Trimming the Mfat: Winston Peters cancels planned cuts, saving ministry $20m a year

NZ First leader Winston Peters has saved Mfat from cuts. Photo / Mark Mitchell

Foreign Minister Winston Peters has saved Mfat from a round of painful cuts, reducing part of its budget by a mere 1 per cent - a fraction of the size of the cut planned by Labour and promised by National.

As Labour’s cuts were already planned, the Ministry of Foreign Affairs and Trade’s budget will actually be $20m better off than expected prior to the election.

Peters said the Government had found “$15 million in savings per year in Vote Foreign Affairs from back-office efficiencies and lower priority activities to play our part in turning around the country’s fiscal position – for a total of $60 million across the forecast period”.

Prior to the election, the then Labour Government had announced a savings exercise of its own, trimming non-front line services by 2 per cent a year or $506m a year across the whole Government beginning in the fiscal year 2024/25. Those cuts were in train prior to the election. They have been absorbed by the new Government as part of its drive to save $1.5 billion a year.

Mfat was in line to contribute $35.1m to that savings exercise from the next Budget, 2024/25. Peters’ office confirmed those cuts have been scrapped and superseded by Peters’ new, smaller cuts, saving the agency $20m.

Mfat was also in line for a 6.5 per cent cut under National’s Back Pocket Boost election policy - cuts that would have been in addition to Labour’s plan.

Those cuts were in addition to Labour’s cuts, but used a slightly different baseline. The policy would have trimmed 6.5 per cent of a $556m departmental spend, equating to an additional $36m cut or $70m in total. In light of that, Mfat has actually saved $55m.

“Given the legacy of exploding debt and budget deficits across the Government’s books under our predecessors, we have found $15 million in savings per year in Vote Foreign Affairs from back-office efficiencies and lower priority activities to play our part in turning around the country’s fiscal position – for a total of $60 million across the forecast period,” Peters said.

Peters said Mfat was getting some new money too, negating the effect of his modest cut.

“$60 million in capital and operational investment for the necessary renewal of New Zealand’s diplomatic post infrastructure in the Pacific.”

He described the budget as “balanced”.

“The balance struck in this year’s budget is between risk and opportunity and between back-office savings and frontline investment. Its emphasis on fiscal savings and risks is entirely appropriate while we review the ministry’s overall operations, including our overseas diplomatic network in the coming months to better align it to the coalition Government’s foreign policy priorities and opportunities to seriously lift our export performance over the coming decade,” he said.

Peters said that the Government would look to turn around a crisis in the Scott Base redevelopment project, which had gone severely over budget. The most recent cost estimate was just under $500m, about twice the original agreed cost estimate.

“Under new board leadership, we are also turning around the serious fiscal risks we inherited on the stalled Scott Base redevelopment project, reducing taxpayer liability for what remains a significant project of national interest.”

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.