The Government's focus on controlling spending and freeing up money for frontline services is reflected in the Crown's financial statements for the eight months to 28 February, Finance Minister Bill English says.

"Despite underlying tax revenue coming in almost $700 million below forecast, the operating deficit before gains and losses was lower than the forecast $5.1 billion deficit - due ongoing control over spending and some one-off factors.

"The Government has made it clear that the large increases in public spending of the previous five years are unsustainable because of the debt burden they impose on taxpayers.

"In the Budget last year, we freed up $2 billion of low quality spending over the next four years to boost frontline services. Budget 2010 will have a similar focus on weeding out low quality spending.

"We are taking a firm but balanced approach - maintaining existing entitlements to social benefits, New Zealand Superannuation and Working for Families, but keeping within the $1.1 billion annual allowance for extra spending we have set ourselves.

"This will continue for the foreseeable future, as we still face several years of large deficits. We are working hard to get back into surplus and get the Government's debt under control," Mr English says.

In the eight months to 28 February, underlying core Crown tax revenue (excluding structured finance settlements) was $681 million or 2.1 per cent below forecast. This was due mainly to lower than expected business profitability producing shortfalls in provisional and terminal tax.

Core Crown expenses came in $915 million or 2.2 per cent below forecast, reflecting lower spending across a number of departments, the timing of Treaty of Waitangi settlements and deferred funding to transport agencies.