The operating allowance for next year’s Budget is set at $2.4b. That means almost all cost pressures in existing services and any new spending initiatives will have to be funded from that pot of money. Treasury said in the Budget Economic and Fiscal Update that $2.5b is needed simply to fund existing service levels, meaning the Government needs to free up $100m from elsewhere just to stand still.
Health has been given a funding commitment of $1.37b and the Government’s late cancer drugs announcement will mean about $151m charged against that allowance. That means the Government has about $880m of its operating allowance left to spend – and it still needs to find $100m to fund existing service levels.
Seymour said: “Nicola [Willis] did a tremendous job in really tough circumstances with the first Budget and where we got to is significant savings and you see that in the pressure coming off inflation.”
He said there was now an opportunity to “go back to first principles and ask questions about why are we doing this, do we need to keep doing this?”
“The exact shape of that is something that’s in discussion,” Seymour said.
The Government had to hurry work on the most recent Budget, given ministers were only sworn in at the end of November. They have a full year to work on Budget 2025 and there are indications it could be bold.
“You’ll see better savings next time than even this time,” Seymour said.
While most of National’s plans for spending cuts got over the line in Budget 2024, particularly the plan for a baseline savings exercise, many cuts proposed by Act at the election did not get the green light.
While National campaigned on across-the-board tightening of departmental spending, Act was keen to abolish entire departments including the Ministry for Women, Pacific Peoples, Māori Development, Ethnic Communities, Crown-Māori Relations and the Human Rights Commission.
The abolition of these departments was estimated to save about $280m a year.
Labour’s finance spokeswoman Barbara Edmonds said the Government’s scramble to find funding for cancer drugs, which was charged against next year’s Budget, showed it had “no understanding” of what was important to Kiwis, and was indicative of a messy Budget process that would require continued cuts to fund new spending pledges.
National’s pre-election fiscal plan said the drugs were meant to be funded in this year’s budget, not Budget 2025. The Government has admitted it could have done better to meet that initial promise.
Seymour, who is the minister in charge of Pharmac, confirmed on Wednesday he only began work on the cancer drugs policy after the Budget. That timeline suggests the backlash to their omission was key to the policy being brought forward and announced.
Edmonds said the Government had been told they needed to find $2.5b in additional money “just to keep the lights on”.
“Anything less than that is cutting into bone,” she said.
Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
