Govt cost-cutting hits wide range of programmes

Prime Minister John Key. Photo / Mark Mitchell

The Government's budget cost-cutting is likely to wipe out or delay a wide range of programmes and projects including those initiated by its support parties, ministers indicated today.

Prime Minister John Key confirmed yesterday that most, if not all, of the $800 million "new money" originally planned for the May budget would go because the Government had to help rebuild Christchurch.

He said there would still be between $600m and $800m extra spending on health and education, but it would have to come from cuts in other areas.

Mr Key said some programmes would be cut, and the extent of the exercise became clear today.

Defence Minister Wayne Mapp said the planned upgrade of the 20-year-old missile system on the navy's frigates would go ahead, but he wasn't going to ask for funding this year.

"We're going to do that in a staged way, in a responsible way, taking into account the current financial situation," he said.

Dr Mapp said the cost was expected to be toward the lower end of an estimated $300m to $500m.

Police Minister Judith Collins wouldn't rule out cuts to the police budget, although Prime Minister John Key said it was unlikely.

"I don't anticipate cuts to the police budget, they certainly won't be getting a substantial increase but they're working hard on their own review," he said.

The chief executives of all public service departments have been told to look for ways to save money and report to their ministers.

Mr Key said he would be cautious when dealing with projects that were part of coalition deals, such as the Maori Party's Whanau Ora welfare delivery programme, but would not rule out cuts.

"We're all in this together, in the end we've got to find ways of making sure that our budget is balanced, that we're in a position where the country doesn't suffer a downgrade unnecessarily," he said.

Mr Key was referring to the international credit rating agencies -- if they downgrade New Zealand, the impact would almost certainly be higher interest rates.

"Our partners know the position the country finds itself in, and they're not immune to that," Mr Key said.

"Take something like Whanau Ora, where there is expectation of a significant increase over time, that increase might have to take longer."

ACT leader Rodney Hide seemed prepared to sacrifice the 2025 Taskforce, an agency set up at his initiative to find ways to catch up with Australia's economic growth.

"I'm happy to put that on the table for discussion," he said.

"I would certainly be asking all party leaders to be looking at issues that have been important to them, and ask themselves whether they are necessary in light of events."

Finance Minister Bill English spoke today about scaling back government programmes, but ruled out dramatic cuts to schemes like KiwiSaver or Working for Families.

"There won't be any radical changes to either KiwiSaver, or Working for Families, or student loans," he said.

Labour leader Phil Goff accused the Government of using the Christchurch earthquake as an excuse to implement an agenda worked out before February 22.

Finance spokesman David Cunliffe said the Government's cost-cutting was "an extreme and dangerous" response.

"By ripping out nearly a billion dollars of expenditure, National is bound to contract the economy and prolong the recession," he said.

"Kiwis are already struggling to make ends meet, and Kiwis who can't find jobs will find themselves even more deeply embedded in National's scrapheap."

- NZPA