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Budget 2018: Defence wins, and loses

Defence has won an extra $400 million in annual spending in Budget 2018, but a long-hoped-for decision on replacing its Orions has been delayed again. Sam Sachdeva reports.

The NZ Defence Force has received a nearly $400 million funding boost, including money to fix run-down buildings – but the Government has held off on committing cash for big-ticket hardware replacements.

With foreign affairs a big winner in this year’s Budget, eyes turned to how much money the NZDF would get as it prepares for an array of significant decisions on upgrading its capabilities.

The last government’s Defence White Paper, released in 2016, outlined plans to spend about $20 billion over 15 years on new aircraft, ships and other assets for a changing strategic environment.

The plans were criticised by Labour while in opposition, and concerns about its predecessor’s plans appear to have flowed through into government.

In March last year, then-Labour leader Andrew Little said the $20 billion to be spent on the defence upgrade could be better spent on housing and education, while Finance Minister Grant Robertson and Defence Minister Ron Mark have accused National of failing to budget for its promises.

"Stupidly, when we were in opposition we took them at their word. They said this money has been budgeted and this money has been allocated, $20 billion out to 2030, and we get into government – wrong," Mark told RNZ.

As part of its coalition agreement with Labour, New Zealand First secured a commitment to reexamine the defence procurement programme "within the context of the 2016 Defence Capability Plan budget".

However, Robertson’s Budget includes no additional capital funding for the capability components of the White Paper.

Some capital decisions are likely to be made soon after the Budget, with the Government facing a mid-year deadline to make a call on whether to purchase P-8 Poseidon aircraft to replace the existing P-3 Orions.

The Budget does allocate an additional $324 million over four years for the NZDF’s operating budget, which it “provides for the operation of the capability requirements” identified in the White Paper.

There is an extra $13.6 million set aside over the next four years for similar funding, although it is contingent on Cabinet approving business cases.

NZDF chief Lieutenant General Tim Keating appeared to foreshadow belt-tightening in an internal senior leader message earlier this year, obtained by Newsroom, in which he said the organisation had agreed to reprioritise resources in a number of areas.

“We’ve got to be smart with our resources in order to deliver today and over the next four years. We’ve got to prioritise carefully, and not simply keep taking on more and more.”

The Budget does include a $41.3 million increase to capital spending over the next 10 years for the first stage of the Defence Estate Regeneration Programme.

That is some way short of the $1.7 billion figure in the last government’s Defence Capability Plan to modernise the defence estate by 2030.

The 2016 White Paper noted there was a “risk of rapid deterioration” for the defence estate, made up of about 81,000 hectares and 5000 buildings across nine camps and bases.

The paper said NZDF needed to better manage costs through internal reorganisation and rationalisation of its estate, as well as considering public-private partnerships.

“There will be challenges associated with this work as the estate increasingly comes under pressure from the impacts of urban encroachment, particularly in Auckland.”

That was backed up this week with the news that NZDF is continuing to look at the possibility of moving part of its Devonport naval base.