Better Stewardship of Public Resources
One of the aims of this Government is delivering good-quality services efficiently. To achieve this aim it is essential that the Government prudently manage the taxpayers' resources. Doing so effectively is not just about balancing the books. It is also about encouraging efficiency and innovation in public service delivery and about taking care of the balance sheet. A balance sheet perspective complements the already strong focus on the major sources of the Crown's financial claims and obligations - its tax revenue and spending plans.
Better, Smarter Public Services
The focus remains on delivering better and smarter public services for less. The Government is a significant part of the economy. Core Crown expenses are 35% of GDP, and together, central and local government spending is equivalent to about 45% of GDP, so it is important that it works as efficiently as possible in delivering the right public services in the right way. Delivering top-quality services and regulatory settings is the way the public sector contributes to private sector productivity.
Figure 6 shows how important it will be to get better value from our existing spending in the future. The $1.1 billion operating allowance is only a small fraction of the $70 billion that the Government will spend in 2010/11 on providing its core services. While the $1.1 billion will add up over time, getting better value out of the amounts we are already spending is increasingly important.
- Figure 6 - Sources of growth in government expenditure
- Source: The Treasury
The challenge of working within the cap on new spending means that the pressure on departments to innovate and prioritise will intensify in coming years. Most agencies will see no additional funding for several years. Chief Executives will need to make enduring and significant changes to the way they operate, including reorganising their back office administrative functions, if they are to deliver the services the public wants.
Across government this will mean exiting from low-value expenditure and looking for new ways to deliver higher-quality services more efficiently. This is not an easy task. The Government will work with the public sector to change approaches, expectations and ways of thinking. We already have a cap on non-frontline full-time equivalent staff numbers as the Government's focus is ensuring resources are targeted at front-line services.
The Government will continue to review spending and examine potential gains from cross-agency approaches to delivering common functions such as administrative and support services. As part of the Better Administrative and Support Services (BASS) programme, a range of administrative and support functions including finance, ICT, procurement, human resources and a range of corporate and executive services are being benchmarked at 11 agencies from across the State sector. This work will identify opportunities for reducing the cost and strengthening the efficiency and effectiveness of these services, and future phases will act on these opportunities. A similar process has been initiated in the health sector specifically looking at District Health Boards.
Changes to the organisation of the State sector can also enhance effectiveness. Recent examples are the amalgamations of the Ministry of Research, Science and Technology and Foundation for Research, Science and Technology; New Zealand Food Safety Authority and Ministry of Agriculture and Forestry; and the National Archives, National Library and Department of Internal Affairs. These three amalgamations will reduce staff numbers across these agencies by up to 55 and realise savings of up to $20 million over three years.
A key reason for these shifts is better service delivery for customers. We want people to receive what they need in ways that achieve better results. For example, both the Ministry of Social Development and Inland Revenue are looking at ways to transform transactional services for customers through improved online services. We also want to enable the social sector to achieve better results by being more flexible and responsive to the needs of communities, not just to deliver contracted outputs. The Whānau Ora programme is an example of this approach.
Delivering sustainable performance improvements and better value for money requires high-quality performance information. The Government is working to improve the quality of performance information across the public sector.
One specific example is the Government's development and release of additional information on tax expenditures. Tax expenditures are targeted preferential tax treatments, such as a tax credit or exemption, used to achieve a specific policy objective. Tax expenditures place pressure on other government spending. Improved transparency around tax expenditures will allow them to be assessed in a similar way to other forms of government spending. The information identifies and, where possible, quantifies tax expenditures that exist within the tax system. The tax expenditure information is available at www.treasury.govt.nz/budget/2010/taxexpenditure.
The return to fiscal surplus and the focus on better, smarter public services are also important for ensuring the long-term sustainability of New Zealand's fiscal position. Ongoing cost pressures, and demands from the public for continued improvements in health and other services will be compounded by the ageing population. As discussed in the Treasury's 2009 Long-term Fiscal Statement, the first of the baby-boomers turn 65 next year, with the proportion of the total population that is over the age of 65 expected to almost double over the next 40 years. This is significant because this age group already receives around a quarter of total government spending, predominantly via New Zealand Superannuation payments and health services. Similar challenges are being faced to varying degrees in most developed economies.
To minimise the impact of increased spending related to the ageing population on future taxes it is necessary to start saving now by running fiscal surpluses and using the surplus to either pay down debt or build up financial assets such as the New Zealand Superannuation (NZS) Fund. This highlights that the need for fiscal restraint, efficiency gains and ongoing reprioritisation is not just a near-term phenomenon, but will be a necessary feature of New Zealand's economic and social landscape for the next few decades.
