Desperate measures to protect surplus

A forecast surplus in 2014-15 was such an important priority in last month's Budget that the prime minister and his deputy were delegated power to take whatever steps were needed to preserve it.

A back-up plan was also prepared that would have cut future spending to help stay within the wafer-thin $197m forecast surplus for that year.

The importance of the surplus target is stressed repeatedly in the Treasury papers, released today, with ministers warned that some or all of the Budget plans may have to change to protect it.

Prior to the Budget, Cabinet ''authorised the Prime Minister and the Minister of Finance to set final allowances for future Budgets and any additional steps necessary to protect the 2014-15 surplus based on the final fiscal forecasts''.

Measurers proposed, but not taken, included cutting the allowance for new spending next year from $800m to $600 and from $1.2b to $1b the following year, to save $400m.

The papers also show officials asked the Ministry of Health to look at various changes to prescription charges that would have raised $60m, $100m and $160m.

The Budget increased charges by $2 an item for the first 20 items, raising $20m a year in year one rising to $40m a year after that.

On June 15, Reserve Bank Governor Alan Bollard dealt a blow to the Government's hopes of returning to surplus by 2014-15, with a new central bank forecast tipping the books will not be back in the black until two years later.

Prime Minister John Key conceded that RBNZ's latest figures were more up to date than those used for the Budget but said the Government would not let the surplus slip lightly.

- © Fairfax NZ News