The Government has found $4b of savings to top up its 2023 Budget, Finance Minister Grant Robertson announced this morning in a speech, but the opposition says the savings are not enough, with National finance spokeswoman Nicola Willis calling Robertson’s speech a “resignation letter”.
Faced with high inflation, Robertson warned at the end of 2022 that he would only set aside $4.5b of new day-to-day spending for this Budget. If ministers wanted additional money to fund election year goodies, they would have to find it by cutting spending elsewhere.
In a pre-Budget speech to the Wellington Chamber of Commerce, Robertson announced the size of those savings was $4b over the forecast period - about $1b a year.
“Ministers were sent a clear message that if they wanted to progress particular priorities, they needed to be looking for savings opportunities within their own agencies’ existing budgets,” Robertson said.
“The outcome of this exercise is that Budget 2023 will include $4 billion of savings and reprioritisations over the four year forecast period. For the most part, this funding has gone toward funding agencies’ existing cost pressures.
“We will detail in full what makes up this number when the Budget is released, but to be clear, these savings have been found across a wide range of areas, some of which have been well publicised already,” he said.
A large amount of this money has come from cancelling things like Covid-19 spending and axing the sweetener payments promised to councils for Three Waters.
The $4b in savings over the forecast period compares with the $1b of savings over the forecast period identified by ministers when undertaking a similar exercise in 2019. Core Crown spending was $86.9b then, the most recent forecast is for core Crown spending to be $129.3b this year.
Robertson said that the cost of the cyclone recovery would be funded from existing spending and borrowing, rather than raising new taxes, something Prime Minister Chris Hipkins ruled out. He said this meant some ministers missing out on funding for pet projects in order to fund the recovery.
“As the Prime Minister has already indicated the ongoing costs of the recovery will be met within the Budget operating allowance or Multi-year Capital Allowance. This means we have put responding to the cyclone ahead of some of the other areas Ministers liked to have focused on.
Robertson said exactly how the $4b in savings - about $1b a year - would be added to the Budget will be revealed on Budget day itself. The obvious way calculation would be to lift the amount of new day-to-day spending to $5.5b, although it is not clear that the $4b in savings neatly work out to $1b a year.
Opposition parties immediately laid into the speech. National finance spokeswoman Nicola Willis said the savings were not enough and that the speech read like a “resignation letter”.
“In last year’s Budget Mr Robertson sprayed the public money hose around with wild abandon, adding $38 billion in new spending over four years,” Willis said said.
“Now he expects New Zealanders to be grateful that he’s cleaning up a small corner of the spending mess, having only been able to sacrifice less than 1 per cent of overall government spending. It’s simply too little, too late,” she said.
Act leader David Seymour said Robertson was “relying on people believing that $4 billion is a big number”.
“But in the context of the entire government budget, it is minuscule,” he said.
Seymour said Act’s alternative Budget “A Time for Truth”, released on Monday, would “face facts”.
Robertson also warned that the slowing economy was having an effect on the Government’s economic forecasts, which will be published with the Budget next week.
“It is inevitable that this will have an impact on our key fiscal indicators. We can also expect to see tax revenue lower than previously expected as we saw in the Crown accounts released this week,” he said.
“Our position remains strong and we are resilient, but there is no avoiding global and climatic forces,” he said.
The speech also spent more time needling the opposition than previous pre-Budget speeches delivered by Robertson. In a thinly veiled reference to National and Act’s tax cut promises, Robertson said they were unaffordable.
He said that while inflation did increase the Government’s tax take, it also meant it cost the Government more to deliver services.
“Others may suggest to you that inflation means that the Government can afford to do any number of things, including tax cuts,” Robertson said.
“This might be a convenient political line to run, but it is not an economic policy appropriate to this time in New Zealand.
“Adequately funding the services that New Zealanders rely on every day is a serious challenge and one which has occupied much of our time and resources in the Budget I will deliver next week.
“Making sure we meet the needs of our people in health, education and housing is core, and it simply has to come first,” he said.
“I don’t go around telling people that spending on public services will go up, public debt will go down and taxes will be cut, all at the same time,” he said.