Budget 2015

This year's Budget had little to offer for the public sector.


Budget 2015 was presented against a backdrop of continuing financial constraint as the government continues its efforts to balance its accounts, but despite many promises to the contrary it has failed to do so in this financial year. This is largely due to lower than expected inflation which has led to lower than forecast tax revenue (down $4.5billion over this year and the next 3 years).

However, this hasn’t stopped the government putting money aside for possible tax cuts. Though it admits it could afford $1.5 billion of “new” spending in each of the next three years it is “saving” some of that up for tax cuts in the 2017 election year leaving only $1 billion. This gives tax cuts a higher priority than the mounting economic, social and environmental deficits that it has swept under the carpet for the last six years.

So the Government continues to set itself tight spending limits, determined mainly by a political agenda of the size of government shrinking government. Core Crown expenses, for example, have fallen from 34.1 per cent of GDP in 2008/09 and are expected to drop to 30 per cent next year. There is no doubt the Government would like them to fall further.

Public sector wages

On the issue of wage rises, the continued constraints on Government expenditure mean that bargaining will continue to be difficult. However, the PSA has shown that it is still possible to get good settlements in workplaces where there is high union density and workers are prepared to take collective action. Public sector wage increases have been falling behind those in the private sector for some time and with many members in bargaining this year there are expectations that this growing gap needs to be addressed. There is nothing in the budget that gives us any encouragement that the Government values the work of its own employees as reflected in their pay and conditions.

Equal pay

We said that we would be looking for funding in the Budget to address equal pay for public sector workers – and we didn’t find it.  The Budget Economic and Fiscal Update in its list of risks states that the Service & Food Workers Union member Kristine Bartlett’s Equal Pay Act case against her employer, TerraNova Ltd, ‘may involve significant costs to the Crown’.  And that ‘changes to the existing policy may require additional funding’, for this and other cases and funding claims in the disability support and aged care sectors. So the risks are noted, but we can’t see that the money to meet them is allocated.

Social investment approach

The Government has used the budget to press ahead with its “social investment approach”, which is about targeting funding upfront to try and generate long-term change and savings. This approach underpins announcements in the budget such as forcing sole parents back into work when their youngest child is 3 and increasing the minimum part time work requirements from 15 hours a week to 20.

The approach also has profound implications for how social services are delivered. In a speech to the Institute of Public Administration of New Zealand in February Minister English spoke about a “customer” centred approach that would be focused on purchasing outcomes instead of services and which would involve “systematically reprioritising funding to providers that get results” – that is, more contracting out of services.

The budget doesn’t have much more to say about this but there are radical and worrying proposals under consideration by the Productivity Commission as part of its inquiry into social services, so we can expect to see more on this subject soon.


The CTU estimated that $549m extra funding was needed in Health to maintain existing services, keep up with population and cost increases, and pay a wage rise of 2%.  $629m was needed to meet the new programmes announced and maintain existing service levels.  An additional $320m has been allocated to Vote Health, which is considerably less than what’s needed simply to keep up with current costs. So any wage rises will have to come from DHB budgets that are squeezed even more than before.

There are some new initiatives (each over four years), including:

  • $10m for National Mental Health Services
  • $76.1m for palliative care services and new nurses, educators and other hospice roles
  • $98m for elective surgery
  • Nearly $12m for child health services
  • $12.4m for bowel screening pilot at Waitemata DHB

But there are cuts as well:

  • Funding for problem gambling has reduced from $19m to $17m
  • Health workforce training and development is cut from $177,441m to $174,250m
  • National personal health services have decreased from $95,645m to $77,933m (this is for mobile surgical services, telephone and online advice services, hospice services, sexual and reproductive health services, and services associated with the implementation of the Oral Health and Cancer Control Strategies).
  • The Ministry of Health’s budget goes down from $193m to $192m.

New initiatives are welcome; but the cuts will bite into workforce training and development and into primary health care services such as Plunketline, sexual health services, and problem gambling. Combined with the failure to fund DHBs adequately, it’s looking like another difficult year ahead for health workers. More of the same, in other words.

Disability and Home Support Services

There are no surprises in the funding of disability and home support services. Disability support services get an increase of nearly $143 million over four years but this is primarily to meet cost pressures arising out of such things as changes in the population. There is better news in home support services with $56 million over four years to assist in funding the costs of travel between clients, as part of the settlement of the case the PSA took against the Government last year. This is welcome but was expected.

Regional Research Institutes

The budget allows for up to $25 million over three years to support the establishment of new “privately led” Regional Research Institutes. They would be funded from a mixture of public and private sources and modelled along the lines of Nelson’s Cawthron Institute, which is a specialist not-for-profit institute for aquaculture, marine biosecurity, and coastal and freshwater ecology. While it good to see further investment in science and research, and while this will be a boost for regional economies, there is a question about why the existing Crown Research Institutes have not been given this job rather than creating new organisations from scratch.

Public service

Overall there is little new money for the public service.Overall there is little new money for the public service. The Government continues to undervalue public services but we know the public  values the services our members provide.There are some specific announcements made that will be positive for the agencies that will be the recipients of new funding. These include:

•    A new levy on travellers to fund passenger-related biosecurity and customs activities at the border. This is expected to raise around $100 million a year from 1 January 2016 and the money will eventually replace crown funding. Another $25 million over four years is being provided for more biosecurity services such as x-ray machines and detector dogs
•    $33 million over four years will go to the Immigration Services for more immigration staff as visitor numbers grow
•    $32 million over four years will go to the Labour Inspectorate to increase the number of inspectors and strengthen the enforcement of employment. While this is a welcome addition to an overstretched service it is also a commentary on the struggle the inspectorate has had in dealing with the worst effects of an under regulated labour market

There is also $23 million over four years to “bolster” the work of Child Youth and Family, but this is somewhat undermined by the current review that the Government has imposed on the agency and which could see fundamental changes to the way it works. Rather worryingly there is $5,839 million set aside in the budget for Child, Youth and Family “modernisation”.


The Government has moved to further cut their investment in KiwiSaver. Several years ago they cut in half the annual tax credit members of the scheme received, down to $521 a year. Now they have removed the $1,000 kickstart incentive for new members, designed to encourage more people into the scheme.  

The argument is that it will not affect the numbers joining KiwiSaver but both these Government subsidies have been important in attracting new members, and they also helped offset the gender bias that all contributory retirement savings schemes have. Women tend to earn less and have more broken service and therefore save less for retirement. Both these subsidies are flat rate and do not favour men to the same extent.

There is also a generational equity issue, as young people once again miss out on entitlements that older generations have had access to.

Local Government

In his speech the Minister referred to an “additional $37 million of operating funding over four years to provide greater national direction and support to councils as they implement the Government’s resource management and freshwater reforms”. Nick Smith, the Minister for the Environment, confirmed in his statement that progressing the Government’s second phase of Resource Management Act reforms was a “key priority” in 2015/16.



What the PSA was seeking in the Budget

Equal pay

The Equal Pay Act case taken by residential aged care worker Kristine Bartlett and the Service and Food Workers Union (SFWU) is about to go before the Employment Court to determine the principles that should set the rate of pay for her job. We want to see the government setting contingency funds aside for a remedial pay settlement, should the Court determine that Ms Bartlett’s work (and that of all other aged care workers) is undervalued.

If the Court does find undervaluation, it opens up the way for other female-dominated occupational groups to take cases.  Many of these occupations are funded either directly by the state or through contracts to service providers – so government must now address pay inequality and prioritise funding for it.

•  The PSA expects that Budget 2015 will contain the government’s intention to allocate funding to remedy the underfunding of work, mainly done by women, that is funded though the Crown.

Wage rises

State sector wage settlements have fallen further behind private sector settlements over the last few years. The  Government has consistently kept down its spending on the state sector, and keeping wages down has been part of this policy.  This is unfair and it is now time for state sector wages to catch up ground they have lost. Workers expect a fair return for their labour, and for their commitment to delivering high quality services to New Zealanders. They see government prioritising other areas of expenditure, such as the flag referendum, bridges for Northland and so on – and this tells them that fair wage rises for the incomes that support their families are not a government priority.

•  The PSA expects that Budget 2015 will provide for meaningful state sector wage rises that will restore state servants’ purchasing power to previous levels.

Proper funding for public services

Alongside the real issue of lack of realistic wage increases for workers, public servants are reporting that the continued constraint on public spending is leading to service cuts for clients, unsustainable workloads, and concerns about state servants’ health and safety. We are seven years past the global financial crisis; the government assures us continually that the economy is doing well and is heading in the right direction. Further cuts in public spending, and attempting to squeeze even more out of departmental budgets, won’t help the people who need public services most. And it makes the jobs of state workers even harder and more difficult.

•  The  PSA expects that Budget 2015 will begin to reverse cuts to public spending.

Contracting out of services

At the end of April the Productivity Commission will release its report on contracting social services. Over recent months there have been signals from government that it is interested in new models of contracting, and that state agencies do not have a monopoly on providing advice. Social impact bonds are one example of these possible new models.The  PSA will be watching this closely in Budget 2015 and in the Productivity Commission report.