Coalition deal schemes face cuts

The Whanau Ora welfare programme and other coalition deals are all on the table for cuts in this year's budget as the Government tries to rein in spending.

Prime Minister John Key confirmed yesterday that most, if not all, of the $800 million "new money" spending originally planned for the May budget would go.

There would still be between $600m and $800m extra spending for health and education, but it would come from cuts in other areas.

Some Government programmes would cease and others would be trimmed at the margins, Mr Key said.

Speaking to news media today, Mr Key said he would be cautious dealing with schemes that were part of coalition deals, such as the Maori Party's Whanau Ora, but would not rule out cuts.

"We're all in this together, in the end we've got to find ways of making sure that our budget is balanced, that we're in a position where the country doesn't suffer a downgrade unnecessarily," he said.

"Our partners know the position the country finds itself in and they're not immune to that.

"Take something like Whanau Ora, where there is an expectation of a significant increase over time, that increase might have to take longer."

KiwiSaver and the interest-free student loan scheme were also up for consideration, with Mr Key saying the Government would look at all the big schemes.

"You're talking about very big schemes, where we might be able to find $20 or $30 million -- they all add up."

Mr Key said the Government needed to respond to the risk of the country downgrading.

"Downgrade means that New Zealanders ultimately pay more for their interest rates and they find it harder to raise capital.

"That means that businesses, if they can't raise that capital, can't use that to fund growth. It's bad for jobs, it's bad for the economy. Every single homeowner pays through higher interest rates."

Finance Minister Bill English said the Government had been working on a tight budget for some time.

"The Prime Minister's indicated quite clearly there's going to be no lolly scramble in the election-year budget, the earthquake on top of other events has put pressure on our debt and we're going to be tightening up Government spending."

Mr English said New Zealand was facing a large deficit, likely to be about 8 or 9 percent.

"It will be a very large deficit for a developed country and we are aiming to reduce it pretty quickly over the next few years."

Mr English also spoke about scaling back Government programmes, but ruled out dramatic cuts to several schemes.

"There won't be any radical changes to either KiwiSaver, or Working for Families or student loans."

Labour leader Phil Goff said cuts to KiwiSaver would be counterproductive to increasing saving.

"A week ago Bill English was saying no need for short-term cuts, this can be dealt with in the long-term, they are now saying there will be growth next year, big growth, and they will have paid the debt down to 20 percent in three years time," Mr Goff said.

"I think this is simply being used as an excuse, an alibi for implementing the agenda they were talking about before the February 22 earthquake."

Mr Goff said there had been talk of cutting Working for Families and student loans before the quake.

"This is their agenda and they are not wasting a good crisis to justify it."