Finance Minister Nicola Willis on her 2024 Budget. Video / Mark Mitchell
The coalition Government is only hours away from unveiling Budget 2024 and many will be waiting to hear Finance Minister Nicola Willis’ much-anticipated plan to provide tax cuts amid challenging economic times.
Willis has so far revealed how many New Zealanders will get a tax cut - 83 per cent of people over the age of 15 and 93 per cent of households.
However, she has refrained from committing to National’s tax plan which proposed to give an average-income family with children up to $250 more per fortnight.
What she has promised is that the tax cuts won’t require the Government to borrow and won’t increase inflation. Willis has also committed to more spending in health, education and police.
In the last few weeks, the Government has revealed several items of spending across defence, Pharmac and corrections.
So what’s already been announced? Here’s a list of what we know:
Corrections
A mega-prison in Waikato is part of its $1.9 billion spend in the upcoming Budget with funding going towards an 810-bed extension of Waikeria prison.
The package would also fund 685 new Corrections staff, including 470 new Corrections officers. Almost $80m would go towards a National Party campaign commitment to provide rehabilitation services to the increasing number of prisoners on remand.
About $1.5b of the four-year package was new money, with an extra $442m from cuts made to Corrections amid the Government’s effort to limit “back-office” spending in the public service.
The 810-bed extension was in addition to the roughly 600 beds set to be added to Waikeria as announced under the Labour-led Government in 2018. Those beds were supposed to have been built by 2022 but the timeline was extended in 2023 with a new completion date in 2025.
Aerial photo of the new Waikeria facility under construction. Photo / Department of Corrections
Factoring in Waikeria’s current capacity of 455, the prison would have a new capacity of 1865 by 2026 under this Government’s plan.
Waikeria Prison had been a political football in the past - in 2018, Labour scaled back National’s plans for a 2000- to 3000-bed prison, slating it as an “American-style mega-prison”. Instead, it announced an extra 500-bed prison with a further 100 beds for prisoners requiring mental health treatment.
Defence
A total of $571 million of new funding will boost pay for Defence Force staff, upgrade its NH90 helicopter fleet and replace dated military vehicles.
The pre-Budget announcement, made by Defence Minister Judith Collins, also included $107m in cuts to the NZ Defence Force and the Ministry of Defence - part of the Government’s efforts to reduce public service spending.
Of the $571m, $163m would be used for “remuneration for uniformed personnel” to help address the Defence Force’s issues with attrition that have heightened in recent years.
The remaining $408m, comprising $127m in operating funding and $281m in capital funding, would be used for new projects.
New Zealand’s NH90 helicopter fleet would get new navigation systems and updated encrypted radios to allow for interoperability with overseas partners. It also paid for the Defence Force to replace the 40-year-old Unimogs and Pinzgauer trucks, used to carry personnel and equipment and provide off-road mobility during events such as Cyclone Gabrielle.
For the rest of the year, the programme would remain as it was with all contracts and commitments in place. From next year, a new model will be established to feed students in years 7 and above and shave money off the cost. There will be no change in the way the programme operates for primary school students.
Seymour had been a long-standing critic of the programme, having previously said the programme could be cut by as much as half.
While the top-up funding was in place in 2025 and 2026, Seymour said a full redesign of the programme would be undertaken based on commercial experience, data, and evidence.
Education
Charter schools are set to return from next year with $153m committed over four years to establish 50 charter schools.
Charter schools operated in New Zealand between 2014 and 2018. They were a long-standing Act Party policy when Act was a support party for the National Government.
However, they were abolished in 2018 by the previous Labour coalition Government. Charter schools at the time could transition into character schools, which are entirely government-funded for years 0-13 and teach the national curriculum that aligns with their “character”, such as an iwi or educational philosophy.
Another $53m has been earmarked to help recruit and train 1500 teachers in the next four years.
Education Minister Erica Stanford has featured in a couple of pre-Budget announcements. Photo / Mark Mitchell
It would add in-school training places for primary and intermediate teachers, as well as the current secondary programmes.
As part of the new government funding, trainee teachers will receive a $20,000 placement package, to go towards living expenses and tuition fees. Schools will also receive a contribution towards the cost of training and mentoring those new teachers.
A further $67m went towards mandating structured literacy across all state schools from the start of next year.
The spend would help advance professional development on structured literacy for teachers, supply books and resources for schools and teachers and introduce phonics checks to assess student progression.
Mental health
Mike King’s well-known mental health provider Gumboot Friday has received $24m from the Government over four years, boosting the number of counsellors it employed and how many mental health appointment for young people it could provide.
King, alongside the country’s first-ever Mental Health Minister Matt Doocey and New Zealand First leader Winston Peters, said he could hire about 300 more counsellors which would help provide up to 160,000 free counselling sessions for people aged between 5 and 25 over the next four years.
The Government’s spend honoured a promise made in the coalition agreement between National and NZ First to fund Gumboot Friday by $6m per year. Gumboot Friday sat within the I Am Hope charity.
King has rebuffed concerns about the procurement process the Government followed in making the funding decision, saying his would be the “most transparent organisation” out there.
The Government will boost Pharmac’s budget by more than $1.7 billion over the next four years, increasing the national drug purchasing entity’s overall budget to almost $6.3b.
Official advice stated the country’s drug buying agency required more than $400m a year on top of existing $1.1b annual funding to ensure medicines already funded could continue to be provided.
Associate Health Minister David Seymour speaking at the first national medicines summit. Photo / Mark Mitchell
The Government claimed the lack of ongoing funding for Pharmac was one of the “fiscal cliffs” left by the previous Labour Government. The previous Budget hadn’t allocated more funding but Labour had promised during the election campaign to increase Pharmac’s budget by roughly $250m annually over four years.
During the election, National promised to roll back Labour’s policy for universal free prescriptions and use the money from reinstating the prescription fees to fund 13 new cancer drugs, at a cost of $280m.
Today’s increase of roughly $450m more per year would enable Pharmac to continue access to the drugs it currently funded but did not extend to the 13 new treatments.
Speculation had grown in recent weeks that the commitment might be altered in the Budget, with Health Minister Shane Reti saying the 13 drugs would be funded when the money was available.
Surf Life Saving NZ would receive $44.1m over the four-year period while Coastguard NZ would receive the remaining $19.1m. The $63.6m package comprised of reprioritised transport spending, primarily from underspends in the last financial year.
Surf Life Saving’s funding would address service costs, upgrade clubs and equipment, help develop beach safety initiatives and build a regular donor base.
The Coastguard spending would go towards regular costs, national membership promotion, four new bases and ongoing maintenance of Coastguard vessels and aircraft.
First home grants cut for more social housing
The Government recently announced it would scrap the first home grant scheme to pay for the delivery of 1500 new social housing places over the coming four-year forecast period.
About $245m would come from ditching the subsidy scheme that allowed first home buyers to access up to $10,000 to put towards a deposit.
Housing Minister Chris Bishop (right) and Associate Housing Minister Tama Potaka during their visit to the Dwell Housing Trust community housing project in Kilbirnie, Wellington. Photo / Mark Mitchell
About $140m of that would go to Community Housing Providers for the social housing boost, while the remaining money would be spent after the forecast period.
The move had attracted significant criticism from Opposition parties, which readily pointed to the Government’s $2.9 billion tax break for landlords as a way to frame the Government’s priorities.
Social investment
Willis earlier this month announced the re-establishment of a new stand-alone Social Investment Agency, worth $50.5m.
The agency was set up by the last National-led Government in 2017 but was changed into the Social Wellbeing Agency by Labour.
Operational from July 1, the agency would manage a Social Investment Fund to directly commission outcomes for vulnerable New Zealanders, and to work with community, non-government-organisations (NGOs) and iwi providers.
Foreign Affairs
A total of $60m has been given to the Ministry of Foreign Affairs for the “necessary renewal of New Zealand’s diplomatic post infrastructure in the Pacific”, according to Minister Winston Peters.
A total of $60m across the forecast period of “back-office efficiencies and lower priority activities” would be cut.
Prior to the election, the then Labour Government had announced it would trim non-front line services by 2 per cent a year or $506m a year across the whole Government beginning in the fiscal year 2024/25. That has been absorbed by the new Government as part of its drive to save $1.5 billion a year.
The ministry was in line to contribute $35.1m to that savings exercise from the next Budget, 2024/25. Peters’ office confirmed those cuts have been scrapped and superseded by Peters’ new, smaller cuts, saving the agency $20m.
Adam Pearse is a political reporter in the NZ Herald Press Gallery team, based at Parliament. He has worked for NZME since 2018, covering sport and health for the Northern Advocate in Whangārei before moving to the NZ Herald in Auckland, covering Covid-19 and crime.
