New Zealand’s Government plans to spend about $40 billion in the year ending June 2003. It is very important this money is properly accounted for and used well to achieve the objectives set by the Government.
The Treasury is the agency responsible for managing the overall process
of raising, spending and investing Crown finances.
There are many laws describing how the government must act in managing public money. One of the most important is the Fiscal Responsibility Act. This requires the Government to:
The Government must compare its plans against five principles of responsible management set out in the Act:
The Act requires the Government to publish reports in a yearly cycle, so that Parliament and the public can see the effect policies will have on the Crown’s finances.
The Budget Policy Statement details Government’s long-term objectives, what it plans to do in the short and long term, and its priorities for the Budget. The statement is reviewed by Parliament’s Finance and Expenditure Select Committee. Its report is normally debated by Parliament before final Budget decisions are made.
The Economic and Fiscal Updates summarise the current financial situation,
and provide forecasts for the next four years. The Updates are prepared
when the Budget is presented – again in December each year – and
before general elections. Another Update (on the current year only)
may be prepared when Supplementary Estimates are presented if they
are separate from the Budget.
Every year, the government writes a Budget setting out its plans for the next year. This allows it to plan ahead and allocate resources based on its policy priorities. The Budget covers the 12 months from 1 July to 30 June. It must be presented to Parliament for approval no later than 31 July each year, and passed within three months.
When the Government has decided what it wants to do in the Budget, the Minister of Finance presents its plans to Parliament. This presentation is usually shown on television where various people have their say on whether the Government’s plans are good or bad.
Parliament sends the Budget to select committees to study before voting on it.
The main select committee doing this work is the Finance and Expenditure Select Committee (FEC). It also scrutinises the year-end financial statements of the government, comparing actual performance with planned performance on behalf of the House.
The FEC, and other select committees do the same for:
More information about the management of public finances can be found in the publication Putting it Together, available at the Treasury website.
Strategic phase: Nov to Feb
Ministers propose a three-year Budget strategy to Cabinet which agrees on key themes for the Budget (based on proposals, information and advice from the Minister of Finance and other Ministers). This information is set out in the Budget Policy Statement. Ministers tell departmental chief executives their priorities to guide their preparation of Budget submissions.
Preparation: Nov to Feb
Ministers and chief executives prepare draft budgets for the next year. They also prepare purchase agreements, which set out the goods and services Ministers want from their departments and what they will cost.
Preparation of the main Estimates (Estimates of Annual Appropriations for the Government of New Zealand) begins. These explain why the money is wanted, and what it will be used for. These appropriations are grouped in ‘Votes’, for Parliament to vote on. Each is assigned to the Minister responsible for that activity.
New initiatives: Nov to Feb
Ministers and their departments develop new spending or revenue proposals based on priorities identified in the strategic phase.
Review baselines: Feb to April
Ministers’ proposed budgets for the next three years (baselines) are reviewed and Cabinet considers any proposed changes.
Ministers and chief executives agree on any additional funding (Supplementary Estimates) needed for the current financial year, as a result of Cabinet decisions and forecasting changes made since the last Budget.
Decisions: Feb to May
Cabinet makes final decisions on Ministers’ proposals that increase or decrease spending and income.
Presentation: Before 31 July
On Budget day the Minister of Finance presents to the House:
Parliament decides: June to Sept
The Fiscal Strategy Report, the Budget Economic and Fiscal Update, and the Estimates are sent to Parliament’s Finance and Expenditure Select Committee. They pass on the Estimates to select committees which oversee each area of government activity.
The committees question Ministers and departments about their plans, and may recommend changes. They report back to the House within two months of the Budget being presented. The House must pass the Budget within three months of its presentation.
What the Government expects to spend in the year ending 30 June 2003
© Knighton & Associates NZ Ltd
© Knighton & Associates NZ Ltd