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Budget 2007 Home Page Half Year Economic & Fiscal Update 2007

Risks Removed Since the 2007 Budget Update

The following risks have been removed since the 2007 Budget Economic and Fiscal Update:

Expired Risks Reason Funding Received
($ million)
Conservation – Lease of Taupo Property Rights from Tuwharetoa Cabinet has decided to set aside funding (CAB Min (07) 32/1 refers) Commercially sensitive
Economic Development – Increased Stadium Capacity for the Rugby World Cup Moved to Contingent Liabilities Operating: 14 in 2006/07; Capital: 20 in 2006/07
Education (Tertiary) – Centres of Research Excellence Cabinet has decided to set aside funding (POL Min (07) 11/2 refers) Operating: 10 in 2007/08 and outyears; Capital: 20 in 2007/08
Education – School Staffing Review Cabinet has decided to set aside funding (CAB Min (07) 37/7 refers) Operating: 2 in 2007/08, 17 in 2008/09 and outyears; Capital: 10
Environment – Climate Change Policies Now funded Operating: 25 in 2007/08, 50 in 2008/09 and 2009/10, 41 in 2010/11 and outyears
Finance – Development of Rail Land Incorporated into other Finance rail risks None
Housing – Hobsonville: Additional Land Purchase No longer meets SFR criteria – not greater than $10 million in any one year over the forecast period None
Revenue – Taxation of Redundancy Payments Funding has been agreed (CAB Min (07) 39/5 refers) Estimated reduction in tax revenue: 14.6 in 2007/08, 12.6 in 2008/09, 11.6 in 2009/10 and outyears; Operating: 1.089 in 2007/08, 1.311 in 2008/09, 2.356 in 2009/10, 0.485 in 2010/11 and outyears; Capital: 0.159 in 2007/08 and 0.487 in 2009/10
Revenue – Tax Treatment for Relocation Expenses No longer meets SFR criteria – not greater than $10 million in any one year over the forecast period None
Revenue – Tax Incentives for Giving to Charities and Other Not-for-profit Organisations No longer meets SFR criteria – not greater than $10 million in any one year over the forecast period None
Social Development – New Zealand Superannuation – International Portability No longer meets SFR criteria – not greater than $10 million in any one year over the forecast period None
Transport – Extending the State Highway Construction and Revenue Guarantee The changes to the funding and planning system mean these guarantees will be superseded as user charges will be adjusted to manage cost and revenue pressures None
Transport – Investment in Transport Infrastructure The Government has agreed to fully hypothecate fuel excise duty to land transport investment from 1 July 2008. None

Statement of Fiscal Risks

Agriculture and Forestry – Industry Partnership for Food and Pastoral Innovation (new, unquantified risk)

The Government is considering options for a partnership with industry to enhance pastoral sector and food innovation. This would decrease the operating balance and/or increase gross debt. This risk is unquantified as disclosure may compromise the Crown in commercial negotiations.

Corrections – Collective Employment Contract Negotiations (unchanged, unquantified risk)

The Government will be entering into negotiations with the Public Service Association and the Corrections Association of New Zealand to settle six new collective employment agreements. Current agreements expire in the first half of 2008. Any additional funding would decrease the operating balance. This risk is unquantified as disclosure may compromise the Crown in negotiations.

Corrections – Capital Projects (unchanged, quantified risk)

The Government is considering the asset management of current Corrections facilities, and requirements for increased capacity to meet the continued forecast prisoner growth in the foreseeable future, including the replacement of Mt Eden Prison. Estimated costs of upgrade and expansion are $1.2 billion capital through to 2014, with ongoing operating implications of $123 million per annum for the programme of capital projects completed by the end of the forecast period, and additional ongoing operating implications of $89 million from 2013/14 for the remainder of the capital programme. These estimates are based on the 2006 Justice Sector Prisoner Forecast which includes the impact of 1,000 Police and Effective Intervention decisions to date, and in response to the 2006 Capital Asset Management Review. Capital injections would increase gross debt while operating funding would decrease the operating balance.

The Minister of Finance has yet to fully consider the quantum of this risk.

Source: Department of Corrections

Culture and Heritage – Broadcasting initiatives (unchanged, quantified risk)

On 3 February 2005, the Government released a Public Broadcasting Programme of Action. The Programme contains a set of priorities to guide public broadcasting policy over the six-year period to 2009/10, and a series of proposals to give effect to these priorities. The Programme as a whole (if fully implemented) would have total ongoing operating costs rising to around $44 million in 2009/10. Broadcasting initiatives totalling $11 million, $6 million and $3 million per annum have been included in Budgets 2005, 2006 and 2007, respectively. The Government may consider individual proposals relating to the Programme for the remaining $24 million per annum over the next three Budgets. If funded, these would decrease the operating balance.

The Minister of Finance has yet to fully consider the quantum of this risk.

Source: Ministry for Culture and Heritage

Customs – CusMod Replacement (new, quantified risk)

Customs' border management systems (CusMod) are over ten years old. Customs received funding in Budget 2007 to develop a business case for replacement systems for consideration in Budget 2008. In accordance with the two-stage approval process for major IT projects, funding for the CusMod replacement is dependent on approval of the two business cases. The indicative cost of the project is up to $100 million capital and up to $22 million operating per annum. Any additional funding would decrease the operating balance and increase gross debt.

The Minister of Finance has yet to fully consider the quantum of this risk.

Source: New Zealand Customs Service

Economic Development – Venture Investment Fund (unchanged, quantified risk)

In Budget 2006, the Government agreed to additional investment commitments in the Venture Investment Fund of $60 million from 2006/07 to 2008/09. The Government is also considering further commitments of $40 million over two years (2009/10 and 2010/11). This depends on the results of the evaluation of the Venture Investment Fund scheduled for completion by 31 March 2009. This would increase gross debt.

The Minister of Finance has yet to fully consider the quantum of this risk.

Source: Ministry of Economic Development

Economic Development – Radio Spectrum Rights (unchanged, unquantified risk)

The Government sets the processes for the renewal or auction of property rights to radio spectrum in consultation with industry. Any revenue from sale of rights would increase the operating balance by the full amount of the sales less the cost of sales as charged to the Spectrum Sales Appropriation. Offers for rights of renewal to existing owners of spectrum rights are set approximately five years in advance of rights expiring from 2010 onwards with settlement being required prior to granting the new right. If any offers are rejected then they will be allocated by way of auction on the open market. (For this reason the expected revenue from sale of renewal rights is not reflected in current forecasts of revenue).

Economic Development – Shanghai Expo 2010: New Zealand Participation (unchanged, unquantified risk)

The Government has announced New Zealand's participation in the Shanghai Expo 2010 and officials are in the process of developing a detailed proposal for the design and construction of a pavilion to be used at the agreed site for New Zealand at the Expo. The Government is considering meeting part of the overall cost of New Zealand's participation. However, the amount that the Government contributes will depend on the level of industry contribution obtained and the development of a more definitive budget for New Zealand's participation at the Expo. Any contribution from the Government would decrease the operating balance.

Education – Schools ICT Network Infrastructure Upgrade (unchanged, unquantified risk)

Budget 2006 provided $4 million in capital and $0.6 million in associated operating funding for a partial roll-out of the Schools ICT Network Infrastructure Upgrade, as part of the School Property Business Case 2006/07. The roll-out is intended to assist schools to meet the costs of upgrading their computer networks to meet the new IT infrastructure standards. The Government will consider further roll-out in future budgets. This would decrease the operating balance and increase gross debt.

This risk is unquantified as disclosure could compromise the Crown in negotiations.

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