Tēnā koutou katoa. Welcome to this Allen and Clark webinar, Beyond the Budget Headlines, What the 2025 Numbers Mean for You. My name is Jodie O'Neill and it's my pleasure to welcome you to our kōrero.
For some of you, this is your first time joining us, so you may not be familiar with Allen and Clark. We're an Australasian-based consultancy dedicated to making a positive impact on communities throughout Aotearoa, Australia and the Pacific. Our areas of speciality include strategy, change management, programme, delivery, policy, research and evaluation, just to name a few.
Today, we're discussing the 2025 budget, or the growth budget as the government is calling it. We're going to look at what the budget means for businesses, NGOs, central and local government. We're not going to provide you with a list of funding or a breakdown of the money.
We're going to choose a few specific areas to focus on and hopefully bring you some insights on how those might affect you. I'm joined today by our New Zealand Managing Partner, Matt Allen. Tēnā koutou and welcome everyone.
As Jodie said, I'm one of the Managing Partners for Allen and Clark, responsible for New Zealand operations. In terms of how we propose running today's webinar session, firstly, Jodie and I will give a bit of an outline of some of the impacts of the budget in relation to the community sector. And we'll then be joined by Simon Arcus, the CEO of Wellington Chamber of Commerce and Business Central.
And with Simon's help, we're going to be talking a little bit about what's in or not in the budget for business. And then later on, we'll be joined by Susan Freeman-Green, the CEO of Local Government New Zealand. We'll be doing a Q&A as we go with Simon, Susan and Jodie and I answering questions.
So please pop those questions into the chat as they come to you. So starting out with what the budget means for communities and the NGO sector. There's $190 million in the budget for a social investment fund.
Now, there's been lots of discussions about the social investment approach over the last year, the pros and cons, and we've covered some of those on our previous webinars. But today, I wanted to look at the broader picture. There's a big investment in this fund, but alongside cutting of other funding from across government.
And the Social Investment Agency has explicitly highlighted that they want to consider funding proposals for consolidating multiple contracts and pooling social sector funding. So a question for you, Matt, if we continue on this trajectory, what would the NGO sector look like in five to 10 years time? Yes, well, I think one thing's very clear. The government clearly wants to only fund programmes which can deliver outcomes, reduce inefficiencies and prioritise community delivery.
And that's, of course, a laudable goal. I think we'd all agree with that. But what we may see as a result of this focus is consolidation of the NGO sector.
You probably can expect larger and more established NGOs who have been in a position to be able to gain funding and also be able to justify the funding through having the capability to track and report on outcomes. You'd probably like to see more of those larger consolidation of NGOs overall. And we are actually seeing a similar trend in the UK, not so much because of the social investment approach being applied there.
But there has been a 90 percent increase in charity mergers last year in that area. And that's a reaction to increased cost pressures and demand for efficiencies and returns. So I think it's quite possible we will see large NGOs receiving funding, still with the ability to work through potentially smaller local providers to deliver specific services.
But I guess the take home message for everybody probably is that those smaller providers will need to be able to deliver to a specific reporting framework upwards to enable large providers to report up and demonstrate value. And I guess the motivation of this, it's probably easier for government because they don't have to manage lots of different small regional contracts. But of course, it does have ramifications for those existing smaller NGOs.
So we've talked a bit amongst ourselves about pieces of advice for NGOs to focus on in this difficult funding environment. So we've got four. The first is to ensure that your organisation has a clearly articulated value proposition.
So this should link back to the outcomes that you're trying to achieve. And also, where possible, it'd be really good to link this back into government priorities. So a really good example of this from the current budget is there's a funding package for response to 111 calls, shifting away from a police response towards co-response crisis teams.
Now, there's currently only funding in the budget for government agencies, but there's a clear role for NGOs here. And I think that's a good example of an opportunity for how NGOs could demonstrate how their services can lead to outcomes and save police time in those areas, which is clearly a priority for the government. Our next piece of advice is to invest in data capability.
So you need good data to demonstrate your value and to tell the story about the benefit that you are making. And it's going to be really important also in future to link in with the infrastructure or the IDI. And it's really important for NGOs, particularly if you don't know what the IDI is, or you're not familiar with that, to get up to speed to understand what it is and how the data you collect might interact with that.
We know that NGOs don't have a lot of money to invest in data capability, but this is something that when you're hiring and when you're thinking about how you do spend those precious resources, it's really important to think about this capability. Our third piece of advice is to explore partnerships and collaborations. So we know lots of NGOs already work in partnership or collaborate with other local providers, but this is a good time to re-look at those arrangements.
Are they working for both the parties? Could they be stronger? What other organisations could you bring into the fold? I think that's really important moving forward and thinking about how the sector is going to operate in the future. And our final advice is to ensure that you have robust measurement frameworks to support your work. If you want to know more about social return on investment approaches or building effective monitoring frameworks, we hosted webinars on those topics earlier this year, which you can find in the resources tab on our website.
Now talking about central government agencies, Matt, did you have any reflections on how the budget will impact central government? Yeah, yes, I have. I mean, I guess one thing I'd say is that there's obviously a lot of new initiatives and agencies are going to have to gear up to deliver on those alongside everything else they've got on their plates. So one thing that's been very front of mind, of course, for staff and many government agencies is the ongoing cuts to the public sector.
Now we know from our clients this has been very difficult, particularly for those, well, both for those making cuts, having to make the cuts, and especially for those suffering them. So my take is that there will be some relief that there aren't wholesale targets for massive cuts across the public sector as a whole in this budget. But that said, the reprioritisation of baseline funding that will continue to be required across many sectors means it will continue to see ongoing restructures and cancellations of programmes.
I did notice that very few agencies received any increased funding for personnel costs. Yeah. Yeah, I mean, usually you would see a small budget potentially to provide cost increases for personnel and other day-to-day costs, and often that's in line with union agreements or just, you know, CPI changes.
But this year, only a few agencies got explicit funding for this. And the implication is, again, that agencies will have to cover these things within their baseline. And of course, the increased costs from the 1% rise in KiwiSaver.
Yeah, exactly. Yeah. So, and on that, actually, most public servants, senior public servants at least, probably haven't seen their wages move since around 2022.
First, we had the COVID-19 public sector wage freeze, and then we had public sector restructuring. We saw some more junior staff get increases, there was provision for that. But it will be difficult through this budget, I think, for many agencies to find money in the budget for wage increases or anything significant anyway.
And what one reflection I had the other day was that one thing that this often leads to is more public sector churn, because people find that the only way they can get increased pay is through shifting roles. And that churn does introduce some inefficiency and lost productivity, but it's not all bad, as it does, of course, promote cross sharing of ideas across the sector of people moving and bringing their experience and knowledge to share with others. We had some questions about the social investment fund.
So I guess we've already covered that. But we've also got a question from Helen about what's on the horizon for infrastructure. So I think there's a couple of clear investments in the budget in terms of, you know, there's investments in the Nelson Hospital, and there's also investments in Wellington ED, and some upgrades to Auckland hospitals.
There's also quite a lot of investment in roads of national significance and those kinds of areas. But I know, Matt, that we were talking the other morning about the independent infrastructure agency. Did you have any comment on that? Yeah, I attended the PM's breakfast session yesterday with business leaders.
And one thing he was talking about there was the idea of a more of a bipartisan approach to infrastructure selection, I guess, and funding. And this has also come up at Beehive to business sessions too. Barbara Edmonds spoke of infrastructure and others.
So I think there seems to be a little bit of a gathering momentum towards looking at a bipartisan approach whereby an agency, I don't know if that would be an infrastructure commission or somebody else, would actually be in charge of helping set priorities, and that the government of the day would respect that to some extent. Obviously, there's always going to be a bit of tinkering. But potentially through major parties, you could get a degree of consensus for a longer term view of infrastructure.
I think that can only be good because what we're seeing now is this boom and bust of governments coming in, cancelling projects, and then a delay while other projects build up. So we need a pipeline, we need a really good consistent approach to it and bipartisan support. Okay, thanks.
We've also got a question here from Joanne asking how money from pay equity disputes has affected the budget. Well, I guess from a purely money perspective, there is a positive side that has reduced the future government viability for claims. There's an obvious impact, of course, on women in traditional female dominated roles who are often on lower incomes.
A lot of others are commenting on this, so I won't go into that in any great detail. But what I would say from a public policy perspective, I've been very interested in the fact that this was done under urgency, and with no regulatory impact, and now it's a shared and no engagement process. And there has been an increase, I guess, over time of both parties doing a lot more under parliamentary urgency.
Again, this has come up at a recent Beehive to Business session where Chris Hipkins, Leader of the Opposition, actually commented, reflecting that both Labour and National had been relying probably too heavily on this, and that maybe things needed to change. And I think that would be a good thing. I mean, legislation passed under urgency, sometimes that's important because we've got an immediate problem in front of us.
Otherwise, it should go through the normal processes. So let's hope that that's the case more in the future. We had a question from Renee about how social services will be funded outside of the Social Investment Agency.
And the thing is, currently agencies still have budgets that they can use to fund social services in the way that they always have. But it is interesting to see that there clearly is an intention to roll some of these budgets into the Social Investment Agency in future. And Cabinet has kind of approved plans for agencies to start to talk about that, to look at how they might go about doing that.
And it's going to be a huge task. But I think it could have real positives for the sector in terms of consolidating and connecting funding from across a lot of government agencies, and hopefully make it easier for NGOs to apply for funding and to know how they might be able to be successful, rather than having lots of different agencies that they have to apply to at any one time. As long as there is a degree of flexibility, because what we have seen in the past, particularly through our recent funding round through, I think, MSD, was that there was an expectation with a pot of money available for all those providers to actually put forward a submission that proved their return on investment.
That was a big ask at the outset of a funding round to do that, because every single person with no guarantee of funding had to go through quite a process to be able to do that. And it did cut off the ability of a number of small NGOs to even have a shot at it. So I think we need greater clarity around what a social return on investment is, and we've done some thinking about that, as you said before.
We've done some webinars, so people, please do check those out on our website. But I think funders actually need to be realistic about what they ask. It's just not fair to have put that burden on NGOs without any guarantee of at least a chance of things going forward.
Now we've got a question from Laura. How will KiwiSaver changes impact small businesses and people on low incomes? Well, just to recap, I mean, we know that I think from next year, there's going to be an increase of 0.5%, so the employer contribution, match contribution goes to 3.5%, and a year later to 4%. That'll be the default for contributors as well.
You can decide to not do that for a period of time. But I guess it will impose additional costs on business. There was speculation in media whether that might just become part of the salary round sort of pressure focus that employers may apply.
That's possible, I guess. What was the second part of that question? No, the second part was about people on low incomes, and I think there is a real recognition that things are tough for people at the moment, and so contributing more to your KiwiSaver can be quite difficult. And we do acknowledge that, but also the reality is that we don't have a lot of retirement savings as a nation, and that we do need people to be contributing more to their KiwiSaver and funding more for that.
So I think that while obviously there will be some short-term pain for people in the long term, it's probably a wise move. If they can do it at all, and some of those people who the default goes up 3.5%, they're probably not doing 3% now because they may not be able to in lower incomes.
