An Unprecedented Aid Increase (or not)

Welcome to another NZADDs update,

Budget time in Aotearoa. And the news from our first-cut-analysis of the aid budget is startling: a massive increase in New Zealand aid.

The aid budget will leap up from NZ$589 million the 2015/16 financial year to NZ$659 in 2016/17. A hefty 12% rise. (These numbers are nominal and don’t take inflation into account; but inflation is very low in New Zealand at present.) As I said – startling. Although before you pop out the champaign and start calling your Australian friends to gloat about being the sole remaining regional power you should take a look at this chart.

Aid trends over time

(Chart data and details are here.)

The blue line is based on data from this year’s budget; the red line is spending projections from last year’s budget. All data are nominal (that is, not adjusted for inflation). The dashed vertical lines separate each three year spending appropriation. The first point to note is that the aid programme has spent $20 million less in 2014/15 than Treasury has estimated it would spend as that financial year drew to a close (which is utterly baffling). The aid programme is also scheduled to come in under budget for the 2015/16 financial year (an actual spend of $589M versus a budgeted spend of $603M in the 2015/16 budget). It’s these under-spends that are providing the extra money budgeted for the 2016 and 2017 financial years. The underspend in the 2015/16 financial year also boosts the year on year increase between 2015/16 and 2016/17. So there’s no dramatic increase at all; it’s just unspent money being rolled forwards.

And so the real story of the 2015/16 budget is not one of increases, but under-spends. I’m not inside the tent and cannot tell you why the under-spending is taking place; however, under-spends have been a persistent problem since Minister McCully took control of the aid programme, whereas they weren’t previously.

There’s plenty more in the budget. And Jo and I are planning to write a more detailed blog for Devpolicy. In the meantime I just wanted to note one point: on page 129 of the Vote ODA Estimates document an increase in aid programme overheads is discussed. Part of the increase is explained as “a retention of underspends of $6 million from 2015/16 to enable the implementation of the outcomes of an internal capability initiative”. Our understanding is that the ‘internal capability initiative’ is an ongoing review looking at aid programme functioning (including examining how other countries’ aid programmes are structured). On the basis of the $6 million dollars budgeted for the coming financial year it would seem this review is scheduled to conclude soon. So far so good. But why will its ‘implementation’ cost so much. It’s unlikely that these are consultants’ fees alone (if they are I’d like to note to any MFAT readers that NZADDs’ Platinum Service offers very competitive prices). It’s hard not to look at the $6 million figure and wonder if it’s money being set aside to pay out redundancies. This is–I hasten to add–definitely only my speculation. However, any clarification from the government would be very much appreciated.

Finally, more happily, on a non-budget note:
Pacific Currents, Global Tides: DevNet Conference, 5-7 December, Wellington
Don’t miss this year’s DevNet Conference, ‘Pacific Currents, Global Tides’, at Victoria University of Wellington from 5 to 7 December. This biennial conference brings together students, academics, policy-makers and practitioners to talk about trends in development thinking and practice. A strong focus on the Pacific will characterize this year’s conference, and practitioners in particular are being encouraged to participate. If you’re interested in taking part, head here to submit your ideas for a panel, workshop or paper – due by 8 August 2016.

Terence (with able assistance from Jo)
for NZADDs admin