Charges against Future Budgets

As part of its Budget strategy, the Government has put in place some longer-term funding paths for particular sectors. This aids long-term planning and demonstrates the Government’s commitment to specific policies.

Charges against future Budgets do not meet the definition of a “risk” under the PFA, as these items are incorporated in the fiscal forecasts. This section is provided to increase transparency about the provisions for future Budgets.

Defence Funding Package

The Defence Funding Package (DFP) is designed to provide the New Zealand Defence Force (NZDF) with the funding required to address issues identified by the Defence Capability and Resourcing Review, including capability, and maintaining equipment and reserves. Budget 2006 included $73 million per annum as the second tranche of the 10-year plan. The following table shows the additional tranches as charged against future Budgets.

Health – Additional Elective Services

The Government has agreed that the indicative Health allocation of $750 million for Budget 2007 may be pre-committed by $59.5 million per annum for additional elective services.

Official Development Assistance

The Government has provided funding for an Official Development Assistance to Gross National Income ratio (ODA:GNI ratio) of 0.27% for the fiscal years 2005/06 and 2006/07 and is committed to increasing this to 0.28% in 2007/08. Budget 2006 included funding of $19 million per annum to reach the 0.27% ratio. The 0.28% ratio in 2007/08 is expected to cost $30 million, and will be charged against Budget 2007.

Removal of Carbon Charge

The Government has decided not to proceed with a broad-based carbon tax. As compensatory measures are still being developed, the cost of the removal of the carbon tax has been agreed as a pre-commitment against Budget 2007.

Specified Superannuation Contribution Withholding Tax (SSCWT) Exemption for KiwiSaver

The Government has agreed that employer contributions to KiwiSaver would be exempt from income tax (ie, Specified Superannuation Contributions Withholding Tax) up to a cap of the lesser of the employee’s contribution or 4% of the employee’s salary or wages. The cost of this exemption will be met from Budget 2007.

Tertiary Student Component Funding Rate Changes (the rolling funding triennium and fee and course cost maxima)

The Government had a policy of increasing Student Component funding rates for tertiary education by the rate of forecast Consumer Price Index (CPI) inflation on a rolling triennium. Funding was appropriated for future years at the rate of the CPI forecast plus 1%, and in the Budget preceding the relevant academic year funding rates are confirmed using a more up-to-date CPI forecast. This particular policy has been discontinued, and there is no further charge against any Budget beyond 2007.

Transport Capital Decisions

The Government has made several long-term capital commitments relating to Transport. This table notes the implications for the capital allowances beyond the forecast period.