The list includes a number of ideas popular at Treasury but unpopular at the political level of the coalition. <\/p>\n
The paper noted the suggestions were not necessarily endorsed by Treasury or the Government. <\/p>\n
\u201cAs signalled last year, we have also attached at annex two a list of back-up savings to this report to seek your indication on if you wish to invite any of these options into the Budget process. <\/p>\n
\u201cWe have had an initial conversation with your office on these options. Many of these cover savings options that you may have previously discounted. These options are intended to give you optionality in putting together your preferred Budget package, and do not represent Treasury advice to support savings from these areas,\u201d the paper said.<\/p>\n
This advice included hiking GST by 1 percentage point to raise $8b over the four-year forecast period. <\/p>\n
Other ideas looked at hiking \u201ccorrective taxes\u201d such as tobacco and alcohol excise. The advice included a sugary drink tax. <\/p>\n
The Government also got advice on axing what was left of its contribution to KiwiSaver, which would have saved $2.4b.<\/p>\n
Another option Treasury proposed was to reduce the depreciation rate for cars from 30% to 25% or 20%. If reduced to 25%, this would save around $80m ($30m for the first two years, $10m thereafter). If reduced to 20%, this would save around $160m ($55m for the first two years, $25m per annum thereafter).<\/p>\n
Who loses from the changes to housing help? <\/p>\n
Among the biggest losers from the Government\u2019s housing help changes are pensioners, beneficiary families and Pacific people.<\/p>\n
Budget 2026 included increasing the minimum income-related rent (IRR) contribution from 25% to 30%, lifting the maximum rates of the accommodation supplement by between $10 and $30 per week, and reducing the maximum rates for the temporary additional support (TAS).<\/p>\n
An analysis of the impact, by the Ministry of Social Development and the Ministry of Housing and Urban Development, is included in today\u2019s release of Budget documents.<\/p>\n
\u201cThe combined package impacts 240,000 families. There are 111,000 families who gain income (on average $14.91 per week), and 129,000 who lose income (on average $24.04 per week),\u201d the analysis said.<\/p>\n
\u201cFor families with losses, Pacific peoples have the highest weekly loss of $30.75 per week. This is due to a large proportion of Pacific peoples in social housing and larger family sizes, which means they are more likely to be impacted by the TAS maxima change.<\/p>\n
\u201cChanges to the TAS maxima are designed to undo the significant increases seen in these maxima as a result of relatively large above-inflation increases in benefit rates. Due to its role as an income deficiency hardship payment, this change impacts people already in hardship.\u201d<\/p>\n
More beneficiary families gain than lose, the analysis said, because of the group\u2019s higher take-up of TAS and residence in social housing.<\/p>\n
\u201cFor families with children \u2013 slightly more gain from the package than lose. The majority of families with children that gain from the housing initiatives package gain between $0\u2013$25 per week. The majority of families with children that lose from the package lose between $25-$50 per week.\u201d<\/p>\n
About 19,000 recipients of superannuation or the veteran\u2019s pension will lose up to $50 per week.<\/p>\n
\u201cAcross the approximately 2500 families with losses of more than $50 per week, the majority (approximately 2200 families) are losing between $51-$52 per week as a result of the IRR change. The remaining 300 families in this group are impacted by the change to remove child support as an allowable cost for TAS and these losses are more significant, over $100 per week or more.\u201d<\/p>\n
Foreign Minister Winston Peters. Photo \/ Mark Mitchell <\/p>\n
Winston Peters sought funding for MFAT business class flights <\/p>\n
A March paper Willis<\/a> received before a meeting with Foreign Affairs Minister Winston Peters showed the latter sought additional funding for Ministry of Foreign Affairs and Trade (MFAT) diplomats to have business class flights.<\/p>\n The paper said, \u201cthe Minister [Peters] submitted four new spending initiatives\u201d. One of the Budget bids, which would have increased MFAT\u2019s overall funding, was for a $1.75m per year lift in funding to change the ministry\u2019s travel policy. According to the paper, the policy change was meant to \u201callow… more business class flights\u201d.<\/p>\n Treasury officials recommended the bid not be supported. The paper was delivered on March 5. A subsequent paper from March 31<\/a> said Peters \u201cno longer\u201d sought funding for that policy. <\/p>\n Willis and Peters had a war of words after the Budget when she hinted at the bid for business class flights.<\/p>\n Stamp duty on houses bought by tax non-residents considered <\/p>\n The Government considered hitting tax non-residents who buy houses in New Zealand with a levy. <\/p>\n It sought advice on applying a 15% stamp duty to all residential property purchases by tax non-residents. <\/p>\n The policy would have captured New Zealanders (who are currently responsible for about 80% of homes purchased by tax non-residents).<\/p>\n The change was expected to have raised between $100m and $200m a year.<\/p>\n While the Government was considering the policy at least up until February this year, it didn\u2019t end up pursuing it in the May Budget. <\/p>\n Act leader David Seymour, a couple of days ago, took credit for the idea being canned, saying National would have forged ahead with the stamp duty if it had its way.<\/p>\n Advice given on suspending NZ Super Fund contributions<\/p>\n In April, Treasury took advice to Willis<\/a> about suspending or reducing contributions to the NZ Super Fund. <\/p>\n Treasury noted the Key-English Government suspended contributions. <\/p>\n A paper notes Willis \u201casked for further advice on potential contribution options and their fiscal implications, in the context of a review of the Expected Fund Return (EFR) assumption that is likely to increase legislated contributions to the NZSF relative to preliminary fiscal forecasts\u201d.<\/p>\n Treasury responded to that request by modelling two options.<\/p>\n The first was a suspension of contributions to the NZ Super Fund until 2030\/31 or moving to \u201cpartial contributions\u201d over that period. <\/p>\n A full suspension of contributions was projected to result in a \u201c$1.9 billion or 0.34% of GDP reduction in net core Crown debt in 2029\/30 relative to the status quo\u201d. <\/p>\n Moving to partial contributions would have resulted in a $300m or 0.06% of GDP reduction in net core Crown debt in 2029\/30.<\/p>\n Treasury said that reducing or suspending contributions would \u201creduce long-term fiscal sustainability because of deferred contributions and forgone returns\u201d.<\/p>\n Scolding from Speaker Gerry Brownlee<\/p>\n Willis received a scolding from Speaker of the House Gerry Brownlee after her officials sent letters to him discussing Budget funding for Parliamentary Service and the Office of the Clerk, forgetting a recent law change meant Willis no longer had the authority over those votes.<\/p>\n On April 23, letters signed by Willis were sent to Brownlee confirming ministers had decided not to progress any initiatives in Vote Parliamentary Service and Vote Office of the Clerk as part of Budget 26.<\/p>\n Previously, the Speaker had to wrestle with the Finance Minister during the Budget, much like any other minister seeking funding for their department. However, the new Parliament Act 2025 changed this and made Parliamentary budget proposals overseen and recommended directly to the House by a cross-party committee.<\/p>\n Brownlee, aware of the law change, responded later on April 23 to both letters with a handwritten letter that read: \u201cThese letters appear to have been sent in error. Please ask your advisers to familiarise themselves with the Parliament Act 2025\u201d.<\/p>\n On April 28, Willis wrote back and acknowledged the letters were sent in error.<\/p>\n \u201cWhile ongoing engagement was required in relation to estimates processes, the letters did not appropriately reflect the distinct constitutional and funding arrangements that apply to these votes.<\/p>\n \u201cOfficials have been reminded of the need to clearly reflect the different treatment of Offices of Parliament in Budget-related correspondence.\u201d<\/p>\n Midwife workforce shortage of 26% puts postnatal stay in jeopardy<\/p>\n The Government\u2019s expanding of bowel screening eligibility and funding for an extra day of postnatal inpatient care for new mothers were announced despite Treasury concerns over workforce shortages and Health New Zealand\u2019s ability to deliver.<\/p>\n Budget 2026 included $45.6m to reduce the bowel screening eligibility age from 58 to 56, potentially benefiting 200,000 people. <\/p>\n \u201cWe do not consider Health NZ is ready to deliver a further expansion to this programme, particularly considering capacity constraints and requirements for significant outsourcing (which is time consuming and costly),\u201d Treasury officials said to Willis in March.<\/p>\n \u201cGiven the cost of this initiative and likely delivery challenges we recommend deferral until further planning and capacity expansion occurs.\u201d<\/p>\n Budget 2026 also provided $34.4m over four years to increase maternity bed capacity and grow the workforce for a three-day postnatal stay in an inpatient care facility. <\/p>\n \u201cWe have significant concerns about the deliverability of this initiative,\u201d officials told Willis. \u201cMidwifery workforce shortages are currently around 26% nationally and maternity wards are already subject to high occupancy rates. If uptake is high, then this would require significant investment in infrastructure and workforce that likely exceeds the funding request they have submitted.<\/p>\n \u201cAs per your request, this initiative has been included in the draft Budget package, scaled to assume 50% uptake.\u201d<\/p>\n Budget 2026 also included some unspecified funding for the Regional Hospital Redevelopment Programme for Tauranga, Palmerston North and Hawke\u2019s Bay hospitals, despite Treasury wanting this work deferred because of concerns about \u201caffordability constraints and competing capital priorities\u201d.<\/p>\n \u201cThe programme is costly, with total indicative costs of [redacted], and creates pre-commitments against future budgets,\u201d officials advised.<\/p>\n Treasury noted the ongoing cost pressures in health, including an ongoing \u201cstructural funding gap\u201d.<\/p>\n \u201cThe Ministry [of Health] advised Treasury on March 4 that its best professional judgment is a $200m-$400m Health NZ deficit is achievable [later revised to $400m or $475m], but this presumes ministerial decisions and some unspecified operational choices to reduce costs.\u201d <\/p>\n A January paper<\/a> said Health Minister Simeon Brown submitted Budget bids that were \u201cwell above\u201d the envelope of funding suggested by Willis.<\/p>\n One of the bids Brown suggested was a \u201c$200m pa\u201d uplift to Pharmac\u2019s budget. <\/p>\n \u201cWe recommend you write to the Minister of Health to seek a clearer prioritisation of initiatives,\u201d Treasury advised. <\/p>\n Treasury later said the submitted bids \u201cgreatly exceeded\u201d Willis\u2019 Budget invitation.<\/p>\n \u201cDespite requests we have been unable to secure a prioritised list of initiatives that fit within the envelope from Ministry of Health officials. We recommend you write to the Minister of Health and request a prioritised list that fits within the envelope you invited,\u201d it said. <\/p>\n Some M\u0101ori families to lose an average $23.85 a week<\/p>\n An April Treasury paper<\/a> to ministers said the Budget welfare changes disproportionately make M\u0101ori families worse off.<\/p>\n Treasury\u2019s distributional assessment said M\u0101ori are about 17.5% of the population but 40% of families made worse off by the welfare\/housing package, losing an average $23.85 a week. M\u0101ori were also 31% of the families that gained from the package, gaining $15.53 on average. <\/p>\n The Ministry of Justice warned some of the social development policies would \u201cnegatively affect the current level of realisation of ICESCR and UNCRC rights [two international human rights treaties] such as the right to social security and the right to an adequate standard of living, and may affect the equal enjoyment of rights by all due to the potentially disproportionate impacts for some groups such as single parents and M\u0101ori families\u201d.<\/p>\n Treasury floats sending fewer low-level offenders to prison <\/p>\n In a March paper<\/a>, Treasury raised concerns about spending on prisons, which has been increasing. <\/p>\n Officials proposed considering \u201cdecreasing the number of lower-level offenders in prisons, changing the high-security prisoner classification, investment in early intervention\u201d.<\/p>\n Police budget reprieve of two years and then a fiscal cliff<\/p>\n Police Minister Mark Mitchell pushed back on Willis\u2019 initial demands for fiscal restraint, saying it would have required \u201cunfeasible\u201d reprioritisation and a \u201csignificant\u201d hit to frontline services.<\/p>\n This is revealed in a Treasury document in March, after law and order ministers were initially invited to show how they could work within a collective operating envelope of $200m for Budget 2026 initiatives, later increased to $300m after concerns about \u201cpotential frontline impacts\u201d.<\/p>\n This still left police shy of what was needed to maintain frontline services, so they proposed a further \u201creprioritisation\u201d of its own spending of about $151.8m, including keeping 100 vacant positions unfilled, and freezing $11m of its investment plan. An alternative from Mitchell, which Treasury supported and Willis accepted, was $50m in cost pressure funding over two years.<\/p>\n Treasury said the cost of not meeting this would see police \u201creduce non-sworn staff by up to 800 FTE [fulltime equivalents] and require constabulary staff to backfill office-based roles, close the 105 line and cease family violence and crime prevention initiatives, which would all impact directly on frontline services\u201d.<\/p>\n \u201cPolice seeks two years of cost pressure funding to enable it to continue current services, and to develop a future capability plan and further work to ensure its long term financial sustainability. This approach would create a fiscal cliff to be addressed at Budget 2028.\u201d<\/p>\n Treasury officials said it would also incentivise police to \u201cconduct the necessary work while managing the tight constraints of Budget 2026\u201d.<\/p>\n International visitor levy for wilding pine<\/p>\n Willis acted against Treasury advice, instead siding with the Department of Conservation (DoC) in drawing revenue from the international visitor levy to fund efforts to address the spread of wilding pines.<\/p>\n In the Budget, Biosecurity Minister Andrew Hoggard announced $79m over three years to control the spread of wilding pines, which threatened productive farmland, compromised biodiversity and increased the impact of wildfires.<\/p>\n A Treasury report on April 16 to Willis showed DoC had proposed funding only $30m through the levy and the rest through the operating allowance, Treasury noting the proposal \u201cpreserves greater funding for other biodiversity and visitor projects\u201d.<\/p>\n However, Treasury recommended the entire $79m be drawn from levy revenue as it would allow the initiative to proceed and \u201creduce pressure on the operating allowance\u201d.<\/p>\n Treasury did note its option \u201csignificantly constrains funding for other conservation initiatives in the near term\u201d.<\/p>\n Willis asked for advice on potential Budget Day change<\/p>\n The Finance Minister asked Treasury for advice on under what circumstances it may move Budget Day and what flexibility there was to do so. This came against the backdrop of the fuel disruption,<\/p>\n The Budget was scheduled, and eventually announced, on May 28. <\/p>\n In an April 17 document to Willis, Treasury said a key benefit of a later Budget would mean additional time for decision-making. <\/p>\n That would allow for \u201cmore time to… develop and finalise fiscal elements of the Government\u2019s response to the fuel situation [and] respond to events as they develop, given the level of uncertainty\u201d. <\/p>\n However, officials said the benefits were \u201cunclear\u201d and \u201ca delay may send unintended signals\u201d. <\/p>\n \u201cWhile theoretically providing more decision-making time, it is not clear that events will settle sufficiently in that an additional week or two would make a substantial difference.\u201d <\/p>\n There was a risk that delaying Budget Day would \u201craise expectations around potential response measures\u201d. The last time a Budget wasn\u2019t held in May was in June 2000. <\/p>\n A short delay to mid-June was \u201cplausible\u201d but would require changing the House\u2019s sitting calendar and a different approach to supplementary estimates. <\/p>\n \u201cBudget day can theoretically be moved up to the end of July, but doing so would be unusual and have significant consequences. <\/p>\n \u201cThe July date is based on the requirement in the Public Finance Act that the main estimates are introduced by the end of July. <\/p>\n \u201cIn this case, the supplementary estimates would have to be introduced before Budget Day. There would also be significant implications for the implementation of Budget decisions given initiatives would be announced past the start of the financial year. This may mean more pre-announcements, particularly of fuel response related initiatives.\u201d <\/p>\n Treasury ultimately didn\u2019t recommend changing Budget Day. <\/p>\n \u201cMost of the Budget package is settled, and there is unlikely to be substantially more accurate information to finalise the small number of remaining outstanding decisions by that point.\u201d <\/p>\n Officials said if there was a \u201csignificant deterioration in events\u201d between then and Budget Day, their judgment could change. <\/p>\n Annual 8% productivity gains to avoid loss of services<\/p>\n That\u2019s what\u2019s needed in the public service to offset the 8700-odd job cuts to meet the mid-2029 target of 55,000 public service workers, meaning about 10,000 fewer positions; as of March, there were 64,535 FTE staff in the public service, down from 65,699 at the end of 2023.<\/p>\n \u201cDelivering this target will require service transformation, back-office functional changes, and the acceleration of the use of digital technology at a scale and speed not achieved to date,\u201d an aide-memoire from April, released today in a dump of Budget 2026 documents, said.<\/p>\n \u201cThe scale of FTE reductions implies two years of 8% productivity gains to maintain the same level of public services. The impact on services will be a key point which agencies draw out in the proposals to implement this target.\u201d<\/p>\n The aide-memoire said the 55,000 target was recently changed from 60,000.<\/p>\n \u201cTo avoid undeliverable or \u2018Washington Monument\u2019 style proposals [where a visible service or asset is cut], particularly from agencies with large workforces (where changes could have outsized implications for the rest of the public service), we suggest a prioritised approach for central agencies to work closely alongside those large agencies. This will likely require ministerial prompting to ensure delivery,\u201d the aide-memoire said.<\/p>\n Budget 2026 estimated these job reductions to save $2b a year.<\/p>\n Officials keen on tax changes that spur private investment <\/p>\n Treasury and Inland Revenue officials advised the Government that changing the tax treatment of assets businesses invest in could help spur economic growth. <\/p>\n They said if the Government wanted to use the tax system to improve \u201ceconomic performance\u201d, its best options were expanding its existing Investment Boost policy and\/or allowing owners of new commercial buildings to deduct depreciation as an expense when paying tax. <\/p>\n The Government launched Investment Boost at Budget 2025. The policy enables businesses to deduct 20% of a new asset\u2019s value from that year\u2019s taxable income, on top of normal depreciation. <\/p>\n Officials said increasing the rate up to 40% would likely be \u201cone of the most cost-effective tax policies for lifting capital intensity\u201d.<\/p>\n As for the depreciation change, in 2024 the Government stopped allowing commercial and industrial building owners to deduct depreciation as an expense, in a bid to bring in $575m more tax revenue a year. Inland Revenue was scathing about the change at the time. <\/p>\n Reversing this policy (even only partially) and\/or expanding Investment Boost would be costly, so officials stressed the Government should only make changes if it found the money to do so elsewhere.<\/p>\n The Government didn\u2019t end up making the changes. <\/p>\n Suspected child abuse reports to Oranga Tamariki up 44% in a year <\/p>\n A March paper to Willis and Budget ministers<\/a> warned that \u201creports of concern\u201d (ROCs) to Oranga Tamariki rose from 74,941 in 2023\/24 to 103,038 in 2024\/25. Treasury warned that if social-worker capacity does not keep up, assessment times lengthen and children\u2019s exposure to abuse can be prolonged.<\/p>\n \u201cIf ROCs increase, but social workers\u2019 capacity to assess them does not, assessment and response times increase. This can prolong children\u2019s exposure to abuse, and extend the waitlist of lower-urgency ROCs,\u201d the paper said. <\/p>\n Officials cited growing online child exploitation, economic factors such as the cost of living, and the increases in the number of children living in material hardship as being behind the increase. <\/p>\n Officials cited possible drivers including online child exploitation, population growth, living costs and material hardship. The final Budget put $22.6m into responding to the increased volume <\/p>\n An Oranga Tamariki ROC is a formal notification made to the agency or police when someone is worried about the safety, wellbeing or care of a child.<\/p>\n Despite most departments not getting substantial increases to fund cost pressures, Treasury recommended the Government fund Oranga Tamariki\u2019s bid for extra funding \u201cin full\u201d.<\/p>\n Treasury warned if Oranga Tamariki\u2019s \u201cfrontline\u201d was not expanded to meet the increased workload, ROCs would \u201ccontinue to place pressure on social workers\u2019 workloads and ROC assessment times, heightening the risk of missed instances of abuse and prolonging children\u2019s exposure to abuse\u201d.<\/p>\n \u2018Unaffordable and likely to be undeliverable\u2019<\/p>\nThe Government considered a stamp duty on expensive homes. Photo \/ NZME<\/p>\n
A handwritten letter from Speaker Gerry Brownlee rebuking Willis’ request for Budget control. Photo \/ Treasury<\/p>\n
Police were given a reprieve. Photo \/ NZME <\/p>\n
The Government got advice on shifting Budget Day after war broke out in the Middle East. Photo \/ AFP<\/p>\n