Treasury urged govt to scrap Gumboot Friday funding, delay changes to tax package

Treasury recommended the government scrap funding for Gumboot Friday and delay changes to its tax package, Budget documents show.

The 'proactive' release of documents from this year's Budget, on Thursday, detailed the advice Treasury gave on proposals for spending and cuts across the board.

That included warnings that the reduction of funding for programmes targeted toward Māori could impact the Crown's relationship with iwi.

Officials also advised "caution" over National's pre-election commitment to fund 13 cancer drugs and stressed it would cost much more than National had indicated.

Tax cuts

Treasury officials recommended Finance Minister Nicola Willis trim the cost of her tax package ahead of this year's Budget.

They explored a range of options, including delaying the implementation of the tax package until October and scaling down its individual components.

Treasury estimated the government could save $530 million by delaying adjustments to personal income tax thresholds.

It also identified $810 million of potential savings by reducing increases to these thresholds by 10 percent each and $750 million of potential savings if personal income tax was halved for the $70,000 threshold.

The government could have saved another $1.16 billion if it retained the bottom threshold, the March document said.

Willis overruled these suggestions in Budget 2024, delivering a tax package largely in line with what National campaigned on.

Health

Treasury officials warned that Health NZ would find it a "challenge" to manage with the Budget funding set aside for cost pressures, exacerbated by its "performance concerns".

They noted the sector lacked a tangible plan for improving efficiencies and had "a long history of over-promising and under-delivering on savings".

Health NZ was also required to deliver 6.5 percent in back-office savings, which Treasury said would mostly come through job cuts. Treasury supported that, but flagged a "low risk" it could impact frontline staff or services in the immediate term.

Treasury advised "caution" over National's pre-election commitment to fund 13 cancer drugs and stressed it would cost much more than National had indicated.

Officials also suggested the coalition phase in its funding for the Gumboot Friday initiative or to scrap it altogether.

They advised against setting up the Mental Health Innovation Fund, but they said it was preferable to just funding Gumboot Friday.

"Whilst innovative approaches may provide unique ways of responding to low mental-wellbeing, we consider investment to address mental health issues is better directed to preventative initiatives."

MFAT

Treasury officials raised concerns ahead of this year's Budget that there was "not a clear rationale" for exempting the Ministry of Foreign Affairs from public service cuts.

All ministries and government agencies were asked by Finance Minister Nicola Willis to find back office savings of 6.5 to 7.5 percent.

Some ministries delivered much more than that, but notably Foreign Minister Winston Peters' ministry fell well short, at less than 1 percent.

The documents showed Treasury officials, in March, warned against treating MFAT differently to other agencies, saying it would be a missed opportunity not to identify low-value programmes.

"There is not a clear rationale for exempting MFAT from the savings process and treating it differently to other agencies, many of which have not seen comparable recent baseline increases but have a greater direct impact on living standards."

"We think that excepting MFAT from engaging in the baseline savings exercise would be a missed opportunity to identify low value programmes and reduce non-essential back-office spending," officials wrote.

Education

Treasury recommended the government end spending on the zero tertiary fees and apprenticeship boost schemes.

The government is shifting the fees-free scheme from the first year to the final year of study.

"We recommend that the Fees Free scheme is closed rather than shifted to Final Year as in the National - NZ First coalition agreement, and the savings are scaled up to the total funding allocated to the Fees Free programme," one of the documents said.

"Recent estimates of the savings from disestablishing the scheme indicate a saving of up to $220 million p.a. We consider the existing scheme to be low value."

There was limited evidence that the scheme had increased participation in tertiary education, or that the proposed replacement would incentivise students to progress, the documents said.

"If ministers wish to maintain the manifesto commitment, we consider a broad eligibility approach represents the greatest value for money. It is more likely to reach students who otherwise would not pursue tertiary study and is less administratively complex."

Meanwhile, another report said charter schools were one of the highest-funded non-capital items in the education budget.

It said that meeting Associate Education Minister David Seymour's aspirations for charter schools "appears challenging". However, the detail of those aspirations was redacted.

The document said the last time charter schools were allowed, only 11 schools opened over four years, the level of demand of demand for the schools was unknown, and support structures for the schools would have to be developed rapidly.

Elsewhere, Treasury described early childhood education as prohibitively expensive, noting that government spending on the sector was in the top third for OECD nations and private spending among the highest.

Māori

Treasury officials noted the reduction of funding in Budget 2024 for programmes targeted toward Māori could impact the Crown's relationship with iwi more broadly.

These programmes primarily targeted Māori or Māori interests, "especially relating to land and housing," as well as education and Te Arawhiti and Te Puni Kōkiri operations, and other areas such as a "reduction in claimant funding for historical Treaty of Waitangi settlement claims".

More than $200 million in savings came from those programmes, around 2 percent of the total Budget package.

"Alongside impacts on Māori individuals and whānau, there are potential flow-on implications for the Crown's relationship with iwi more broadly.

"Departmental saving initiatives across several agencies are expected to reduce funding on partnerships and Māori capability which could impact Crown-Māori relations, both in the context of the individual areas of cooperation and across the breadth of the relationship."

The documents also showed a "significantly smaller" share of Māori and Pacific peoples would benefit from the government's tax package - 10 percent less than non-Māori and non-Pacific peoples who would benefit.

"This is partly due to a higher proportion of Māori and Pacific peoples being main benefit recipients whose income in unaffected by personal income tax changes. Māori and Pacific peoples populations are also younger. Younger people are more likely to have little or no earnings because they are in training and education."

For Māori and Pacific peoples who did gain from the package, they would receive the same average benefit to the rest of the population, around $16 per week.

Overall, the major initiatives in the Budget would benefit Māori, but to varying degrees compared to non-Māori.

"Budget 2024's major initiatives are intended to benefit all population groups, including Māori. Most of the expenditure in the Budget is on personal income tax reductions, health and education, all of which benefit Māori.

"Māori benefit from funding targeted by economic need - for example, higher operational grant increases for low equity index schools, continuation of the Ka Ora, Ka Ako school lunches programme, and increased social housing places."

Justice

Officials warned proposed cuts across the justice sector would impact the quality of services, and could affect frontline staff.

Scaling back the Hikitia mental health and addiction service at the Waikeria Prison redevelopment risked being at odds with the government's plans to reduce re-offending, officials warned.

"Corrections has identified degradation of outcomes associated with reducing reoffending as the primary risk of this initiative. There may also be some commercial risk associated with early exit of third-party contracts for some of the services," the document said.

Justice also proposed a $3.1m reduction in funding for legal aid services. Treasury supported the idea, but acknowledged it could create equity risks around access to justice, and put pressure on Corrections.

"The Ministry expects the policy change to be limited to fine sentences but if the mix of sentences changes this proposal may create costs for Corrections management of community sentences," Treasury said.

A $2.1m cut to the Office of the Privacy Commissioner was found to possibly risk its ability to respond to major privacy breaches or prosecute key privacy issues, while a $68.4m reduction to Corrections' asset management budget came with a risk to asset availability due to lower levels of maintenance, and could have an impact on frontline staff working in those environments.

However, Treasury found those risks were manageable.

Welfare

The government deferred its Welfare that Works programme, after officials advised it would be too expensive and questioned its effectiveness.

"With regards to new spending, we consider the youth-focused employment support is not achievable at Budget 2024, given the government's fiscal constraints and the Treasury's concerns about the design of this initiative," a document from March said.

Officials said while there was merit to supporting young people into work, the cost of National's proposal was significant. They also said the programme mostly came from expanding an existing employment programme, He Poutama Rangatahi, which officials believed had limited effectiveness.

Instead, aspects of the initiative were funded through reprioritisations. In August, the government announced additional placements for job coaching, and its plan for tougher sanctions.

Meanwhile, $9.45m for job coaching was funded through reprioritised underspends from the 2023-24 Budget, while the Traffic Light System and 26-week reapplications for Jobseeker Support were funded within the Ministry of Social Development's baseline.

The Treasury recommended the minister for social development instructed officials to report back after the Budget on steps to ensure employment programmes were targeted, tested, and transparent.