FINANCIAL STATEMENT APPROPRIATION BILL 2010-11 SPEECH BY THE HON. Parliament Sitting on Wednesday 11th August 2010

Extract from Hansard – Proof Only

ORDERS OF THE DAY

Second reading of the Appropriation Bill 2010-11.

I call upon the Minister of Finance Honourable Wilkie Rasmussen.

HON W. RASMUSSEN: Kia Orana again to you Mr Speaker and all the staff members of this House. Kia Orana also to our Prime Minister and Deputy Prime Minister , to all Ministers of the Crown, Kia Orana. Members in Government Kia Orana. To the Leader and Deputy of the Opposition the Honourable and the Honourable respectively and to your colleagues in the Opposition Kia Orana. Kia Orana to all of us in this Hon. House and I commend us for gathering together as we continue to look at the appropriation for the next financial year. Kia Orana also to all our people who are listening in to our deliberation this afternoon to the Ui Ariki, Ui Mataiapo, the Ui Rangatira and the Aronga Mana Kia Orana. To all our people both in the north and the southern groups and to all our people in Rarotonga I extend greetings to you in the love of our Lord. Mr Speaker, I move:

That the Appropriation Bill for 2010-11 be read a Second time

And in doing so Mr Speaker, I seek your indulgence to make a statement in relation to that Bill. But first of all I just wish to again commend and say thank you to all Members of this House for the cooperation and the understanding of the situation that we are currently in with regards to the need for the Supplementary and Validation Bill that we had just passed and I say thank you to all that supported that.

When we get to the debates on the principles and merits of this Bill I will reflect on some of the questions that were asked earlier because most of those questions I believe were covered in this Appropriation Bill. But I believe over the few days now since we have had a copy of the Appropriation Bill that we have familiarised ourselves with its contents, it may not be that difficult a Bill to pass. But let me say that this new fiscal year 2010-11 will not be one without its challenges. Indeed when I discussed the national economic and budgetary situation with the Ministry of Finance and Economic Management team some six months ago, the sobering and somewhat gloomy prediction was that this current year 2010-11 would be quite a challenging one or a difficult one. With an indication of a down turn in the arrival of tourists in the early months of this year the excitement of record breaking tourist numbers in the previous year started to look like something of the past.

And of course who can forget the devastation caused by Cyclone Pat on Aitutaki combined with a series of cyclones and warnings and with the destructive force of

1 winds of Tropical Depression10F on Tongareva within that same period and amongst other things, it deepen the economic gloom that appeared to be taken form around us. In addition the Order by the High court and indeed by the Court of Appeal for Government to honour the terms of the settlement agreement between Government and Apex Agencies Ltd operating as TOA Petroleum, and TRIAD, further served to immerse a national budget into further gloom.

And yet Mr Speaker, from the deepest part of all of that gloominess, there was a spark and it quickly burst into flame, I would say a flame of inspiration. In the wake of cyclone Pat devastation of Aitutaki and the resulting despair amongst the people of that island we the people of the came together as a united nation of one people with one objective to support the people of Aitutaki in their time of great need. From Pukapuka to Palmerston, to Manihiki and Rakahanga, Nga-Pu-Toru to Mangaia and to us here in Rarotonga we were as one. The sense of unity of purpose permeated through our communities in Australia and New Zealand and we as one people were galvanized into action through an outpouring of support for the people of Aitutaki that I, for one, have not seen since Cyclone Martin’s tragic visitation of Manihiki.

Mr Speaker and Honourable Members of this House, it is that sense of unity of purpose that inspires us to work as one people in response to catastrophic events that visit some of our people that I am referring to as the “flame of inspiration”.

Honourable Members, I ask this question with us in this House – in debating the merits of the Appropriation Bill before us, must we do so with a sense of unity of purpose for the benefit of all our people or must we create our own cyclone of disunity before we can recognise that the flame of inspiration to work together for the common good of all our people.

I believe Mr Speaker that over the last few days we have demonstrated that spirit of unity and the Opposition of this Honourable House stand united and open minded behind this Appropriation Bill. I also have no doubt that those on the left hand side of this Honourable House that is the Government side are imbued with that same sense of purpose in pursuing what is best for the people of the Cook Islands.

Mr Speaker, it is these types of actions and cooperation that we as Members of Parliament must demonstrate to the people of this country and to the voters of this country that we do actually care as Members of Parliament about our people. And that we are not as many of them or some of them have criticised people with particular self interest and particular personal agendas, instead we are here because we have been given the mandate by the people of this country to lead and to act on their behalf. If I may add, I know every Member of this House has obligations and sometimes their pay does not stretch to the end of fortnight because of the obligations that they have to the community at large. So I humbly ask our people out there to give it second thoughts as to their sometimes dismissive attitude of the jobs that we had to do.

Mr Speaker I am not saying that there should not be any debate on this Bill, but on the contrary I believe that our capacity to respond adequately to questions from the floor on the merits of the Bill will serve to reassure all including our people out there

2 listening, I know they are listening in the Northern Group islands on radio that the contents of the Bill are for their best interests.

It is for that reason that I stated earlier that we stand united and open minded behind this Appropriation Bill noting that the operative word in this regard is open mindedness. We must also acknowledge that there may be times when we may have to agree to disagree in the spirit of our parliament tradition.

Mr Speaker and Honourable Members let me now briefly outline the projected economic settings within which budget 2010-11 is expected to operate.

Despite a contraction in 2008-09, the economy has bounced back into a positive growth albeit at a much lower or slower pace than the growth rates expected prior to the Global Economic Crisis. Real GDP growth in 2009-10 is estimated at 0.8% with the expectation that output in 2010-11 will wee a gradual growth to 0.9% moderating to around 1.5% in the future years.

Following a spike in 2008-09 of 10.3%, inflation is estimated to significantly slow to 0.4% n 2010-11 and moderate to below 3% in the outer years predominantly as a result of lower global fuel prices brought about by slower demand in response to the GEC.

Visitor arrivals for financial year 2009-10 are estimated to be 99,500 people, an increase of 2.7% when compared to 2008-09 while Visitor arrivals for the 2010-11 are projected to be 101,400 people an increase of 1.9% in compared to the previous year.

The trade deficit on the other hand is expected to deepen with limited prospects to increase the value of exports in the short term combined with an expected continual increase in the imports aligned primarily to growth in tourism-related activities.

Mr Speaker and Honourable Members, overall our economy is on a positive track and with the uncertainty in global trends, a higher level or variability against estimates is expected but projections are conservative.

Mr Speaker, in perusing the fiscal strategy report, it is pertinent for this Honourable House to note that Budget 2010-11 was developed within the context of a tightening fiscal environment and of an uncertain economic environment while, at the same time, seeking to meet Government’s policy objectives outlined in the Budget Policy Statement.

So from a fiscal perspective Honourable Members, allow me to point to the key features of Budget 2010-11.

First, operational revenue is expected to increase by 1.7 per cent to $101.8 million mainly through the additional revenue expected to be collected in higher dividends from State-owned enterprises of $1.1 million.

Second, actual taxation revenue is estimated to come in higher than the original estimates by about 3.2 per cent in 2009-10 through one-off receipts in company tax. Accordingly then, taxation revenue is expected to grow by just 0.2 per cent in 2010-

3 11 significantly slower than in previous years. However, with one-off fishing fines anticipated in 2010-11, other revenue is expected to grow by 10.3 per cent.

Third, operating expenditure is appropriated to reduce by 1.5 per cent to $101.2 million in comparison to 2009-10 levels predominantly through the removal of significant one-off expenditure items appropriated through the 2009-10 Supplementary Budget. Mr Speaker, the Supplementary Budget I refer to here is of course the Appropriation Amendment and Validation Bill that we have just passed.

Fourth, Ministry outputs have increased by 1.1 per cent, the equivalent of $0.7 million to $64.3 million primarily through increases in personnel and depreciation costs of the Public Service.

Fifth, Payments on Behalf of the Crown – that’s POBOCS – are appropriated at $28.4 million, a reduction of 10.2 per cent in comparison to 2009-10 levels through the removal of one-off expenditures.

Sixth, a fiscal operating surplus of $0.6 million is presented in line with the requirement of Section 23 (2) (a) of the Ministry of Finance and Economic Management Act of 1995-96 as compared to an actual estimated shortfall of $2.7 million in 2009-10.

In other words, Mr Speaker, we have a Budget Surplus rather than a deficit as was anticipated much earlier in the year.

Seventh, Ministry Capital Expenditure is appropriated at $4.4 million, an increase of $2.3 million when compared to the previous year reflecting the reinstatement of funding for road maintenance and Outer Islands Capital.

Eighth, a restructuring of plans for infrastructure investment has resulted in the removal of a $37.5 million Peoples Republic of China loan initially intended for water and road upgrades.

And finally, this Appropriation Bill tabled in this House shows an overall Budget Surplus of $1.1 million consistent with the need to be conservative and as a result, I can proudly confirm Mr Speaker and Honourable Members of this House, this Budget does not require the drawdown of our Reserve funds.

Mr Speaker and Honourable Members of this House, as required under the Ministry of Finance and Economic Management Act, the Budget Policy Statement for 2010-11 were published in March 2010. The Budget Policy Statement was in fact drafted with the very real prospect of a possible shortfall in funding for existing commitments in 2010-11 of around $6.1 million and this expanded to $8.2 million towards the end of the Budget process as a result of revenue estimates being revised downwards. This revision reflected the significantly lower revenue growth by comparison to the growth in expenditure commitments. In other words, we were spending more than we were bringing in.

This Government has, Mr Speaker, managed to balance the Budget as you will see from the Budget document before you and with all of that in mind, it is with a sense

4 of relief and high expectations that I will now present some of the major new initiatives for the financial year 2010-11 against the Budget Policy Statement. I don’t think it will come as no surprise to anyone that Government’s largest support in the economic sector and even when compared to other sectors is targeted towards its commitment to improve connectivity to high return tourist markets.

The Budget therefore reflects a $6 million subsidy to support the continuation of airline linkages to key tourism markets. Of this amount, $2.5 million is allocated to support the growing Australian market for the direct Sydney-Rarotonga-Sydney Air New Zealand service for a 17 week trial period that is currently being implemented and the subsidisation of an additional flight out of New Zealand by Pacific Blue at $0.1 million and, of course, lastly the allocation towards the risk associated with the Los Angeles-Rarotonga Air New Zealand service of $3.5 million.

In supporting the competitiveness of our tourism industry an additional $250,000 in marketing funds has been appropriated consistent with the Budget Policy Statement. If I may add this is in additional to an $800,000 that was given to the tourism authority to begin its process of promotion in Australia and overseas in order to generate more visitors coming into this country. These funds were funds that had been sitting in the Tourism books for some time but it is now had been agreed for usage by the Tourism Authority for its purposes of marketing and promotion.

In the agriculture and marine sectors Mr Speaker, government will support the revitalisation of the agriculture industry in the Southern Group through the Te One Kura project and will also support the Pearl Industry Strategic Marketing Plan by utilising existing loan funds. Towards this end, Government will be negotiating with the Asian Development Bank to seek their agreement to use the loan funds made available through its Economic Recovery Support Program to fund these initiatives.

In addition, Mr Speaker and Honourable Members, the Food and Agriculture Organisation (FAO) has committed up to $5 million for food security purposes under the direction of the Ministry of Agriculture.

In supporting other sections within our economic base, Budget 2010-11 commits to the continuation of the newly established Financial Services Development Authority a sum of $0.4 million, the acquisition of specialized equipment to assure the quality of the local pearl production for accreditation purposes and the associated marketing funds totally $200,000. Moreover, the conversion of the Punanga Nui Market into a State Owned Enterprise should result in greater efficiencies in its operations.

In relation to the infrastructure sector, Government has reinstated funding for road works and the Outer Islands capital fund totalling $0.7 million and $1.9 million respectively. The Budget also incorporates funding towards water works and will result in the completion of the water distribution main upgrade project on Rarotonga by the end of the year noting however that we still have a number of plans to put in place to improve overall water supply on Rarotonga and the Outer Islands.

Funding for amenities required to improve aviation navigation facilities to the outer islands at $100,000 is also appropriated.

5 In terms of ensuring that our natural environment supports growth and development, additional appropriations are being provided for the increased cost of operating the waste management facility on Rarotonga of $0.13 million, the increased cost of managing the Tepuka waste management facility of $0.03 million, and an allocation to assist in counteracting the risk to small communities on Rarotonga adjacent to streams from stream erosion. Funds for the operational and personnel costs of the Environment Service are budgeted at the same level as for 2009-10.

While base appropriations for the law and order sector of government has been maintained at the same level as 2009-10, one-off funding is provided for the biennial slipping of Te Kukupa to ensure its seaworthiness at $300,000, and an allocation of $60,000 to improve Court reporting processes.

Let me now turn to the human face of our economic realities. In addressing this Budget 2010-11 provides additional appropriations for programmes under the Education Master plan totalling $200,000 including the lead teachers programme, health and safety in schools, the Rakei Toa programme, and the Outer Islands student subsidy in line with Government’s focus on the vulnerable.

Turning now to welfare payments, Mr Speaker and Honourable Members, with the continuing increase in the number of new recipients, this expenditure item has been increased by $0.03 million. Additional funds of $80,000 have also been appropriated for the establishment of a Consumer Commission to administer the Fair Trading Act and Consumer Guarantees Act, and consumer Guarantees Act in pursuance of the interests of the consumer.

The Ministry of Cultural Development has been allocated an additional appropriation of $50,000 to commence a project on cultural mapping that will identify and quantify the value of cultural heritage to the economy, promote cultural enterprise and train practitioners to produce culturally-based goods and services.

Further, with government’s policy decision for those residents in the Outer Islands to celebrate Constitution Day 2010 in their home islands, funding assistance of $30,000 has been provided to assist with those individual island celebrations. Funding of $90,000 has also been appropriated to upgrade the technical equipment of the National Auditorium.

To further raise the profile of the Cook Islands within the Pacific Community, Government has successfully negotiated the right to host the Secretariat for the Pacific Legislatures for Population and Governance Secretariat. As part of the hosting agreement with this regional agency, Government has allocated an ongoing appropriation of $50,000 to assist with the Secretariat’s operations.

Mr Speaker, I am getting close to the end but I would like to turn to a most important part which is getting government’s house own house in order. Mr Speaker, Honourable Members we have all recognised the need for government through the public service and its State Owned Enterprises to significantly uplift the quality of their services. While there have been incremental improvements, we have also recognised for sometime the need for a comprehensive approach to this issue. The passing of the new Public Service Act last year was the first part of working towards

6 that goal. Budget 2010-11 provides some resources for the development of increased capacity within the Office of the Public Service Commissioner to review and develop appropriate policies and processes for the machinery of Government. We anticipate Mr Speaker that the outcome of those reviews will be to minimise wastage and maximise efficiency gains.

Government recognises that State Own Enterprises’ in general are better resourced than their counterparts in the public service and should therefore be in a better position to provide better services. However, there are even within the State Own Enterprises’ some serious areas of concern. Since the public sector reforms of 1996- 97, we have emphasised the fact that ours is a private sector driven economy. While that maybe a factual statement, government in fact does not have a cohesive approach to the private sector nor is there any strategic plan or policy to guide all government agencies and ministries in their routine interactions with the private sector.

Mr Speaker it is partly for this reason that the operational focus and structure of for example the Business Trade and Investment Board came under review as a first step towards formulating a rationalised and coherent approach across the whole of government towards the private sector. With regard to the Business Trade and Investment Board the government had felt that it will allow its continuity but it must prove itself according to some itemised activity so that it will be clearly seen as benefiting the country.

There also appears to be a perplexing issue of leadership within the public service combined with a general lack of initiative and drive to take ownership of issues that appear to have fallen between the cracks. As in the cost of government’s linkages with the private sector that I have referred to earlier, these issues were identified and brought to the Government’s attention by the Budget Policy Statement and indeed by the Budget Review Committee. We acknowledge Mr Speaker that there are those within the public service who do their best within the resources available to them. We also acknowledge that there are those in the public service who have begun to address these issues but also in a haphazard manner and we look forward to the emergence of a cohesive approach across the public services in addressing these issues.

Mr Speaker and Honourable Members, what about our own House? I am optimistic that we will all accept the significant reductions in Budget 2010-11 to certain expenditure items that we have become accustomed to. Towards that end the Civil list has taken a base cut of $250,000.00 in the travel appropriation for the travel of Members of Parliament with further cuts to specific allowances.

Further appropriation cuts have been implemented for various government departments where consistent under-expenditures over previous years have been identified. To protect governments revenue base, additional funding has been appropriated to the Ministry of Finance and Economic Management to strengthen its taxation compliance capacity. To be more specific this is to do with the double tax agreements that have been signed previously and are still in the process of negotiations with fellow countries.

In conclusion Mr Speaker, let me now express my most sincere appreciation to all those who assisted in putting this Appropriation Bill together. I extend special thanks

7 to heads of CEO’s of government ministries and agencies, the Chairpersons and members of the various Boards, The Budget Policy Statement and Budget Review Committees, the Acting Financial Secretary and his hardworking Budget Team. I am grateful for the significant assistance that each one of them performed towards that end and your understanding of the difficult decisions that government has had to make between equally deserving and competing priorities. To the Non-government and Community Service Organisations that responded to the invitation to contribute towards the Budget debate and to those groups and individuals who voluntarily provided their viewpoints, I thank you for your valuable inputs.

With that I wish to personally apologise to the Red Cross Organisation of the Cook Islands because we were unable to find some funding towards their building that is being planned for construction in Tupapa despite the tremendous work they did with regard to Aitutaki and the other natural disasters that this country suffered. And I am also most grateful to the Prime Minister, the Deputy Prime Minister my colleagues in Cabinet and to all members of the Democratic Party for your guidance support and understanding. And I am also grateful to the Leader of the Opposition the Honourable Tom Marsters and his Deputy Honourable Teina Bishop and members of the Opposition who have during their own time discussed with me the budget process.

Mr Speaker, notwithstanding the recent developments in our political scene in particular including the lead-up to the imminent General Elections or perhaps because of them, we in this Honourable House are duty-bound to place the best interests of our people at the forefronts of our minds in debating this Appropriation Bill.

Amidst all the rhetoric, accusations and counter-accusations, perhaps, as I intimated in my introductory remarks, this is the appropriate time for all of us to remind ourselves as to who put us here in this Honourable House and why they put us here.

We know that some amongst our people have expressed their disillusionment with our performance and are questioning our collective capacity to work in their best interests. We also know that with no Parliamentary sitting over the last several months, we are now in the glasshouse of public scrutiny.

Mr Speaker and Honourable Members, we have the opportunity over the next few days to collectively respond positively to those questions through a constructive and informed debate on this Appropriation Bill. We do that with a view that we will reach consensus on the way ahead for our people and nation over the next year and beyond.

Mr Speaker and Honourable Members let me now conclude this Budget Statement by commending the Appropriation Bill 2010-11 to you for consideration.

Kia Orana and Kia Manuia.

MR SPEAKER: The Question is:

That the Bill be now read a Second time?

I now call for a Seconder?

8 Seconded by the Honourable Minister, William Heather Jnr

I now call for speakers?

The Question is:

That the Bill be now read a Second time?

END OF EXTRACT

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