Budget 2012: The Facts

Bill English has delivered his fourth Budget this afternoon.

Overview:

• New spending of $4.4 billion over the next four years.

• This will be paid for by $4.39 billion of savings and new revenue initiatives. Savings coming from education, welfare and transport.

• Total net new spending of just $26.5 million over the next four years.

• There’ll be no new spending on capital projects in this or the following four Budgets. Any new projects will be funded through things such as partial asset sales rather than additional borrowing.

• Operating deficit before gains and losses - $8.4 billion. In BPS in February that was estimated to be a $12.1 billion deficit. It’s being put down to lower than expected government spending and a delay in some expenses, such as earthquake costs.

• Deficit falls to $7.9 billion in 2013/14 and $2 billion in 2013/14.

• Surplus still on track for 2014/15 – but it’s expected to be just $197 million. Last year it was expected to be over $350 million.

• Growth to average about three percent a year over the next four years.

• Forecasts show net core Crown debt will stay below 30 percent of gross domestic product (GDP) – will peak at 28.7% in 2013/14.

• Treasury expects 154,000 people to gain work over the next four years.

• Taxes New revenue of $1.36 billion is expected by increasing tobacco excise tax, greater targeting of tax avoidance, closing tax loopholes and ending outdated tax credits. New rules for tax deductions for assets rented for income such as baches and boats.

• New operating spending allowances of $800m for next year and $1.2 billion for 2014.

ANNOUNCED:

Future Investment Fund: The partial sale of five SOEs is still expected to garner five to seven million dollars.  

The money will go into the Future Investment Fund and the first $558 will go into schools, hospitals, innovation and transport.

The first $33.8m will go on modernising schools.

$250 million will go towards the KiwiRail Turnaround Plan.

The health sector will get $88.1 million, mainly towards hospital redevelopments.

And $76.1 million will go on the creation of the Advanced Technology Institute.

Kiwisaver: Plans for auto enrolment in KiwiSaver have been deferred, indefinitely.

The Government had planned to introduce it in 2014/15, but finance minister Bill English says it’ll now only proceed when the Government has sufficient surpluses to meet the forecast cost of up to $514 million over four years.

There’ll also be new disclosure rules on performance, returns and fees and a review of current default provider arrangements.

Govt Spending: It can now be identified where the Government has re-prioritised its spending for this year’s Budget.

Budget papers reveal the Government is to spend more than $4.4 billion on new initiatives over the next four years.

Health, education and social development get the lion’s share.

However their gain is other areas pain.

The Government’s removing half a billion dollars from student support packages and over $120 million dollars from housing.

Economic Development: Two MED funds set up by Labour are to be cancelled. The Enterprising Partnerships Fund and the Transformational Initiatives Fund will be disestablished, saving $26.1 million over the next four years.

Justice: A new fund is to be set up that’ll see money saved in some areas of the justice system poured into areas that need it more.

As part of this year’s Budget, the Sector Funding Pool will be established, covering police, corrections, court, justice, Attorney-General and the Serious Fraud Office.

All spending will come out of current budgets.

Inland Revenue: Inland Revenue is to get extra cash to make sure taxpayers are meeting their obligations.

The department's getting just shy of $80 million in the Budget with the money to be used to strengthen debt and compliance activities.

Revenue Minister Peter Dunne expects the approach will accrue an extra $345 million in revenue over the next four years.

School Infrastructure: There's to be a review of the management of school property as part of this year's Budget.

Nearly $34 million of money gained from the partial sale of the four state owned energy companies will be spent on school infrastructure.

Education Minister Hekia Parata says alongside that, there'll be an independent review of where money should be invested in and who should be responsible for maintaining it.

Tobacco: The price of tobacco is being hiked.

After raising excise rates by at least 10 percent over the past three years, the Government is to repeat the strategy.

Finance Minister Bill English has announced tobacco excise will go up by 10 percent a year for the next four years as part of the Government's wider anti-smoking programmes.

The change will see the price of cigarettes hit around $20 for a 20 pack by 2016.

Tax Rule Changes: Tax rules are to be changed and loopholes closed in moves the Government predicts will raise hundreds of millions of dollars in revenue.

Unveiled in today's Budget are new rules for cost deductibility of assets rented for income, such as holiday homes, boats, and baches.

Regulations for livestock valuation are also to be changed to negate unintended tax breaks.

And three tax credits are to be canned because they’re deemed no longer fit for purpose; the under $9880 income credit, the childcare and housekeeper credit, and tax credits for a child’s active income.

In total the Government says the changes will bring over $400 million in savings over four years.

Transport: Transport looks to have been one of the biggest losers when it comes to the Government’s reprioritisation of its spending.

Documents released in today’s Budget reveal the area’s one of several to feel the Finance Minister’s knife with its annual appropriation almost $140 million dollars lower than what it was last year.

Energy: Energy’s budget is down by $20 million and Arts, Culture and Heritage is getting a $14 million trim.

Foreign Affairs and Trade: Foreign Affairs and Trade, which has been at the centre of cost cutting measures sees its budget increase by over $20 million.

KiwiRail: is to get further cash from the Government.

$250 million worth of capital funding has been allocated to the state owned enterprise.

Transport Minister Gerry Brownlee says it's for the company's turnaround plan and is the final round of funding in a three year programme.

He says the aim is to help KiwiRail's freight business become self sustainable.

Christchurch Recovery: Funding plans are being revealed for ongoing quake recovery work in Christchurch.

In total, almost $3.7 billion is to be spent over the next four years with around $1.4 billion to be allocated on infrastructure.

Almost $30 million will be spent on the new Christchurch Central Development unit, and just under three million on a CERA community wellbeing team.

Health and Education: Health and education are the winners, with most other sectors having to make do with what they’ve got.

The health sector receives the largest amount of new spending, totalling $14.2 billion over the next year.

The Government also wants to focus its spending on science and innovation.

$133 million will go on improving services for people with disabilities, $20 million on maternity services and $48 million for faster and more elective surgery.

Early Childcare Education: $1.3 billion this year to be spent on ECE subsidies – but the amount will stay the same, whereas in the past there’s been a annual adjustment.

Funding for the sector will remain the same with the focus continuing to be on increasing participation, particularly among the vulnerable or at risk. Participation in ECE will be increased to 98 percent by 2016, up from 94.7 percent currently.

Maori:  1000 Maori cadetships will be funded over the next four years, costing $10 million. Two million has been allocated to maintain the Maori Language.

Partial Asset Sales: The money gained from the partial sale of the four state owned energy companies is to go into school buildings, KiwiRail, hospital redevelopments and a new Advanced Technology Institute.

An initial $558 million will be spent on those, with $250 million going on the KiwiRail Turnaround Plan.

Student Loans and Allowances: It's been confirmed money will be taken away from student loans and allowances and poured into engineering and science programmes.

Those cuts will save $240 million, with a further spend of 65 to $74 million will go into high-level tertiary education, including the Performance-Based Research Fund.

Skilled Training: 3000 more young people will get government support into training and education.

It’ll take the number of free tertiary-based Youth Guarantee places up to 8,750.

Tertiary education minister Steven Joyce says those will go on levels 1-3 at technical institutes and will go in priority trade areas such as carpentry, engineering, horticulture, plumbing and gas fitting.

Housing: $70 million in savings from Housing New Zealand will go towards providing more money for non-governmental organisations to build affordable homes.

$104 million of savings will go to the Social Housing Unit.

And an extra 41,000 homes will be insulated as part of the Warm Up New Zealand programme.

Money has also been cut from the Welcome Home Loans Mortgage scheme.

Youth Mental Health: $18.3 million will be spent over the next four years on mental health services for children and young people. Includes $1m for mental health information and support for families, $8.7 million for mental health youth workers in secondary schools. A new contestable fund will be set up for NGOs to get information to families and young people.

PREVIOUSLY ANNOUNCED:

Welfare Reform - $287.5 million extra over four years to spend on education and training, support for youth

Prisoner Rehabilitation – Reducing offending  by 25 percent by 2017, $65m reprioritised for better rehab

Education – Student teacher ratios increased, post grad qualification required for teachers, performance pay

Tertiary Education – Changes to student loans, allowances, parental income threshold frozen

Welfare Changes - $1m on long term contraception for beneficiarires, $80m over four years for ECE and childcare, $55m for more WINZ staff, more youth services

Health – Prescriptions to rise from $3 to $5, $101m to be spent on elective surgery and scans, cancer services

Labour Leader David Shearer is castigating Bill English's fiscal plans labelling it a "departure lounge" Budget.

He says it's a zero Budget with zero growth and zero aspiration and offers zero hope that it'll grow the economy.

Mr Shearer says the budget will result in more Kiwis heading for airport departure lounges and looking for better opportunities offshore.

The Government's decision to remove tax credits for children's incomes is being greeted with disdain.

Mr Shearer is scathing of the move.

"We're picking the pockets, Mr Speaker, of our paper boys and paper girls around the countryside."

Mean spirited, nasty, and vindictive are the words of New Zealand First Leader Winston Peters.

He's accusing the Government of being stuck in a time warp, selling assets, cutting public services, and ignoring manufacturers and exporters.

Mr Peters says the Government's ignoring the status of the rich yet has resorted to taxing the pocket money children earn.

He says it's the work of a fiscal fiend.

The Green Party is unimpressed with the Government's plans.

Co-Leader Russel Norman says it's a petty Budget that does nothing to address the big issues facing the economy.

"We've got a current account deficit getting worse, we've got international debt position getting worse and the Government has produced a non-event Budget that's not going to fix those problems."