The Government has slashed $700 million in this year's budget to pump more money into core services, but opponents say it has been less than transparent about where the axe will fall.
Most of the cuts will come from well-forecast changes to student loans, KiwiSaver and Working for Families, but solid details of a $330m shake-up of the public service won't emerge until departmental chiefs start to make cuts from next year.
Finance Minister Bill English today said the budget would free up $5.2 billion over four years, including $700m in this year's budget, with the savings to be re-invested into frontline services.
The changes to KiwiSaver, which include halving the member tax credit and taxing compulsory employer contributions, will save $2.6b over four years.
Tightening up the Working for Families scheme will save $448m, while changes to the student loan scheme will save $276.6m in operating funds and $170m in capital funding over five years.
A well-signalled shake-up of the public sector won't come into effect until after the November election, with the first savings to be made from July next year.
The budget calls for $650m in savings over three years by requiring more than 100 state sector agencies to fund their own employer contributions to KiwiSaver and other state sector retirement schemes.
A further $330m will be cut from 31 core public sector ministries and departments over three years from July next year. Where those savings come from will be left to the departments.
The Ministry of Foreign Affairs and Trade will take a hit sooner, with $30m to be trimmed over two years in an efficiency review. Changes to overseas development assistance funding will save $100m by spreading planned increases over four years rather than two.
Social development savings will total $67m, with another $245m to be reallocated within the portfolio. Reallocations include $56m of funding that had been ring-fenced for family support services and $45m from under-spending in other areas.
The health sector will reprioritise $505.1m over the next four years, with savings to made in workplace training, immunisation programmes, back-office spending, and contingency funds that are no longer needed.
Education savings will be made by reprioritising $356m of unused contingency funding left over from last year's budget.
Among the savings signalled ahead of the budget was $638m over four years from the ACC non-earners' account, which covers injuries for people such as retirees and students, due to improved returns and better cost control.
The state sector cuts have drawn the most criticism, with Labour finance spokesman David Cunliffe questioning where the axe will fall.
"Unspecified cuts of $1b over four years to public services will hit education and health, and there will be no alternative to service cuts or a return to the failed user-pays policies of the past," he said.
Public Service Association national secretary Brenda Pilott said Mr English had cut the very services New Zealanders would need to help them through tough times.
"He doesn't even have the courage to spell out where the cuts are going to fall. Instead he leaves it to his chief executives to make the tough choices that he won't make himself."
Council of Trade Unions economist Bill Rosenberg said the Government would be spending little more than last year despite the gloomy economic outlook, which would amount to a $2b cut in real terms when inflation was taken into account.
Mr English said the savings would provide significant funding for better frontline services in areas like health, education and law and order.
"Trimming lower-priority spending, or spending that is no longer affordable in today's circumstances, plays a key role in meeting these goals and helping rebalance our economy towards more savings, investment and exports."
