NZ Herald's Liam Dann and Jenée Tibshraeny break down the big takeaways from Budget 2024. Video / NZ Herald
Winston Peter’s iron-grip over foreign affairs funding has been showcased in just-released Budget documents, which show how the veteran politician delivered savings nowhere close to Finance Minister Nicola Willis’ initial expectations.
He was able to do so despite officials saying there was “no clear rationale” for treating Peters’ ministry differently from others.
Peters today defended his approach, saying officials are “not running the country anymore”.
Prior to the May Budget being delivered, Peters announced $15 million in savings per year in the Foreign Affairs space, mostly from back-office changes. This comes to $60m over the forecast period.
This equated to around 1% of the Ministry of Foreign Affairs and Trade’s (MFAT) budget, despite most agencies being asked to find 6.5% or 7.5% worth of savings. Ahead of the Budget, Willis said some agencies would deliver savings below target while others would be over.
As she did with each minister, Willis wrote to Peters in December laying out her expectations for how he would approach Budget 2024 and the demands of cost savings.
“You must identify options to meet the savings target of $98.9m per annum from 2024/25. This target is 6.5% of your eligible base,” Willis said.
The minister also highlighted that MFAT’s full-time equivalent (FTE) figure had increased 35% since 2017 against an average increase across the public service of 34%. Operating expenditure increased 44% and Willis said this growth should be scrutinised when Peters considered saving options.
Willis’ letter also said there had been a 98% increase in contractor and consultant spend since 2018, compared with the 55% average increase across public service departments. She made her expectation clear that Peters prioritised a reduction of this spending while finding savings.
Officials say MFAT shouldn’t be treated differently
On March 15, officials provided a briefing to Willis saying Peters hadn’t submitted an option to save the expected $98.9m.
It made a point of noting that to reach the Government’s overall savings goal of $1.5 billion annually, “all ministers and agencies need to look hard” at their spending and the baseline for Foreign Affairs “has increased markedly” from $1.3b in 2018/19, to $2.2b in 2023/24.
“There is not a clear rationale for exempting MFAT from the savings process and treating it differently to other agencies, many of which have not seen comparable recent baseline increases but have a greater direct impact on living standards.
“We think that excepting MFAT from engaging in the baseline savings exercise would be a missed opportunity to identify low value programmes and reduce non-essential back-office spending.”
Asked about this official advice on Thursday, Peters said: “Well that’s what officials might say, but they’re not running the country anymore, are they?”
Peters goes to the Prime Minister
Four days later, on March 19, Peters wrote to Prime Minister Christopher Luxon. He said this followed a meeting with the PM in February. Peters has since said all ministers wrote the Prime Minister.
Much of the letter is redacted, but Peters said the coalition Government needed to bring “discipline” to public spending after “our predecessors’ profligate spending”.
“It is in this spirit that we, with extreme reluctance, and ahead of my Budget bilateral with the Minister of Finance... present the following ideas which (taken together) offer up more than the $98m per year in requested savings across the Parliamentary term.”
Peters emphasised that the ideas presented were an “absolute last resort” if the Prime Minister and Minister of Finance “insist” on proceeding with applying a savings target to MFAT.
Many of the suggested actions have been kept secret, but those that added to $15m in savings are shown, such as reducing the back office, stopping an annual contribution to the Pacific Co-operation Foundation, and reducing the use of contractors and consultants.
At the end of the letter, Peters again makes clear he believes the overall package of savings – at that point worth more than $98 million - “to be seriously unwise” and they were a “last resort proposal in the interests of finding a resolution to our Budget 2024 discussions”.
He believed by “reluctantly agreeing” to upfront back-office savings and reviews leading to significant reprioritisations, the Government could “safeguard its international agenda and reputation” and ensure taxpayer money was targeted at the right places.
‘Important we work together’
A meeting was soon held between Willis and Peters, with the Finance Minister following up on March 26 saying his proposals “fall short of meeting the expected savings target”.
However, she thanked him for the $15m of proposed savings and said she would accept them.
Notably at the end of her letter, Willis said: “Getting the Government’s books back in order and effectively managing taxpayers’ money is a responsibility we all jointly hold as ministers”.
“It is important that we work together to meet our fiscal and policy goals.”
Where the savings comes from
A series of emails between staffers in the office of the Finance Minister, Treasury and MFAT have also been made public.
They appear to show some confusion about how exactly the $15m would be made up, including whether some savings would come from aid programme expenditure. That issue was eventually kicked to ministers to clarify.
In the end, Peters confirmed the make-up of the $15m cuts with Willis on April 17, including $7.615m in annual savings from non-priority areas of international development.
Other savings the Budget showed included $4.255m each year from reduced consultant, contractor and back-office spending and $1.4m each year by ceasing funding for the Pacific Co-operation Foundation.
Peters said on Thursday “what we’re doing is stepping up as a country” after he found a “massive void” in the foreign affairs portfolio.
Jamie Ensor is a political reporter in the NZ Herald Press Gallery team based at Parliament. He was previously a TV reporter and digital producer in the Newshub Press Gallery office.
