This year is an ‘almost’ zero Budget with only $26.5m of new spending over the four year period. Through efficiency and reprioritisation the gross new spend is actually $4,417m. This does not include increases in spending which moves with the economic cycle such as welfare payments and debt interest.
Budget 2012 confirms operating allowances in future years will remain lower than historical levels but higher than recent Budgets: $800m in 2013/14 and $1.2bn in 2014/15. The Government will need to deliver on its forecast economic growth if it is to keep these allowances.
Government Departments have identified $1.28bn within their own budgets to reprioritise towards areas which they believe are likely to deliver better results. A further $982m has been taken off some departments and reallocated to new spending initiatives. The remainder of new spending has come from tax and excise changes and reducing past contingencies.
One can’t help but feel the cupboard’s been thoroughly searched and little remains to be saved without more reprioritisation and tough policy trade-offs. The Minister of Finance advised analysts that, for too long, spending has not been linked with improved outcomes. In that context, it is pleasing to see Government articulate the clear, challenging outcomes it’s seeking from the public sector.
The big stories this year are:
- Around $280m over the next four years will be saved from changes which have already been announced for student loans and allowances, partly to be reinvested in tertiary education.
- $194m savings from the welfare reforms.
- Changes to teacher- to-student ratios will save $174m over four years.
- $123m of housing savings reprioritised back into housing initiatives.
- Around $150m from justice will be reprioritised back into reducing reoffending.
- Saving $40m a year by increasing medical prescription charges.
Departments will need to produce solid plans to make these savings stick so they can deliver on the new spending commitments.
The challenge will be managing the trade-offs required. At one level the politicians are demanding budget constraint. At the delivery level, the decisions are increasingly being left to Government departments and agencies to make those spending choices.
Recent events show it is no easy task to manage the balance of public, employee and Government expectations. This is even more so when departments need to spend money and access specialist skills to deliver the savings or more effective results.