A bill intended to stop governments from “concealing” cost blowouts has gone before Parliament’s Finance and Expenditure Select Committee.
The Public Finance (Amendment) Bill requires public sector fiscal forecasts to include specific statements of risk.
It details “time-limited funding” and “capital cost escalations.”
The Bill was ushered into Parliament late on Saturday by Finance Minister Nicola Willis, fresh from delivering her second Budget.
“When I became Finance Minister, I was alerted to a number of risks that were not clear in the statements I had read previously,” Willis said, referring probably to cost blowouts such as the pay equity bargaining regime, the new Dunedin hospital and KiwiRail’s iRex ferry replacement plan.
Workplace Relations and Safety Minister Brooke van Velden’s April dismantling of the previous government’s pay equity negotiation regime injected $12.8 billion over four years into last week’s Budget.
Van Velden said the costs to the Crown of negotiated settlements had reached $1.8 billion a year.
Thirty-three public sector claims have been stopped and sent back to be resubmitted under a new threshold for proving work has been historically undervalued.
The Government has also ordered a revision of the new Dunedin Hospital project after indicative cost estimates of $1.2 billion to $1.4 billion blew out to a possible $3 billion.
The Government in December 2023 cancelled the iRex ferry project, the cost of which it said had blown out by $3 billion.
The Public Finance Bill drops the requirement for governments to articulate how their objectives will enhance New Zealanders’ wellbeing, and for the Treasury to produce four-yearly wellbeing reports.
“While Treasury should, and does, have a broad perspective, I would like the bright and talented minds at the Treasury to focus on economic and financial advice, rather than preparing reports on whether people have friends and whether their life has meaning and purpose,” Willis said.
3 Comments
It is called doing the job properly
No it isn't. Willis is not applying double entry accounting to her approach. She is ignoring public assets and future growth and the fact that deficit spending is essential in modern fiat currency systems like NZ.
Government deficit spending = private sector income and savings.
The government is not a private sector entity and does not borrow money - it creates money - out of thin air - when it spends.
Taxation and government bonds withdraw money from circulation to help control inflation.
The government has to create the money first and spend it into the private sector before they can tax it - money is not circular - when you pay taxes or pay the principle on a loan - that money (or credit) is destroyed - it can't be recirculated.
I can't imagine this will be much fun for Willis when evitable blowouts are aired in election year.
Ultimately while she blames the previous government for not disclosing things, it's Treasury who would be expected to disclose this information alongside their forecasts. Having Treasury publishing information that undermines a finance minister as a matter of course would be an interesting dynamic.
Also having the government's stated risks disclosed while commercial negotiations that lead to those risks are underway would be counterproductive surely.
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