22 Mar 2011

Government plans to further reduce new spending

6:13 am on 22 March 2011

The Government is looking to further reduce the amount of new spending in the May budget, Prime Minister John Key says.

Mr Key says health and education will continue to be priority for any funding increases, but savings will have to be made in other portfolios.

In his state of the nation speech at the start of the year, Mr Key announced that new spending would be cut from $1.1 billion to about $800 million.

Now, Mr Key says while funding for health and education will be increased, ministers have been to told to find that money from other portfolios.

He said the Government was keen to reduce New Zealand's reliance on overseas borrowing.

Mr Key said the Government wanted to take a tighter fiscal approach and return the Government's books to surplus more quickly.

The Prime Minister says any spending cuts won't be a savage attack on any particular area, but the Government is going to have to be very careful.

Tax cuts unaffordable - Goff

Labour Party leader Phil Goff says it is now clear that the Government's tax cuts, especially for those on higher incomes, were unaffordable.

Mr Goff says the Government is scrambling to balance the books because of its substantial tax cut package.

The Christchurch earthquake in February has been a determining factor, but the economy was running into trouble well before that, he says.