INDEPENDENT NEWS

Budget 2024: A novice's guide and what to expect

Published: Thu 23 May 2024 10:55 AM
Giles Dexter, Political Reporter
It's one week to go until the Budget, and you may be experiencing some jargon fatigue already.
"What are appropriations?" you may be asking.
"When do I find out how much my tax cut is?" perhaps.
"What's up with the cheese rolls?" maybe.
Fear not, RNZ has put together this handy-dandy cheat sheet that will bring you up to speed and allow you to impress all your friends.What is Budget Day?
The Budget is a chance for the Finance Minister to open the cupboard for everyone to see what's inside. It sets out exactly how much money the government has, where it plans to find more, and where it plans to spend it.
In addition to the Budget, the Treasury also publishes its latest Economic and Fiscal Update (BEFU). This will be the first chance to scrutinise the books since the Half-Year Economic and Fiscal Update late last year. The BEFU contains the Treasury's economic outlooks and forecasts, as well as its analysis of some of the risks.
Throughout the Budget, you will see the phrase "appropriations". This is simply fancy Treasury speak for an authorisation for the government to spend money.
The Budget will contain a number of appropriations set out one year at a time, and some multi-year appropriations, which is a lump sum expected to last that particular policy a number of years. The Auditor-General has recently warned against there being too many multi-year appropriations but that warning will have come too late for this year's Budget.
Only coming once a year, it is seen as a major event in the Parliamentary calendar. There are a number of routines and rituals which take place, some of which are serious (like the lockup, a long period of time where everybody gets access to the Budget documents but are not allowed to transmit what's in there), some not (the previous Finance Minister Grant Robertson liked to have a cheese roll and new tie, Sir Bill English liked to go for a pie - no word yet from Nicola Willis what tradition she wants to set).Where are the lollies?
The Finance Minister and Prime Minister are setting this up to be one of the least frilly of no-frills Budgets. Not an austerity Budget, but don't expect big spending surprises.
All eyes will be on the "meaningful but modest" tax cuts Nicola Willis has promised, and exactly how she plans to pay for them. Willis maintains the government will not need to take on any debt for the tax cuts, and that Treasury modelling has told her they will be "fiscally neutral".
The tax cuts won't be in the form of a refund or anything like that. Instead, the government will legislate to adjust tax brackets, which have not changed since 2010. This will kick in from 1 July.
National campaigned on lifting tax thresholds by 11.5 percent, but it is possible the coalition has settled on a different mix.
The government has also promised frontline investment in education, disability services, police, and health. But beyond that, don't expect any lolly scramble surprises like 2022's cost of living payment, or last year's removal of prescription co-pays. Unless, of course, they are secretly plotting something, which one can never rule out.
Willis has set herself an operating allowance of "less than" $3.5b. That was the initial figure set by the previous government, but Willis has said the government will not be spending that much. It has allowed her to attack the previous government, saying they would set operating allowances and then blow it. So, by not revealing what hers is, it gives her some wriggle-room.
The operating allowance is the net amount of new money a government adds to the Budget. It consists of the spending increases and revenue reductions, as well as the offsetting savings.
The Finance Minister has also indicated the books will not return to surplus by 2026-2027, as originally hoped.
We'll also get confirmation of the scale of the proposed job cuts across government departments, and the programmes that have been cut to save some money.What's been announced so far?
Governments like to make a few pre-Budget announcements in the lead-up to the big day.
This is a good way of making sure a particular programme (or minister) gets its own day in the sun, rather than risk being buried in the sea of figures on Budget Day.
So far this year, we have already seen the likes of the FamilyBoost childcare payment, the re-vamped school lunches programme, a defence top-up, establishment funding for charter schools, funding for Gumboot Friday, and an investment in more social homes through cancelling first-home grants (though that was one announcement the government was forced into making early thanks to some dogged reporting).
Two of those announcements were made by David Seymour, another by Winston Peters. Giving coalition partners a chance to get their Budget announcements in early means National can take most of the Budget day spotlight for itself.
None of these announcements have come into effect yet - they still need to be legislated with the rest of the Budget.The day itself
On Thursday 30 May, journalists and economists will pile into the Beehive's Banquet Hall - a towering room which usually plays host to glitzy functions - in time for the Budget documents to be distributed at 10.30am.
However, the Budget takes place under a 'lock-up' situation, meaning everyone puts their devices on flight mode and no transmissions are allowed until 2pm. This rule is taken very seriously: in 2022, the Wall Street Journal breached the embargo by an hour, and the Treasury banned the publication from attending lock-ups until 2025.
At midday, the Finance Minister will give a speech and take questions, but again, this is not allowed to be reported on until the embargo (timed ban on publishing) lifts at 2pm.
At 2pm it's all go. Everyone can hit publish, and the Finance Minister then walks into the House and delivers a speech to Parliament setting out what is in the Budget and how proud of it they are (this also doubles as introducing the Budget legislation to the House).
Opposition parties will respond, usually to say how terrible the Budget is and what they would have done differently. The Prime Minister gets a chance to speak too, but will make it clear it is the Finance Minister's big day.
Sometimes, the government will put up a rolling maul of ministers in the Beehive's theatrette (where the Prime Minister does his post-cabinet media conferences from) to talk about the wins the Budget has for their portfolios.
The debate in Parliament has an eight hour allocation. It goes long into the night, and often into Friday (which is not usually a sitting day).What are the government's priorities?
Repeat after Christopher Luxon: rebuild the economy and restore the cost of living, restore law and order, and deliver better public services.
That list has been repeated ad nauseam for over a year now, and the government will use every chance it can within the Budget to repeat it again.
In March, Willis delivered her Budget Policy Statement (a few months later than usual), which set out what her first Budget will address.
Tax relief is, predictably, bullet point number one.
Identifying savings across government departments and agencies soon follows (that's all the job cuts and programme reprioritisations that have been proposed over the past few months). Willis has confirmed $1.5b of savings has been found from that exercise.
There will also be a limited number of high-priority policy commitments and urgent cost pressures, and a long-term pipeline of infrastructure investments.When does this start taking effect?
The Budget isn't just something Nicola Willis can announce and then voilà it's done. Like any government announcement, it must be legislated, and Budgets are a never-ending cycle.
Once the Budget has been delivered to the House, Select Committees all start scrutinising its individual spending proposals, and report back to Parliament.
Parliament must have completed its debate on the main Appropriation Bill (essentially, the big Budget bill) for the coming financial year within four months of Budget Day, although debates on various appropriations don't completely finish until nearly two years later. Parliament has only just finished debating the 2022-23 appropriations.
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