Govt aims to curb spending

Press, 15 February 1986, Page 8

Govt aims to curb spending

By

MARTIN FREETH

in Wellington

The Government has set up a committee of four senior Ministers to look for expenditure cuts in a drive to hold down the Budget deficit in the coming fiscal year.

The Minister of Finance, Mr Douglas, says the committee is not a “razor gang” but restraint in expenditure is its main concern; and that 1986-87 will have few, if any, big new spending projects. The year’s deficit is expected to be higher than for this financial year, largely because of a

net $1 billion cost to arise from tax reforms in October.

The Government committee of Mr Douglas, the Associate Finance Minister, Mr Prebble, the Deputy Prime Minister, Mr Palmer, and the Minister of State Services, Mr Rodger, will go through each policy aspect assessing expenditure priorities. “It will undoubtedly mean lower spending in some areas but it is also most probable that other areas will receive a higher priority,” Mr Douglas said yesterday. He used an address to the Ellerslie Rotary Club

in Auckland to give a background to the expenditure restraint exercise.

Mr Douglas dismissed the across-the-board approach to spending, cuts adopted by National in 1982, and also the idea of chopping expenditure, selectively, such as buying no new cars for Government departments for one year. The Government would instead review how policy was implemented and the costs in effectively achieving policy goals, Mr Douglas said. The approach was based on separating the Government’s trading

activities from its social policy functions. This would mean further change in the public sector to separate commercial from other activities, as was being done with the new Forestry and Land Development Corporation announced last week.

Mr Douglas said it was a matter of clearly identifying what were social policies that should be paid for by taxpayers and what were trading activities that should be run according to business imperatives. He pointed to pressure on the deficit from a

delay in revenue flow that the Government would experience during the introduction of the goods and services tax, and also the impact on revenue from a general slowing of the economy this year. An expenditure review at this time of the year is part of the usual pattern of preparation of estimates for the annual Budget. Labour has changed the process used by the previous Government. The Ministers’ committee will take a package of proposals to the Cabinet Policy Committee,' and then the Cabinet, probably in May.