new spending was $900 million, not $800 million as foreshadowed, but new spending in the next Budget will be a little lower. Overall spending in the coming year will be $72.36 billion. The deficit for 2013-14 is forecast to be $2.03 billion.

Mr English has delayed for two more years the resumption of payments into the Superannuation Fund, to 2021 when net debt is forecast to be down to 20 per cent of GDP.

Unemployment, which is now 6.2 per cent, is forecast to fall to 6 per cent next year and to 5.2 by 2017.


- NZ Herald

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