Next month's budget will cut "low quality" government spending and more public service jobs are likely to be lost, Finance Minister Bill English says.He revealed today $1.8 billion would be "redirected" from ineffective programmes into
Next month's budget will cut "low quality" government spending and more public service jobs are likely to be lost, Finance Minister Bill English says.
He revealed today $1.8 billion would be "redirected" from ineffective programmes into high priority areas like health and education, reiterating that government agencies should expect little, if any, new money.
"I think there will be a continuing sorting out of the public sector," he told reporters after a budget scene-setting speech in Wellington.
"There was a reduction of about 1500 jobs in the last 12 months and I expect that process is likely to continue."
Mr English said ministers had found that across the public service there were many ways to provide the same services with less money "and in some cases drop off services that aren't effective".
The money flow would go mainly into health and education, he said, although there would be some "shifting around" of resources within those areas as well.
"Under the last government there was quite a lot of pretty ineffective expenditure put in place, so we'll be shifting it from the back office to the frontline and from programmes that are less effective, in some cases ineffective, to programmes that work better."
Mr English did not rule out a business tax cut in the May 20 budget, although he indicated decisions hadn't been made.
"It's not off the table. We're looking at a number of issues around the taxation of business, including whether Australia moves on corporate tax because that would have a competitive impact on New Zealand, but that's not finalised," he said.
Mr English said raising tobacco and liquor excise tax were "possibilities" and referred to the Law Commission report on the sale and supply of liquor which is due to be released on Tuesday.
"I understand it is likely to advocate an increase in excise tax. The Government will deal with those issues as they arise," he said.
In his speech to the Wellington Regional Chamber of Commerce, Mr English said New Zealand had come through the recession in reasonably good shape and the budget would focus on building higher and sustainable economic growth.
"The road to recovery will remain bumpy at times," he said.
"We still face some economic headwinds -- the global recovery remains fragile, our high exchange rate against the US dollar and the pound is hampering exporters, and New Zealand households are over-extended.
"The slightly better than expected economic outlook won't bring any dramatic changes to the fiscal forecasts accompanying the budget compared to the December forecasts."
During his speech Mr English appeared to confirm that GST would increase from 12.5 percent to 15 percent in the budget -- a move that has been widely expected but never actually announced.
"The prime minister has said that any tax switch involving cutting personal taxes across the board and raising GST to 15 percent would leave the vast bulk of New Zealanders better off. That will definitely be the case," he said.
Mr English went on to give details of how an increase to 15 percent would work, saying the price of products would rise by 2.22 percent, not 2.5 percent as many commentators had assumed.
"Secondly, Statistics New Zealand has also confirmed that an increase to 15 percent would raise overall consumer inflation by 2.02 percent," he said.
"This is because several consumer items like housing rentals, mortgage payments and school donations are not subject to GST."
