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(BusinessDesk) - The government's margin-of-error target to meet an operating surplus by 2015 has put spending on its biggest programmes under the gun, according to Finance Minister Bill English.
The government plans to keep its spending programme in check as the deteriorating global economy puts its budget surplus at risk, singling out "long-term drivers of costs in areas such as welfare, health, education and law and order," according to Mr English's budget policy statement.
"The forecast surplus of $66 million is not large," Mr English told a media briefing in Wellington. "The need for control does not expire once we get into surplus."
The budget policy statement spending priority will be given to health and education in the 2013 budget, with other departments and agencies expected to stay within existing baselines.
"We're not willing to get to surplus at any cost to the economy, because we're already on a pretty solid rate of fiscal consolidation," Mr English says. "We will continue with expenditure constraint."
The Treasury is forecasting social assistance grants, including benefits and pensions, rising to $24.31 billion in 2017 from $21.16 billion in 2012. Of that, pensions will rise to $12.69 billion by 2017 from $9.58 billion while family tax credit, and benefits will remain relatively flat over the forecast horizon.
Total health spending is forecast to rise to $13.71 billion by 2017 from $13.65 billion in 2012, education is expected to increase to $13.35 billion from $12.41 billion, and law and order costs are forecast to rise to $3.75 billion from $3.59 billion over the projected horizon.
The government has imposed zero budgets in recent years as it keeps a lid on spending and prevent its debt levels from ballooning after the global financial crisis in 2008.
Mr English will unveil spending plans for its future investment fund at next year's budget, which is expected to take $5 billion to $7 billion raised from its sell down of stakes in state-owned enterprises and use it for new capital investment.
The government will also use the next budget to support and extend its business growth agenda to assist businesses become internationally competitive.
The 2013 budget will also show what actions the government is taking to achieve its 10 policy targets as part of the better public services programme.