Budget said the Government\u2019s actions meant <\/a>\u201cthe estimated cost of pay equity settlements for the Crown has significantly reduced\u201d. This created a \u201cfiscal headroom of $12.8 billion over the forecast period\u201d. <\/p>\nFinance Minister Nicola Willis said at the time these savings were redirected into health, education and other government services. About $1.8 billion was repurposed to capital investments. <\/p>\n
As the Government expected some pay equity settlements would still be reached under the new regime, an undisclosed amount of money was retained in a contingency fund. The amount wasn\u2019t revealed due to the sensitivity of negotiations. <\/p>\n
![\"The]()
The $12.8 billion figure was first revealed in last year’s Budget. Photo \/ Mark Mitchell<\/p>\n
Speaking last week, Hipkins is reported to have reiterated Labour\u2019s commitment to reinstating the former pay equity regime but wouldn\u2019t go as far as to put a cost on it. <\/p>\n
\u201cHow much will that cost? We\u2019re trying to work that through at the moment, because the Government aren\u2019t releasing any information on how they reach the figure that they appear to have just made up,\u201d he is reported by interest.co.nz as saying. <\/p>\n
The Herald asked the Treasury about Hipkins\u2019 comment that the figure appeared to be made up and whether it stood by it. <\/p>\n
\u201cYes, Treasury stands by the $12.8b figure and the professional judgement from which it is derived,\u201d a spokesperson responded, saying it reflected the \u201cexpected fiscal impacts over the forecast period\u201d of the Government\u2019s changes. <\/p>\n
Hipkins doubled down today when asked if he stood by his criticism. <\/p>\n
\u201cThey haven\u2019t released any calculations that demonstrate that that number relates to a calculation of each of the individual claims that they basically unilaterally cancelled,\u201d he said. <\/p>\n
He said, \u201cIt\u2019s just the Treasury putting a figure in the air and trying to find a number to put on the paper. <\/p>\n
\u201cIt\u2019s not based on a claim-by-claim assessment of what settling those claims might cost.\u201d <\/p>\n
Hipkins was comfortable questioning the Treasury over the matter, saying, \u201cI\u2019d do it if I was in Government as well.\u201d <\/p>\n
![\"Chris]()
Chris Hipkins has doubled down on his questioning of the Treasury. Photo \/ Mark Mitchell<\/p>\n
Willis said Labour\u2019s approach was \u201cpathetic\u201d.<\/p>\n
\u201cLabour\u2019s attempt to dissemble and say that the number created by Treasury, that existed in Treasury forecasts is wrong, I think shows that actually they\u2019re trying to distract you and New Zealanders.\u201d<\/p>\n
She said Labour was trying to hide that \u201cthey have promised to restore a policy that they have no idea how to fund\u201d. <\/p>\n
\u201cWhat Labour are actually saying is that they no longer trust Treasury\u2019s professional judgement and their ability to forecast the costs of policies. <\/p>\n
\u201cThat is a very serious claim to be making and I\u2019d suggest not one that a party of frankly fiscal incompetence should be making.\u201d<\/p>\n
Willis said she questioned the Treasury\u2019s judgement when she saw the figures.<\/p>\n
\u201cThey were very, very clear that that was their forecast implication. There is independence in those forecasts.\u201d<\/p>\n
The Act Party\u2019s David Seymour said it was \u201cfiscal denialism bordering on conspiracy theory\u201d from the Labour leader. <\/p>\n
\u201cIf Hipkins doesn\u2019t trust Treasury \u2013 the department governments of all stripes have relied on for costings for decades \u2013 who will he get to cook up an alternative figure?\u201d asked Seymour. <\/p>\n
\u201cOne way or another, the fiscal chickens will come home to roost. If Chris Hipkins genuinely believes Treasury\u2019s numbers are wrong, he should do what real leaders do: publish his costings, show his assumptions, and tell New Zealanders what he will cut, tax, or borrow to pay for his promise.\u201d <\/p>\n
How does Treasury say it got to the $12.8b figure? <\/p>\n
The Treasury explained that previously, as a result of decisions by the former Government, the cost of the pay equity settlements had been managed outside the usual annual Budget process, which involves ministers bidding for money from a fixed pool of money known as the operating allowance. <\/p>\n
The usual Budget process forces the Finance Minister to make trade-offs between bids made by different ministers. <\/p>\n
The Treasury would take into account the predicted cost of pay equity claims when doing its usual forecasts, such as the forecast total Crown expenditure, but wouldn\u2019t disclose the exact amount \u201cto protect the bargaining position of the Crown\u201d. <\/p>\n
\u201cIn April 2024, Cabinet agreed to the Pay Equity Reset which, among other changes, brought the fiscal management of pay equity partially into the budget allowance framework via two contingencies,\u201d the spokesperson said. <\/p>\n
These are essentially two pots of money. <\/p>\n
One was to manage the cost of meeting the government\u2019s own pay equity obligations \u2013 obligations to the people it employs in the public service. This is called the public sector pay equity contingency fund. <\/p>\n
The second fund was to manage the government\u2019s contribution to settlements in private organisations which deliver some government services. This is the funded sector pay equity contingency fund. <\/p>\n
![\"The]()
The Treasury has stood firm by the figure. Photo \/ Mark Mitchell<\/p>\n
After the Government\u2019s tightening of the pay equity regime last year, there was \u201can expectation of lower settlement costs\u201d, the Treasury said. <\/p>\n
As a result, $3.2 billion was returned from the public sector pay equity contingency fund. An undisclosed amount was retained for any future settlements. <\/p>\n
On top of this, ministers decided to manage any future Government contribution to the funded sector from usual budget allowances, rather than having a separate contingency fund.<\/p>\n
The Treasury said this led to $9.6b over the forecast period being returned from the funded sector contingency fund. <\/p>\n
\u201cThis reflects the change in the fiscal management approach, not an estimate of the likely settlement costs or the Government\u2019s commitment to contributing to claim outcomes.\u201d<\/p>\n
Adding the $3.2b returned from the first fund and the $9.6b from the second gets you to the $12.8b over the forecast period.<\/p>\n
What does Labour say? <\/p>\n
Labour says the amount in those contingency funds \u2013 was the figures underpinning the headline $12.8b in savings – are just estimates of the amount of money that may be needed. <\/p>\n
\u201cThe $12.8 billion comes from contingency funds, basically money that\u2019s set aside as a precaution. That amount is an estimate, Treasury\u2019s best guess of what might be required,\u201d said Labour finance spokeswoman Barbara Edmonds in a statement. <\/p>\n
She said that was a different figure from what the actual pay equity settlements would cost. <\/p>\n
\u201cWe\u2019ve asked to see the detailed calculations behind Treasury\u2019s estimates but much of that advice still hasn\u2019t been made available.\u201d <\/p>\n
Jamie Ensor is the NZ Herald\u2019s chief political reporter, based in the Press Gallery at Parliament. He was previously a TV reporter and digital producer in the Newshub press gallery office. He was a finalist in 2025 for Political Journalist of the Year at the Voyager Media Awards.<\/p>\n","protected":false},"excerpt":{"rendered":"The opposition party has said it would reverse the Government\u2019s changes but has not revealed how much funding…\n","protected":false},"author":2,"featured_media":251298,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[169230,806,8613,169232,4500,3276,10039,3054,39053,6097,6095,1137,9058,1138,7237,169231,13480,6721,13489,111,43,139,69,1118,2744,106462,26631,12229,4578,23742,1361,25187],"class_list":{"0":"post-310688","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-new-zealand","8":"tag-169230","9":"tag-as","10":"tag-billion","11":"tag-calculating","12":"tag-changes","13":"tag-chris","14":"tag-controversial","15":"tag-criticism","16":"tag-doubled","17":"tag-down","18":"tag-engaged","19":"tag-equity","20":"tag-figure","21":"tag-firm","22":"tag-governments","23":"tag-guesswork","24":"tag-hipkins","25":"tag-labour","26":"tag-leader","27":"tag-new-zealand","28":"tag-news","29":"tag-newzealand","30":"tag-nz","31":"tag-of","32":"tag-pay","33":"tag-produced","34":"tag-reignites","35":"tag-result","36":"tag-savings","37":"tag-stands","38":"tag-that","39":"tag-treasury"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/310688","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=310688"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/310688\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/251298"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=310688"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=310688"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=310688"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}