Boring, predictable and colourless is Bill English's label for next week's Budget. Political editor Audrey Young reports
Finance Minister Bill English does a cruel impression of former finance minister Bill Birch conducting a bilateral Budget meeting in a bygone era.
Sitting in his Beehive office this week, English flicks his tongue to the corner of his mouth several times.
"Like a lizard," he says.
Those were the days when English was Health Minister and Birch was doing what finance ministers did - make ministers and officials sit well into the night to haggle for every cent of new spending programmes of $2 million here and $5 million there.
Birch, now Sir William, turned predictability into an art-form.
The lack of deference by the current finance minister towards his former senior colleague suggests that Birch made English jump through hoops for increases to his budget.
But under the much tougher times of English budgets, not only has the haggling over spending increases gone - there's no money - so has the haggling over savings.
In a Budget process for the times, most of the savings and reprioritisation for next week's Budget was done by Government departments.
"Get them to do the work and we sit and watch," he says, only half-joking.
Last year so-called purchase advisers - consultants who knew the public service inside out - were called in to help inexperienced ministers from being out-manoeuvred by cunning chief executives defending their budgets.
They helped to cut $2 billion over four years for reallocation.
This year most of them have gone solo, and the savings have been made by chief executives and ministers. They have shifted $1.8 billion which had been budgeted over fours years to other priorities.
English has little sympathy for public service resistance, given that departmental budgets grew so rapidly under Labour.
"Four or five years ago, in the middle of the brilliant pink consensus, everyone was quite happy with their baseline being 30 to 50 per cent lower than it is now. So [I'm asking them] why it has to be so big and [to] go and figure it out."
So if others are making the savings, what has English been doing apart from signing off Treasury's work on the tax reform package?
What gets him most excited is much bigger picture stuff, something called "the responsibility model."
It is a process that delves deeper into the heart of each Crown entity to find out what is driving up its costs and then changing it.
It is done through Cabinet's expenditure control committee, the strategy committee, and between English and other ministers, and looks at spending tracks over three to five years.
"We are saying is - and there will be a number of examples of this in the current Budget - now we can understand what is driving these costs, by making two or three changes here over the next four years we can get that under control and by year four, it could be $50 million [saved] or $110 million.
"Whereas if I go in now and get $5 million out, I haven't solved the problem."
The smart ones are already thinking about the 2011 Budget, he says.
"We would be expecting them to come back, not with a list of rinkie dinkie savings but saying 'here are our cost-drivers, this is our cost structure and this is what we are going to do to get it down, or get our service levels up', or whatever."'
As examples he cites work being done at Housing New Zealand and specifically at the Ministry of Social Development by the welfare working advisory group looking at the big driver of future costs: long-term invalids and sickness beneficiaries, a group he describes as "this big hard lump of long-term waste of human potential".
English says the MSD is not set up to deal with them.
Rather, it is set up to deal with "the easy stuff" - the unemployment and the domestic purposes benefits.
"They do the easy stuff and they do it very well, but they don't worry about these guys. If they were ACC customers, we would be spending a lot of money on trying to move them. They cost a bit less on sickness and invalids [benefits], not a hell of a lot less, but we do nothing and we are actually doing nothing to reduce this very large long-term liability."
English says there is a tension in the process because if you are not really familiar with how a particular entity works "it's a bit hard to tell if they are trying hard enough. We don't know a lot about what happens in some of these fairly big outfits so we are always arguing internally between myself and Treasury about whether we need to step in or not."
English says the process of examining the big cost-drivers is called the responsibility model because it throws the responsibility back.
"The traditional view of the public service is when things get tight, Treasury and the Minister of Finance are responsible. We are saying 'no it's you, you're the chief executive, you're responsible'."
The Budget process has not only changed dramatically from the 1990s, the economic conditions have changed considerably from even a year ago.
This time last year, in the full face of the global recession, the media was obsessing about what Standard and Poors and other credit rating agencies would make of National's first Budget.
"Legitimately so," says English. "We should just be pleased that Standard and Poors are not obsessing about us."
That Budget got the tick and New Zealand avoided a credit downgrade, the interest rate rises and the political humiliation that would have followed.
And now in comparison with other parts of the world, and in light of the "shock and awe" $1.3 trillion stabilisation package for Greece by Europe and the IMF this week, English says New Zealand is looking pretty good.
He doesn't believe the shock and awe package is going to work that well.
"If the answer to too much debt is more debt, well the day of reckoning is just further ahead of you. It just reinforces the need not to be exposed to those debt markets. This is debt markets on steroids."
It is the sort of debt market that would have been perilous for New Zealand if the dire financial projections soon after the 2008 elections had not improved.
"They'd be after us."
The debt levels in some of the developed world would create 20 to 25 year volatility around sovereign debt.
"What it tells you is that if you can get into a stronger position sooner, you really are going to do better than lot of people because we won't be subject to that uncertainty and all those political problems."
The central plank of the Budget will be the well-signalled "tax switch" - increasing GST and removing some of the tax breaks for investment properties to fund cuts in personal tax.
There will be a few unexpected twists, he says, and a bit more detail but there will be no "new arguments."
"So it will be boring, predictable, and colourless," he says.
That's what puts him in mind of Bill Birch.
