Reprioritising Towards Front-line Public Services
Delivering better, smarter public services is a critical part of the Government's economic programme. Over the last two years, we have signalled the need for the public sector to become more efficient following large increases in spending over the past decade. In Budgets 2009 and 2010, we reprioritised $3.8 billion in public sector spending towards front-line services.
Budget 2011 directs spending towards front-line services
Budget 2011 achieves further savings of $5.2 billion over five years. Of this, we have redirected almost $4 billion towards new initiatives – primarily front-line services such as health and education. The remaining savings will be used to reduce the deficit.
In addition to this $5.2 billion, agencies have reprioritised a further $1.5 billion from within existing budgets towards higher priorities. This reprioritisation has allowed the Government to continue investing in front-line services, while constraining the increase in debt.
Health
The health sector will receive $1.7 billion new operating and $40 million capital funding over the next four years.
District Health Boards (DHBs) will receive an additional $1.6 billion to manage price and demographic pressures and widen access to newly subsidised medicines. Additional funding is also being provided to deliver better public health services, including $68 million for more elective surgery, $130 million for disability support services and $55 million for mothers and babies.
In addition to the $1.7 billion in new operating funding, a further $500 million has been reprioritised within Vote Health to help deliver these priorities. Total funding in Vote Health will be almost $14 billion in 2011/12.
Education
Budget 2011 provides an additional $1.3 billion new operating and $109 million capital funding for the education sector.
New funding is targeted toward initiatives that support our education system, lift student achievement and engage young people in study options that lead to worthwhile qualifications. Over the next four years this includes an increase of $118 million in new operational funding for schools, $550 million for early childhood education and $67 million to increase the number of Trades Academies and Service Academies.
In addition to the $1.3 billion in new operating funding, a further $356 million is being reprioritised within Vote Education to fund higher-priority initiatives. Total funding in Votes Education and Tertiary Education combined will be $12.2 billion in 2011/12.
Supporting State sector efficiency
Rebalancing the economy towards the tradable sector means that the public sector will need to make up a smaller part of the economy than it does at present. This means that the public sector will face tight spending constraints for some time to come.
To support our drive for better, smarter public services, the Government is seeking efficiency savings across the State sector of $980 million over three years.
This initiative will ensure that the State sector faces the same pressures that the private sector faces to improve efficiency and productivity. The aim is to reduce costs across the public sector while ensuring that the Government continues to provide the critical services that are important to New Zealanders. These savings will provide a catalyst for making significant changes to agencies' business models.
A key component of this initiative is a new requirement on State sector employers to meet the costs of KiwiSaver, the State Sector Retirement Savings Scheme (SSRSS) and the Teachers’ Retirement Savings Scheme (TRSS) from within their own budgets. At present, many State sector employers are centrally funded for the costs of these schemes.
Budget 2011 terminates this central funding effective from 1 July 2012, which will place State sector employers on the same footing as other employers.
Insulating State sector employers from these costs is inconsistent with the Government's efforts to rebalance the economy towards the tradable sector. It is important that State sector employers face the same personnel costs as private sector employers.
Savings generated by the removal of central funding for KiwiSaver, SSRSS and TRSS equate to $650 million over three years. A further $330 million in efficiency savings will be sought from core government agencies.
The Government has been developing a range of tools to assist agencies to achieve these savings, such as improvements to procurement and capital management processes. The Better Administrative and Support Services (BASS) programme's recent benchmarking exercise has identified significant savings that can be achieved by improving efficiency across agencies, in the areas of human resources, information and communication technology and finance. This comes alongside the Government's sustained focus on addressing the long-term cost drivers in key areas such as welfare and law and order.
