Govt To Turn Around State Sector Spending
May 10th, 2010
The Budget is all but locked down, and Finance Minister Bill English concedes he is “happy” with the way major departments have buckled down to living within the cap of $1.1bn of new spending. It had been a big challenge to turn around the state sector spending “super-tanker,” but by re-prioritising programmes, and knocking some on the head, many departments, with a smaller allocation of “new spend” money, will be able to undertake new activities. In the process the departments have got a better understanding of cost drivers, and can see plenty of potential for getting better results within baselines.
This holds out the scope for another tight budget next year. The Police Dept is cited as one which at first said it couldn’t change within the confines of current spending, but when it looked hard it found enough cash to get through a pay round without increasing the baseline. Traditional trench warfare by the health sector unions has been foregone with a consensus on the delivery of changes in the sector. The same can’t be said of unions in the education sector where a 4% pay claim may evolve into a war of attrition. Major exercises in ACC and the Housing Corporation will also be significant in the reform process, which English concedes has a good distance to travel yet. While the headlines from the budget will be dominated by the tax changes, it may be the long-term development of a more efficient state sector which has an equally significant impact on the economy.
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Duncan Cotterill