Budget 2026: Winston Peters secures MFAT slight reprieve from cuts, Labour hints this could imperil $2.4b savings goal

Nicola Willis (left) says Winston Peters' MFAT will not be asked to make baseline spending cuts this year. Photo / Mark Mitchell

Finance Minister Nicola Willis has confirmed the Ministry of Foreign Affairs and Trade will not be asked to make baseline spending cuts this year.

The confirmation, responding to questions from Labour’s finance spokeswoman Barbara Edmonds, came after Foreign Affairs Minister Winston Peters cast doubt on whether MFAT would be asked to make spending cuts at all.

Edmonds used Peters’ remarks to suggest that Willis will fail to hit her $2.4 billion target of savings from the public service if Peters succeeds in protecting MFAT.

On Tuesday, Willis announced a plan to reduce public sector headcount to 1% of the population by 2029, a cut of 8700 roles on current numbers.

As part of this programme, she announced a baseline savings exercise, which would force some departments to reduce their baseline spending by 2% this year, followed by 5% reductions next year and the year after. The cuts are meant to generate savings of $2.4b over the four-year forecast period.

Some departments, like the intelligence agencies and the Ministries for Health and Education, have been excluded from the exercise. MFAT was not listed amongst the excluded agencies on Tuesday, a fact that surprised some political analysts who have observed how hard Peters fights for MFAT’s resourcing.

Peters himself seemed sceptical that his department would be making cuts, when asked on Tuesday.

“I know all of our embassies are going to be retained, everything is going to stay the same,” Peters said.

On Wednesday, Willis confirmed in the House that “the Ministry of Foreign Affairs and Trade was excluded from the 2% baseline reduction but has not been excluded from the outyears”.

This exclusion was not made clear in the material released on Tuesday.

There is some doubt as to whether the 5% savings Willis promised in the outyears will materialise, with Peters hinting on Tuesday that he would campaign on keeping funding as it was.

“There’s the small matter of [an] election on the 7th of November, and the Budget next year,” Peters said.

“The Budget doesn’t stretch four years. If you believe that with an election coming, you know nothing about democracy,” he said.

“That’s knucklehead stuff, mate,” he said.

Willis said in Parliament today that she disagreed that MFAT should stay the same. She said efficiencies “should be found in the back office to better support our diplomats and frontline workers around the world”.

Willis admitted to having “extensive debates” with Peters about “what the Ministry of Foreign Affairs’ budget should be”.

“It’s fair to say our views sometimes differ,” Willis said.

She said Treasury had judged that Cabinet’s decisions to cut baseline spending were enough to book the savings and that Treasury’s $2.4b calculation included the fact MFAT was excluded from the 2% cut this year.