Estimates Debate — Finance

Thank you, Madam Chair. It’s a pleasure to speak on this Estimates committee stage. When the coalition Government took over, we were left with the economy in a perilous state, like the Kaitaki drifting towards the rocks, but, fortunately, we had an incoming coalition Government that was ready and up for the task, and a finance Minister who realised that, while Kiwis were doing it tough and having to tighten their belts and cut down on spending or reprioritise spending, she didn’t think it was appropriate just to leave it to Kiwis to do that.

The Government had to do the same thing as well, so she embarked on a line by line—looked right through all of the Government expenditure, at different Government departments, and found 240 different savings initiatives. So my question to the Minister is: that’s a fantastic job, Minister, but is that the end of it? Is that all the possible savings and reprioritising that is able to be done? Is there more potential to get expenditure from the back office out on to the front line to deliver services to Kiwis in a more efficient and effective way?

Thank you, Madam Chair. I thank the member for the question. As the member implies, our fiscal strategy is that we wish to get debt back down under 40 percent of GDP. In order to do that, we need to get the books back into surplus. If we had stuck with the operating allowances left to us by the outgoing Government, that date of balanced books wouldn’t come until the 2030-31 fiscal year, obviously far too long to be running in the red. We have set a very prudent fiscal policy in which we will have much tighter operating allowances.

We got off to a great start in this year’s Budget with 240 individual savings initiatives across Government, but the work must continue. In answer to the member’s question, there are always opportunities to look across the billions of dollars the Government spends, to judge what the best value for money is and what the investments that should be a priority for New Zealanders are. Ministers are in a continuous process of looking at initiatives to judge whether they are delivering what it says on the tin, whether they are delivering the outcomes promised, and whether there are better uses for those resources. That is actually the way that households run themselves, that is the way that small businesses run themselves, and we may have got out of the habit, as a Government, over the past six years of doing that, but over these next few years it is going to be essential and this Government is looking forward to doing that work.

Thank you, Madam Chair. I thank the chairman of the Finance and Expenditure Committee for his opening comments. It’s quite interesting that he talked about how the previous Government left the economy in a mess when, actually, it was just Fitch Ratings last week that confirmed the same credit rating as the previous Government for this Government—so it’s no better, it’s no worse; it’s exactly the same.

Going into what the Minister has spoken about—front-line services—we’ve heard right throughout debates, questions, in select committee, and the media, the Minister has confirmed to the public of New Zealand that there will be no front-line service cuts to pay for the tax cuts, because, ultimately, that is what I understand the fiscal savings programme was set out to achieve. However, it’s been almost three months since the Budget and we are having daily examples throughout the community of front-line service cuts that have been done. For example, in Porirua, which has one of the lowest socio-economic areas in this country, we have seen cuts to the Salvation Army, cuts to the Taeaomanino Trust, we’ve seen cuts to the Porirua women’s centre. We have seen so many cuts across the board at a time when the cost of living is so high. Some of these cuts are to financial budgeting services. And this is not just isolated in Porirua alone; this is right throughout the country. There are ramifications for these Public Service cuts, and I don’t think it was wasteful spending for the previous Government to support these numbers of service providers. I’m sure members on this side of the House will actually come forward with other examples of where there have been front-line service cuts.

The other area that has been quite clear there’s been front-line service cuts is in Te Whatu Ora. So there is a savings programme, I understand, under way where they need to find $1.4 billion, which is part of the savings, as part of the merger of the different district health boards, and yet there is a hiring freeze. How do we know this? It’s because the nurses have come out saying that: “We can’t get jobs.” For those members of the public who don’t understand, through the memorandum of understanding with the Nursing Council, these graduate nurses are promised a job within the health system if they do not go to the private areas.

One of the key areas that the Government did have to respond to really quickly after the Budget was released was in relation to cancer drugs. We’ve received a number of Official Information Act (OIA) requests since that particular period, so I do want to ask the Minister, in relation to some of the process that she undertook—which was, in particular, that the OIA requests showed that the costings for those 13 cancer drugs were done after the Budget was released—why she had not prioritised her election promise and another party’s election promise around those cancer drugs. What was it that she thought wasn’t as important to prioritise?

We’ve seen, in the Budget, an allocation of $2.9 billion for landlords. We’ve also seen that there’s been an excise tax contingency of $216 million for heated tobacco products. I do acknowledge that the cancer drugs were eventually funded, and that was because of the community, because the community was up in arms because they wanted those promises to be met. However, given that her operational allowances have been reduced as a result of this Budget, how will she meet the cost pressures for health when only $103 million, in particular, has been set aside for infrastructure cost pressures? And we’ve seen some of our senior doctors’ unions, who have done some analysis of the Budget since it was released, saying that, once adjusted for inflation, there’s only a 0.4 percent increase in Vote Health.

The other question I want to ask to the Minister is how will she commit to delivering more efficient health services, alongside the $600 million for Pharmac, all while reducing the operating allowance to $2.4 billion in Budget 2025? We know that population growth is increasing, we know that people are getting older, we know the issues that are within the health system about the reduction of nurses or the hiring freeze that is currently happening, the savings target that Te Whatu Ora has to go through, as well as the fact that the operating allowance—about three-quarters has already been spent. I want to hear from the Minister how she was going to deal with these health cost pressures in the future.

The member makes a few assertions which I wish to address. The first is an assertion that in order to maintain the level of front-line service delivery to New Zealanders, somehow the Government must pledge to never ever alter a contract with a private or community provider—that we must under no circumstances review those. I think that would be a foolish stance for the Government to take, and we reserve the right to look at the contracts we commission on behalf of taxpayers to assure ourselves that they are delivering on the intentions that were there when they were initially funded.

Our pledge is to deliver improving quality of services, not to do things in exactly the same way as they have always been done. In fact, if we were to do that, we would continue to get the completely suboptimal results that characterised the past six years. We’ve set better Public Service targets. We are very focused on delivery and outcomes, and that includes actually being quite innovative and bold in doing things differently—for example, our work on charter schools comes to mind as I look out at the Hon David Seymour.

The next set of questions related to health funding. Now, in this Budget, which is what this debate relates to, we made a couple of important decisions. The first was that we decided to allocate funding for the pressures in health at a level which was exactly the same level as the National Party campaigned on, and, interestingly, the same number as the Labour Party campaigned on. That was because we judged that number was sufficient to meet the pressures. In addition to that number, we then funded individual initiatives, including some that have been very warmly received by New Zealanders, if opposed by the Labour Party, including things like funding Gumboot Friday mental health services for New Zealanders. So we stand by that approach.

We then took another decision—and I want to acknowledge in this House that it was a decision we did need to think hard on—which was: should we pre-allocate additional funding to the health system from future Budgets now, or should we reserve judgment and come to those decisions later? Ultimately, we were persuaded by the case that Health New Zealand and others working in the health system put to us, which is: if you commit up front out of future operating allowances to put additional funding in, that will provide us certainty of our funding path, the ability to plan and to budget, to find efficiencies, and to engage in longer-term contracts.

On that basis, we’ve then pre-allocated additional operating funding from future Budgets totalling $16 billion in total. And what that means is that the health system can be assured by this Budget that it is literally the first cab off the rank when it comes to additional Budget funding. It doesn’t need to line up to bid for funding in next year’s Budget; we’ve already allocated it and we’ve already allocated it from the next Budget as well—such is our commitment to the health system.

Then the member asks a series of questions about how we ensure that the health system can deliver and deliver effectively. I would put to that member, if only we hadn’t had a Government that was so focused on rewriting the org chart at Health New Zealand and merging different district health boards and creating new layers of management, then our task now might be easier. But that is not the case. We inherited a botched merger. We are now working through that. The way we are doing that is according to some principles, and one of those principles is that we think that those working on the front line are often best placed to make the best decisions for patients. We do not think that multiple layers of bureaucracy are the way. We’re working with the commissioner to get good results, but we are also thinking about the policies needed to ensure our health system can be productive, efficient, and service-oriented into the future.

Finally, the member asked about cancer medications. Well, I am proud to be a member of a party that campaigned on funding additional medicines—a campaign that that member has never made—and that actually delivered on that not only for those in need of those cancer treatments but delivered on that for multiple other patients by using the Pharmac model. That is a front-line delivery, and it is commitment, and it’s one that I’m pleased that this Budget represents.

I call Chlöe Shwarbrick, thank you.

Thank you, Madam Chair—Chlöe Swarbrick, for the record. Just some interesting comments there from the Minister of Finance, particularly that one on a pledge to improve the quality of services. I think this is something that is worthy of a little bit more scrutiny and, if the Minister would indulge me, a little bit of back and forth. There is a few elements that I’d like to touch on in this contribution.

The first is actually around the operating allowance, which, as we know from Treasury, is approximately $100 million less than is necessary to keep the lights on, based on projections around keeping public services as they presently are. I guess I would put to the Minister, as I believe we did in the back and forth that we had at the Finance and Expenditure Committee—the great committee that it is—that deferring maintenance into the future, or on one’s health issues, for example, can cost a lot more in the long run.

Here we have a Government that is saying that they are putting more money into front-line health services, but we’re also hearing from the front line—riddle me this—the fact that there is a hiring freeze and that there are professionals going offshore. The Government is saying that they’re not making cuts to front-line services, yet we’re hearing from front-line services that these cuts are, in fact, being made. It simply does not add up.

We also heard from the Government that they would be going line by line through expenses that the Government has on its books, but we’re then hearing that, despite this apparent meticulous approach, they have no responsibility where any of these cuts are then found to be unpopular, least of all by those at the front line. What all of this prompts for me is actually some reflection on a number of the debates that we’ve had in this Chamber over the last few months, and it is something that, I think, needs to be put on the table and put directly to the Minister, especially if she is to retain that operating allowance and her Budget as it currently sits.

The first question would just be a straight-up question: can she guarantee that the Government will stay within that operating allowance that she has set for herself, which Treasury has made pretty clear is artificially low and is going to be very, very challenging to meet? And, secondly, can she guarantee for the committee that she is not going to move towards greater privatisation and sell-off of State assets? Just a few months ago, we heard in a debate on the iReX project—it was pretty mask-off from the ACT Party when they argued for the privatisation of KiwiRail.

Funnily enough, they used the example of the partial privatisation of gentailers, which are now delivering us the energy crisis in the form of keeping fossil fuels on life support in order to keep household energy bills high and, therefore, the profits of those gentailers high as well. We’ve heard some similar comments from the Minister when it comes to the so-called capitalisation of Kiwibank, and I think, also in the context of this energy crisis and much of the hay that’s been made by this Government, I just want commitment from the Minister that there is no intention for further State asset sell-off.

I also wanted to touch on—because it is actually really related, too—the potential constructive liabilities that we have for meeting the Paris Agreement, or our nationally determined contribution therein. I think the Minister and I had a pretty constructive back and forth on this. We got into an Official Information Act request, and I understand that her office and the office of Minister Simon Watts got some advice on this issue. For the uninitiated, the Ministry for the Environment and Treasury did a phenomenal piece of work last year, which was published towards the end of last year, which touched on how, if we were to have a—basically, to pay towards meeting our nationally determined contribution under the Paris Agreement, we would be looking at potentially a liability of approximately $24 billion, which would be, effectively, us paying other countries to do that mitigation where we refused to do it ourselves, ultimately costing all of us all the dearer. The proposal here from the Green Party is that it makes sense for us to have this represented on the Government books, because it is a liability, be it constructive or otherwise, as far as the general public would concern themselves with understanding an issue such as this.

Not to thread too much through the needle on this point, but if I can just conclude on an issue that I’ve also had a bit of back and forth with the Minister about, which is for the Parliamentary Budget Office—to ask her whether this is something that she has progressed any further work on, because I believe this is, hopefully, something that we can have cross-partisan accord on, and, therefore, progress understanding of what all of our election costings are going out, so that the general public has baseline information to judge us all upon.

Thank you, Madam Chair. Rather a few items there to rattle through, so I will do so. The first is about the operating allowance, and the member Chlöe Swarbrick used the phrased “artificially low”. Well, I would reject that characterisation, but I would say that it is the operating allowance required to get us back into surplus. If we were to have more generous operating allowances, the consequence of that would be more and more years of debt accumulation, and, actually, it would be future generations that we would end up saddling with that.

I know the member is conscious of intergenerational impacts, and this is one that she should consider. Actually, if we were of a fashion like the last Government, whereby the only way for spending to go was constantly to add additional layers to the cake, then, yes, it would be an extraordinarily challenging operating allowance to meet. But our approach is different. As I characterised in my initial remarks, we are constantly looking for areas where spending is not generating the maximum outcome or value, and we will look to reprioritise funding so that we can put it into the areas that really matter to this Government, which includes things like front-line education services, which includes things like our defence force and our police service. Those are the sorts of services that we accept will continue to need additional funding.

The second question was around State assets, and I’d just make a couple of comments there. If the member is still labouring under the belief that the reason we don’t have enough wind farms and solar farms in this country is somehow to do with the ownership model of the gentailers, I would just put to her: go and read the evidence. Actually, the considerable constraint those generators have faced is the consenting environment. It is very significant, and I once again join my colleague Chris Bishop in urging her to get on board the fast-track bus.

The member then also made comments about Kiwibank. Look, it’s not some sort of ideological burp. This is the Commerce Commission saying that if you care about fair and competitive banking services for New Zealand bank users, then—boy oh boy!—you should be on board getting a maverick disruptor in there, and Kiwibank is best positioned for that. It requires capital. If the member’s view is that instead of putting additional capital into hospitals, we should put it into Kiwibank, well, I would say that if there are others willing to invest in Kiwibank and we can do that in a way that allows it to remain New Zealand’s bank, then, actually, we owe it to New Zealand bank users to do that.

The next issue that the member raised was to do with climate change liability and how it sits on the books. I have released the advice that I have received on this matter. I am satisfied that Treasury has considered this properly and well and that this is not something that should properly sit as a liability on the books.

Finally, the member asks about the Parliamentary Budget Office, and let me put on the record today that one of the things that disappointed me with Grant Robertson when he was in this role was that he went out there saying, “We need a Parliamentary Budget Office to heighten our debate, so that we don’t have election campaigns with silly debates about costings and, instead, can focus on principles and policies.” Then, when I wrote to him and said, “Let’s get it done”, he rejected my advances. I do have that on my conscience, and I have commissioned from the Treasury advice saying, “What’s a way that we can do this, bearing in mind our current fiscal constraints? How can we do this in a way that makes use of the resources we already have but is impartial and fair?” I have not yet received that advice, but this is something that I, in good faith, would like to make happen.

Thank you, Madam Chair. I just have some questions for the Minister of Finance, particularly around some of the climate aspects that we discussed at the Finance and Expenditure Committee.

There was $2.9 billion—arguably $3.7 billion—worth of climate initiatives that were cut in Budget 2024. We can see that this lines up quite neatly with the amount of money that was given back to landlords as a tax break in the Budget, but given that we have seen some of those initiatives that had direct emissions impacts—and subsequent to the Budget coming out at the Estimates hearings we had around the Budget, we have, of course, had the first scorecard from the Climate Change Commission around how policy changes from this Government are taking New Zealand backwards in terms of meeting its climate budgets and the flow-on effects to nationally determined contributions (NDCs).

A couple of specific questions for the Minister: she’s touched on one of them in terms of the contingent liability question that Chlöe Swarbrick asked her, but one of the things is that there has been an increasing body of work that’s come out only in recent months, and I just wondered if the Minister is thinking that, as we head into Budget 2025, this will change the scenario of how it is that we need to treat that liability under accounting practices.

What we’ve seen is the work from the McGuinness Institute that looks very specifically at some of those accounting standards, particularly, if we want to be specific, PBE IPSAS 19, which is an accounting standard that says that we need to take into account the likelihood an outflow of resources will be required to settle the obligation and the extent to which a reliable estimate can be made. This is quite different to the way Treasury has previously addressed this question of the liability and how it should be booked.

While Treasury acknowledges that there is a specific fiscal risk in terms of us not meeting our climate budgets—and us not cutting emissions at home means that New Zealand needs to go and pay other countries to do that work, that we need to go and buy credits off other countries, effectively paying for jobs and paying for initiatives in other countries rather than our own. We’ve seen the impact that this Budget had on reducing the domestic work we were doing on climate change, which means we’ll be funnelling more and more money overseas to pay other countries to cut their emissions and to keep people in green jobs.

I just wonder if the Minister is looking at how that might have to be accounted for. The Treasury’s argument has always been that the Government has choices about how it achieves its NDC. We’re seeing as work firms up with things like the report from the Climate Change Commission that it’s becoming increasingly apparent that the Government can’t, because it is cutting initiatives domestically that reduce emission, that that increases New Zealand’s liability offshore. It also points to the fact that when the then National Government actually signed the Paris Agreement, they laid bare explicitly that their plan was to offset by buying international credit.

So I just would like some information from the Minister around whether or not her thinking has evolved on this. There’s a lot more evidence that’s pointing to the fact that New Zealand has a $24 billion liability that needs to be booked, and the moves of this Government taking New Zealand backwards, cutting our initiatives here at home are just widening and making that liability for New Zealanders even greater.

As the member who has just resumed her seat, Megan Woods, knows from her time as the Associate Minister of Finance, Treasury provide advice on how such matters are to be treated, and I accept the same advice that the member accepted, which is that this does not constitute a liability. It does not meet the test required to do that. I’d also note for the member that the $24 billion figure she is throwing around is actually the upper range and it is dependent on a number of factors.

I’d also note for members of this House that the national contribution is significantly higher than the reduction required over the following emissions budget, following decisions taken by the previous Government. In terms of our emission reduction budgets, we are currently consulting on a plan that will see us achieve the emission reduction goal set out in the zero carbon Act in the second campaign period, and we’re on track to achieve those in the first period.

We have been unapologetic and, I think, very clear in a way that has been useful to the market in saying our key mechanism for reducing emissions will be the emissions trading scheme. Our recent moves to reduce the future allocation of units to that scheme has been a good response. That member took a different approach. Her approach was to put a carbon price across the economy that drove up prices for everyday people, and then to use that money to invest in projects for profitable multinationals. She went around the country signing cheques for profitable companies to help them on their decarbonisation journey.

Here, on our side of the House, we said that, actually, hard-working everyday people who don’t make multimillion-dollar profits deserve to keep a bit more of what they earn. We campaigned on a climate dividend and that is partly how we funded our tax policy. I think that, actually, if you want sustainable emissions reductions in the economy, it’s not sustainable to say to the working people, “You will pay ever more tax and ever higher costs so that Megan Woods can go and cut ribbons.”

Finally, I would say that I do respect the McGuinness Institute and the contribution it has made to public debate over many years, but on this matter, I beg to differ.

Thank you, Madam Chair. There was a moment in the Finance and Expenditure Committee hearing with the Minister of Finance on the Estimates that I remember very, very clearly, and it was an astonishing comment made by the Minister where she said that she expected to see more workers in hard hats and high-vis and fewer workers wearing a lanyard on Lambton Quay. It’s a bit of an astonishing thing to say when the Minister was surrounded by officials wearing lanyards and threatening their jobs. It was quite a hard-edged thing to say.

The astonishing thing is that just three months on, in August 2024, we’ve been receiving reports from the New Zealand construction industry that the work is right down, that they are losing work, that Government work has disappeared. They are losing workers, they are losing people to Australia, they cannot see a future for them. We now have fewer people in hard hats and high-vis, and we actually also do seem to have fewer people wearing lanyards on Lambton Quay. We can all see the impact of that in Wellington, which is—you know, it’s a great city; I love Wellington, but it is a pretty tough place to survive at the moment if you’re trying to run a business.

It seems that the Minister, by cutting costs so aggressively, has in fact tanked the economy—fewer workers altogether—and I wonder what responsibility the Minister takes for the actions that she has taken in her line-by-line taking money away from New Zealanders, taking money out of the Budget, taking money away from the construction industry. I wonder what responsibility the Minister takes for that huge impact on our economy.

Well, it’s wonderful to know that Dr Deborah Russell is still in fact the revenue spokesman. I’d thought that David Parker was auditioning for that role today with his comments on capital income taxes and the like, but I suppose we could characterise that as a leadership bid rather than a bid to be the revenue spokesperson.

Look, the member has raised a couple of matters. One of them is about the impact on the Wellington economy of our efforts to ensure taxpayer money is going to its best purposes. I would share with the member an anecdote where I went to a breakfast in Wellington recently and a business owner turned to me and said, “Thank you, Nicola. Actually, we can hire people for our business now. For years, we were competing against Government agencies that paid them more, and we couldn’t get the skills that we needed into our business.” Actually, having skilled, experienced people able to deploy that within private enterprise is no bad thing, Dr Russell.

Then you’ve asked me about hard hats in the construction sector, and what I would put to you is that this is a Government that is very committed to real infrastructure projects—not make-believe ones like light rail and project Onslow and all of that guff but real ones like filling in potholes, like repairing local roads, like building State highways. We have set out an extensive Government policy statement on transport which makes that commitment real and puts funding to it.

The member has asked me whether I will take responsibility for an economy which has been ravaged for six years by the economic mismanagement of the Government she was a part of. No, I won’t take responsibility for the impact of a Government that poured fuel on the inflation fire such that interest rates rose higher than they should have otherwise. Those interest rates have then had a crippling effect across the economy and have displaced economic activity and have driven unemployment.

What I will take responsibility for is the decisions that we have taken since coming to Government, which have seen inflation come down, the first reduction in interest rates in four years, tax relief delivered to the bank accounts of New Zealanders, and a much sharper focus on outcomes for the taxpayer investments we make.

Thank you, Madam Chair. I now find it really interesting that the Minister likes to take responsibility for the official cash rate (OCR) coming down, but she doesn’t want to take responsibility for the economic outlook, which is in the Monetary Policy Statement, which shows all the major indicators are falling down. Which is it: do you want to take credit for it coming down but not responsibility for the economic activity in the outlook, or is it that you don’t want to take credit for the economic activity, which has caused the OCR to come down? That is the reason why in the Monetary Policy Statement and the OCR the Reserve Bank decided to pivot and to make those cuts earlier, because all the indicators were going down.

In the same way that the Minister’s Budget and Economic Fiscal Update—why has economic growth been revised downwards since that Budget was released? Those are actions of this Government. You can blame as much as you want the previous Government, but, again, the whole point about crying wolf, which was reflected in question time today—the reason why I asked that is because we had the same credit rating. You have the same credit rating, the same grade as Grant Robertson. I’m confused on this side of the Chamber about what it is about this economic activity and why it’s coming down progressively more quickly—which is why the Reserve Bank had to cut rates.

The really good thing around scrutiny week wasn’t necessarily the extra time we had with Ministers but, actually, it was the extra time we had with officials, because we actually got answers to our questions. One of the questions that we’ve repeatedly asked this Government is this: what are you actually doing about productivity? The response we’ve had back was around red tape. However, what are the other things that you’re doing around productivity, because when we asked their chief economist in that Finance and Expenditure Committee (FEC) hearing—when we asked them the same question in FEC—their response was that there was nothing in the Budget that gave cause for the Treasury to revise productivity upwards. These are all the facts that are in their own books. So, as much as Ministers in commentary may want to try and gaslight the economy that Labour left them with, the Government has the same grade as Grant Robertson did in relation to those credit risk ratings, but what has changed is that the Government’s decisions around economic activity have caused the Reserve Bank to have to cut things down.

Economic activity in New Zealand is coming down, which is why we’ve had so much migration from New Zealand over the Ditch, to Australia. So my question to the Minister is: does she think that making cuts to the likes of Callaghan Innovation, for example, an agency that supports research and development, which has been key to helping productivity, which is one of the reasons why other commentators would say and why the Productivity Commission would say to invest in research and development—how will that help improve productivity? Again, as we heard in the Finance and Expenditure Committee, we’ve heard from her own officials that productivity did not need to be revised as part of the Budget.

Well, I’m sure that the mortgage payers of Mana would be disappointed to hear that their representative seems to want the interest rates to stay higher for longer, which is what I took from that statement. As a humble member, I don’t take responsibility for everything that has occurred. Nine months may be enough time to grow a baby, but it’s not enough time to completely change the course of a Government, but we are making good progress.

There are a few things that members on that member’s side of the Chamber said would happen. They said that if we delivered tax reduction, it would not be fiscally neutral. Well, we proved that wrong. Then they said that delivering tax reduction would increase inflation, and instead we’ve seen inflation come down faster than had been forecast. Then they said that tax reduction would lead to either increases in interest rates or interest rates staying higher for longer. Instead, what we’ve seen is the official cash rate come down sooner than had been predicted. Against that backdrop, I defend our economic decision making.

The member has asked a very good question, and it is one that this House should be focused on, I believe, every day, and that is: how do we enhance the productivity of this economy? That productivity directly relates to how much value New Zealanders are able to create with an hour that they work. For my part, I want New Zealanders to face better choices, better opportunities, and for this to be a wealthier nation that has more funds to invest in the things that matter to all of us. Now, as the member knows, enhancing productivity is not as simple as giving Callaghan Innovation a bigger grant, because, if that would have worked, we would have seen a big enhancement of productivity over the past few years as the last Government threw more money at just about every Government agency it could find. Instead, what enhancing productivity requires is deliberate action across a number of fronts.

I put to the member that one of the most important areas is education and skills, because our most important capital is human capital. We cannot expect to have a more productive economy if our school-leavers can’t read, write, and do maths. The legacy we inherit from the previous Government is one of declining educational achievement across those basics, which are the precursors for going on to be innovative scientists, AI engineers, road workers, and the like. We are actually stabilising the base of productivity by ensuring that we’re getting our skills back to basics.

I then put to the member that actually having an infrastructure pipeline that works is critical for productivity. The OECD and others have said that our infrastructure deficit and the inadequate way in which we plan and deliver infrastructure as a nation has directly reduced our productivity. I’m hoping that, soon, Minister Bishop will make a contribution about the many things we are doing to improve the infrastructure pipeline in this country.

We also need to be an outward-looking country that builds on our trade relationships and invites foreign capital in. We have low rates of capital intensity and we need to make sure that we’re getting more of that into our economy. Yes, regulation does actually matter. If you look at what the OECD have said, they say that one of the issues for New Zealand is that this economy has not got the levels of competition it needs in major sectors because of its small size, and we, therefore, need to be particularly careful to make sure our regulation ensures that our markets operate properly. You will have seen that the Government is responding, for example, to the Commerce Commission’s banking inquiry. We will take very seriously the next report on the grocery reforms that have occurred, ensuring competition and ensuring sensible regulation is part of our recipe for productivity.

Finally, Madam Chair, I would put to you that if you want a more productive economy, one of the things you need to reward is initiative and hard work. One of the ways you do that is have a Government that says, “When you earn a dollar, it’s not always the Government’s job to take more of it. In fact, we’ll give some back.”

I’m just responding to the Minister of Finance’s invitation to talk a little bit more about infrastructure, and, in doing so, I want to touch on housing, because the Opposition finance spokesperson, at least for the moment, was making much of the Government’s plans around—or lack of plans, in her mind—productivity. The simple reality is, she’s right in her diagnosis of the problem, which is that we have a big productivity challenge in New Zealand. This is not something that can be wholly blamed on the previous Government. If we’re honest about it, it goes back many, many years. And the Government is ambitious to address that.

One of the things we must do is get much better at the way in which we deliver infrastructure in this country, and that will be a key driver—

Hon Shane Jones: Fast track.

Hon CHRIS BISHOP: —of productivity. I am told—well, I’ll come to fast track—that we do a very bad job, as a country, of turning our infrastructure delivery ambitions into reality. For example, we rank in the bottom 10 percent of high-income countries for the quality and efficiency of our infrastructure investments—bottom 10 percent. I’ve got to tell you, on asset management, it’s even worse. On asset management, governance, and expertise, we are dead last in the OECD. We’re the bottom, and we’re the fourth last on asset management altogether. We’ve got a big job to do, as a country, when it comes to asset management.

This Government is going to outline a 30-year infrastructure national plan and we hope that that will achieve some degree of bipartisan consensus. That will be very important. We are going to use every tool in the tool box available to us to drive better value for money from our Crown infrastructure spending. That means being open to private capital, and that will be a bit challenging for the other side of the Parliament, because, under the last Labour Government, there was just a hard no to private sector finance or even philanthropic capital, for that matter, when it came to things like hospitals and schools and roads and all the other things that the Crown has to procure and fund. Well, we’re very open to that. We’re developing new tools around value capture, around the reform of the Infrastructure Funding and Financing Act. We’re open to public-private partnerships, so there’s a whole lot of different tools on the table. It’s going to take us a bit of time, as a Government, to build up the expertise inside the system to make that a reality, but we’re absolutely determined to do it.

While I’m talking about productivity, I do want to talk briefly about housing, because the committee will be aware that we have a housing crisis in this country. We’ve seen over the last 20 years the fastest house price growth in the Western World. You stand back and you say, “Well, how can that be? We are only 5 million people. We have a land mass the size of the United Kingdom.” Something has gone terribly wrong in our system where average house prices in New Zealand are seven, eight, nine, 10, and, in the case of Queenstown, 12 times average household incomes in Queenstown. You say, “It does not have to be that way,”, and that is, of course, true.

One of the points that I am constantly reiterating around the country is that one of the single best ways we can get productivity going in this country is to fix our housing market, because cities that grow and expand and are allowed to grow up and out are engines of prosperity. The evidence is really clear that the bigger a city is, the more people you have living close to each other; connected by good quality, high-quality public transport; and able to get all of their agglomeration benefits of a bigger city—the evidence is really clear: that is a key driver of productivity. That is the Government’s ambition for our housing market—bigger and better cities.

That involves a lot of complicated work around land supply, both at the urban fringe of our cities to make sure that there’s a safety valve at the fringe so that cities can keep growing out, but also sensible density, growing up as well. It involves fixing the infrastructure settings that mean that we have a housing crisis, for example. It also involves partnering with local government to make sure that councils are incentivised to go for housing growth, because we are determined to change the political economy of our communities and our councils that sees, at best, ambivalence towards housing and, at worst, outright hostility from some councils around the country to the idea that our cities should grow. Well, we’re determined to change that.

One way to do that is a big stick. We can use that. Another way is a bit of a carrot, and we’ll do the incentives as well. And we’ll find our way through the middle. Probably both will be effective, but we are determined to let our cities grow to address the productivity problems that the member opposite talks about.

Well, thank you, Madam Chair. I wasn’t going to say anything, because I just thought Nicola Willis was doing a fantastic job in the chair, and I thought Chris Bishop did OK too. You might ask what it was that made me want to get up and speak. It was the absolute drivel from the other side of the Chamber.

I heard Chlöe Swarbrick get up and I was transported back to the lounge room of my mum’s friends, listening to the music of the 1970s; Talking Heads - “Psycho Killer”.

You’re talking a lot, but you’re not saying anything.

—on and on and on.

What I heard in the different drivels was that we’re spending too much money, but also not enough. I heard that it’s somehow a problem that the Government has listened to people on the question of funding medicines and is now going to spend too much money on medicines. Well, let me talk about medicines funding. When I became the Minister responsible for Pharmac, I got some advice from the Pharmac people—and very good people they are—to say that if you don’t deal to the fiscal cliff we face, we’re either going to have to stop listing new medicines, stop letting new patients get new medicines, or tell existing patients that they can’t continue to have the medicines they expect to receive. That is because the previous Government did not put aside the money over its four-year period to fund the medicines that Kiwis expect.

We had to spend $1.774 billion extra in order to just keep the medicines that people expect going. Then we decided to put in hundreds of millions more to fund the 13 cancer drugs, and actually twice as many as that, and I can tell you that, around Pharmac, there’s been a real buzz because people who work at Pharmac love spending money to buy medicines. That’s what they get out of bed to do, and they’re doing more of that than they’ve been able to do in a very, very long time.

Then we heard about “All the cuts—it’s just so terrible.” It was actually revealing. It explains how we got here. You see, the people in Te Pāti Māori and the Greens and Labour think that the only way to get results is to throw more money at a problem. That’s why we got an extra hundred-billion dollars’ worth of debt, but, actually, this Government is showing how sometimes you can have your cake and eat it too. In the case of school lunches, literally we are saving $104 billion—sorry; million dollars a year; started to get so excited—$104 million a year on that programme. We’re reducing the cost by around a third and we’re going to feed 10,000 more children in early childhood centres and the most vulnerable children of all.

Doing more with less. Now, that will be a foreign concept to the people in the Green Party and Labour and Te Pāti Māori, but, actually, it’s very normal to households and farms and firms and families and the people up and down this country who have been having to do more with less, just as the Government has been doing less and less with more and more over the past five years—driving up debt, driving up inflation, driving up the interest rates that people pay, and, yes, driving up the rents that younger New Zealanders pay because their landlords have mortgages too, although that may be a revelation for some on the other side of the Chamber. We’ve shown right across the board that we can actually deliver better services with less money by working harder and working smarter and making the taxpayer dollar go further.

We’ve also committed, in this Budget, to spending money on dealing to red tape and regulation. I’m proud that this Government is putting together a regulatory standards bill, regulatory sector reviews in early childhood education and animal and horticultural products in order to make sure that Kiwis that go to work can actually spend more time doing the things they like, helping the children learn and grow, getting the products they need to be more productive on the farm, rather than spending money filling in forms and complying with reckless regulation which has been made by too many Governments for too long, taking us from second to 20th in the OECD for product market regulation in the last 25 years.

Finally, we’ve set a strict target of $2.4 billion allowance for the next three years, which means that we’re going to have to keep doing more with less. The good news is that we’ve shown we can do it, and the good news is—as a wise woman once said—that when this Government takes a smaller slice of the economy, there is just so much more for real people up and down this country to eat. Thank you, Madam Chair.

Thanks very much, Madam Chair. I’d like to ask the Minister to talk us through the 248 roles that are being disestablished at New Zealand Police. I would like to have a level of reassurance from her that this will not, in fact, impact the front line. Also, would it be possible for the Minister to give us a bit of a steer on what services are able to be delivered for police with that 248 roles being cut? Specifically, service delivery in relation to beat patrols, the visibility of police on the street, responding to family violence when there’s need for that within the community, and also, the third one, in terms of crime prevention. Thank you.

Madam Chair, I’d really like to hear from the Minister. I was hoping to do quick-fire, but given that we seem to be getting lectures, I’ll do a series of questions, and it would be great to have answers about mental health.

The Minister for Mental Health has not been able to tell me, in response to written questions, what percentage of the $30 billion health budget he actually has available for mental health. I find that problematic, because with Oranga Tamariki, for example, three one-stop shops have been cut. Normally they would be able to go to the Minister for Mental Health and say, “Could you fund it out of your budget?”, but given he doesn’t know what his budget is, it would be really useful to hear that from the Minister of Finance and to hear whether she thinks he should be spending his budget on revitalising those really significant services, because we do know the country is in a mental health crisis.

I would also like to get her take on whether it is normal practice for a Minister to apply criteria to a fund such as the mental health innovation fund, requiring $250,000 co-funding without any formal consultation, in Government, with organisations. We understand from the media that he was consulted when he was in Opposition. That doesn’t seem kosher to me, so I’m just really keen to see whether it is going to be a continued practice of her Government.

Finally, we’re expecting the workforce plan to come out at the end of September. There hasn’t been any allocation for workforce in Budget 2024. What is she going to do to support her new Minister for Mental Health to be able to implement something, because the sector is crying out for psychiatrists, psychologists, mental health nurses, and so on, and it’s very clear that this cannot happen—it doesn’t matter how good the plan is—if there is no uplift of funding. Can she please advise how that workforce plan is going to happen? Is she going to provide her Minister with more money?

Briefly, I’d just like to congratulate the member Ingrid Leary for taking a pause in her ongoing crusade against Gumboot Friday to ask some other questions about mental health. We are proud to be a Government that has the first ever Minister for Mental Health, and I am advised that, in this Budget, we increased overall funding for mental health over the course of future Budgets, in terms of health funding, by $166 million.

The member Ginny Andersen asked some questions about police. Hey, this is a Budget that delivers 500 additional front-line police officers. It is true that Police did not contribute the full quantum of savings of 6.5 percent. That’s because when they put forward their proposals, we judged that some of them were not proposals that we wanted to advance. However, we did accept their advice that they could make some reductions at headquarters without compromising front-line services. At the same time, we provided a considerable uplift of funding to address police cost pressures of $120 million.

I’ll tell you what else helps the police. It is about funding, it is about front-line officers, and we’ve delivered those things, but it’s also about having a Government that says, “When you arrest people, we’ll ensure that the courts can sentence them properly by having proper sentencing laws, by having laws that actually make gangs out to be what they are, which is a threat and a harm to society, to create victims of violence, and we will be a Government that will be tough on crime”, and I think the police like that too.

Madam Chair, thank you very much. I note the comments earlier in this debate about increases to Vote Health, and also note that there has been substantial commentary and research showing that those increases to Vote Health do not meet reasonable assessments of what cost pressures in the health system are. So I’d be interested to hear from the Minister of Finance if there’s been any other advice to the contrary on that. But, of course, every year, our population goes up, inflation in the health system goes up, and more is required to do the same.

Then, I want to talk specifically about the population health primary and community care appropriation within Vote Health. That is $9 billion under this Budget, an increase of approximately $400 million from the year before, an increase proportionate to all the other health appropriations. What characterises that appropriation is that the vast majority of it is for services in the community that are largely provided by other providers—they’re largely contracted out. The most important one to most people is the contract the Government has with general practitioners is funded out of there.

What I want to ask the Minister is: if the uplift overall in this appropriation is sufficient, why is it that general practitioners are in the unusual situation of having to increase their fees this year? And, in fact, Health New Zealand has provided an allowance this year for general practitioners because they only have a 4 percent uplift in their contract, which is insufficient to keep up with their costs. Health New Zealand has taken the unusual step of allowing them to increase their fees by up to 7.7 percent, and that puts additional costs on people.

Hon Shane Jones: Relevance. Relevance.

Hon Dr AYESHA VERRALL: It’s going to hit them in their hip pocket. And I think it is relevant to a Minister who promised there’d be no cuts to front-line services, when general practitioners are taking the unusual step of writing to their patients around the city and saying that this is a consequence of this Government’s Budget. How does it add up?

As I have said previously in this House, the cost pressure funding approach that we took in this Budget was twofold. One, we set a figure from Budget 2024 for the upcoming financial year that was informed by both the top-down funding model that factored in demographic inflation and other expectations, and a bottom-up planning and budgeting by Health New Zealand as part of developing the 2024 New Zealand Health Plan. The number we finalised was exactly the same number that we campaigned on and that the Labour Party campaigned on, so I do find it difficult when that member the Hon Dr Ayesha Verrall dances on the head of the pin and pretends that somehow there would be free money trees if she were in Government, when, actually, she campaigned on exactly the same number.

As the member understands, there are always challenges in the health system and our job is, of course, to ensure there are additional resources. That’s why we’ve taken the extra step of making pre-allocations from future-year Budgets to give the health system assurance that there will be more funding for demographic increases in the future, that there will be more funding for cost pressures in the future, and that they should plan on that basis. But, as my colleague David Seymour has said, we would be fooling ourselves if we said that all that was required was more money. In fact, what is also needed is to ensure that we are supporting our front-line workforce to be the productive people that they wish to be, and not to be saddling them with flawed reforms like that member did when she was the Minister of Health, because that did not help at all.

What I would finally say to the member is this: it is lovely to have her embracing the public-private partnership, which is the GP model. And I would remind colleagues across the Chamber of this: we often hear that ideological cry that the private sector should not be involved in the delivery and provision of what are public goods.

Hon Chris Bishop: What about GPs?

Hon NICOLA WILLIS: I have, in the GP model, an outstanding example of why private enterprise has a very crucial role to play in our communities and to play in service delivery. And we, in this Government, want to work alongside GPs to ensure that they can deliver more of the services that are needed to prevent New Zealanders turning up in hospital and in the emergency room, and we are thinking very laterally about how to achieve that.

Members, the Minister’s time in the chair has come to an end. We now have the Minister for Children. The Minister is available until the dinner break.

Children