KEY POINTS:
The Treasury has demonstrated its willingness to give free and irritating advice to ministers by telling the National Government which of its big policies it doesn't like.
They include its changes to Kiwisaver, some features of its tax policy, such as the new independent earner allowance Independent; scrapping the R and D tax credit and investing 40 per cent of the New Zealand superannuation Fund over time in New Zealand, a paper released yesterday reveals.
Labour seized upon the paper, suggesting it was vindication of its policies.
But it is evident from the paper that the Treasury had major concerns about the quality of the spending under the former Labour Government.
It points to concerns about lack of performance in the education sector and about the quality of youth training, about Labour's $500 million broadband investment fund, the cost of increased imprisonment of low-level offenders, and how elective surgery was managed by district health boards.
The briefing paper, Economic and Fiscal Strategy - Responding to Your Priorities, was released by Finance Minister Bill English yesterday. The Treasury gave it to him ahead of the 2009 budget policy statement issued in December last year.
The Treasury strongly backs Mr English in giving priority to cutting "wasteful expenditure" from the public service.
"Our analysis of the public sector from a value-for-money perspective has identified significant concerns with the quality of government spending that supports the priority you have given this."
It says he should also give priority to getting better information on performance in the public sector. It says it can provide him with a list of departments, sectors or programmes for a targeted exercise on value for money.
It says that health, education and justice were likely to deliver "maximum gains" in terms of savings and demonstrable value-for-money improvements.
In education it suggests that some of the spending on school property, for example, be targeted to popular, over-subscribed schools.
It has concerns about how schools will cope with the stronger focus on skills training.
"There is a risk that schools avoid responsibility for struggling students by referring them to alternative providers of variable quality."
Alternative programmes could come under the Education Review Office, or be funded only if the student remained at school.
The Treasury told Mr English that it had already identified potential savings of $2.5 billion of "lower value components" in initiatives and it pointed to other areas of saving.
"We think there is scope to reconsider a number of pre-commitments signalled for Budget 2009, particularly in the areas of defence, innovation and health."
Labour leader Phil Goff said the Treasury had given responsible advice that key Labour policies were sound and worth retaining but that for party political reasons the advice has been ignored."
TREASURY SAYS:
Education
* Government's approach to school sector industrial negotiations in the next three years should emphasise the need for greater flexibility, productivity and performance as a condition for salary increase.
* There is no need to increase real expenditure significantly...the most significant value for money gains are likely to come from improving how funding is linked to performance.
Abolishing R and D tax credit
* We recommend retaining the R and D tax credit...our judgment is that the overall benefit in terms of higher productivity is likely to be greater than the cost and complexity of tax credits.
Cutting minimum Kiwi Saver contribution to 2 per cent
* Could reduce the level and adequacy of the retirement savings of some middle-income earners.There is no clear evidence that the 4 per cent contribution level is acting as a barrier to participation.
Independent earner rebate
* It may pose implementation challenges for IRD.
Labour's broadband fund
* We recommend that the broadband investment fund is immediately abandoned as this is not an appropriate funding model for a national network.
Law and order
* As a result of previous policies, New Zealand currently faces an unsustainable cost in the construction, operation, and wage cost of the infrastructure required by the criminal justice system.BY AUDREY YOUNG
