Labour has given the first clues about how it would run the economy - and hard-working Kiwis should be worried, Finance Minister Bill English says.

"It's an old-fashioned recipe of borrow and hope, tax and spend. Labour would mortgage our families' futures to pay the bills."

Labour leader Phil Goff has confirmed in recent days that more debt and higher taxes would be the twin pillars of his economic policy.

"We already know Labour supports an emissions trading scheme that lumbers Kiwi families with even higher bills, and it now confirms the only way it can deliver on its billions of dollars of promises is to borrow more from overseas.

"Labour does not seem to recognise that the world has changed. The large budget deficits and ever-increasing debt being promoted by Phil Goff and his finance spokesman are reckless and irresponsible."

The fact is that this Government inherited a situation where Crown debt was forecast to increase sharply and to continue rising indefinitely. The Government has worked hard to turn around that worrying debt track.

Even so, our December forecasts predicted a $10.1 billion cash deficit this year and core Crown debt trebling to $65 billion by 2014. Yet Labour says there is no debt problem and it would continue to borrow and spend.

"The National Government makes no apologies for reprioritising low quality government spending and redirecting it into priority areas such as health, education and law and order.

"The Budget will underline this Government's credentials as a responsible manager of worker and business taxes, with a growth plan and a tax system that better rewards hard work and enterprise. We will also produce a set of government accounts that make much better reading than those we inherited.

"By contrast, Labour will mortgage our families' futures with a borrowing programme that saddles our children with a legacy of deficits and debt."

Hard working Kiwis will be shocked by confirmation today that Labour would mortgage our future when we are already borrowing an average $240 million a week for the next four years, Finance Minister Bill English says.

"The question for Phil Goff is whether he still has confidence in his finance spokesman, who this morning said Labour would borrow even more money, without regard to already soaring debt and persistent budget deficits.

"On radio this morning, his finance spokesman said: ‘New Zealand's problem cannot be primarily that it has a yawning budget deficit, because it does not'.

"It was plainly ridiculous to then claim that New Zealand doesn't have a debt problem because it's below Japanese levels at 200 per cent of gross domestic product," Mr English says.

"The fact is that Treasury forecasts in December predicted a cash deficit of $10.1 billion in the current year to June 30.

"Labour is in cloud cuckoo land by ignoring our significant debt problem - a problem of Labour's own making. We actually face another six years of Budget deficits, which this Government is working hard to turn around.

"Furthermore, New Zealand's habit of spending more than it earns has accelerated in the past five years.

"Our total external debt - including households, businesses and the Government - has ballooned from $90 billion to about $170 billion since 2000. This is forecast to approach $250 billion by 2014.

"This is clearly New Zealand's single biggest vulnerability.

"No amount of cosmetic surgery can hide the fact that Labour's reckless economic policies are stuck in the past. There is no evidence of fresh thinking - in fact, precisely the opposite is true when their answer is to saddle future generations of New Zealanders with more debt.

"This dangerous policy prescription would drive up interest rates, hurt exporters, cost thousands of jobs and ultimately bankrupt the country."

The Budget next month will focus on getting faster economic growth, sustainable and higher paying jobs and getting the Government's finances back into shape.

"We will live within the $1.1 billion annual operating allowance for new spending we have set ourselves, and restrict annual increases in this figure to 2 per cent from 2011/12," Mr English says.

"And we will find another $1.8 billion of low quality spending between now and 2014 - on top of the $2 billion of lower quality spending identified last year for improving frontline public services.

"This money will be directed into higher priority initiatives such as better healthcare services, better education and keeping New Zealanders safe."

By contrast, even before today's confirmation of its plan to run up more debt, Labour's spending policies amounted to at least $6 billion, all of which would have to be borrowed.

"I issued the following table of Labour's unfunded spending commitments last year - and the list gets longer every time Phil Goff or his finance spokesman open their mouths," Mr English says.

The Budget next month will redirect another $1.8 billion of lower quality government spending between now and 2014 into high priority areas, Finance Minister Bill English said today

This follows Budget 2009 redirecting $2 billion of lower quality spending to higher priority initiatives, he said in a speech to the Wellington Regional Chamber of Commerce.

"That's a significant sum of money we're making available for priority areas such as better healthcare services, better education and keeping New Zealanders safe.

"The Government will continue to weed out low quality spending. We will live within the $1.1 billion annual operating allowance for new spending we have set ourselves, and restrict annual increases in this figure to 2 per cent from 2011/12."

Mr English repeated that most Government agencies would receive no budget increases over the next three or four years, as the Government moved to get back to Budget surplus as soon as possible.

"It's clear from the work we've done so far that there is considerable scope to provide better public services by improving processes, removing duplication and reallocating resources from low quality spending to improve frontline public services.

"It's about doing things better and smarter, after a decade where new funding flowed freely and constraint wasn't required."

"Public service chief executives are coming to terms with this reality. The Government has given them time to prepare their agencies to provide better public services with little or no new money over the next three or four years.

"I want to get the Government back into budget surplus as quickly as possible, because surpluses give us choices.

"For example, surpluses give us choices to invest more in public services; to pay down public debt; to resume contributions to the New Zealand Super Fund - or to do any number of other things.

"As long as we run deficits, we don't have those choices," Mr English said.

Good afternoon and thank you Charles for your warm welcome. It's good to see so many people here today from the Wellington Chamber of Commerce and the wider Wellington business community.

In exactly four weeks today, I will deliver the second Budget for the John Key-led Government.

It will be delivered in a very different global economic and financial environment than we faced when preparing the Budget last year. The world was then gripped by a financial crisis on a scale not seen for many decades and the global banking system was creaking at the seams.

Out of necessity, Budget 2009 focused on dealing with the immediate effects of that crisis.

We had to work hard to get the Government's deteriorating books in order - particularly turning around forecasts of ever-increasing public debt that last year threatened New Zealand's international credit ratings.

Looking back, I believe we struck the right balance.

We helped the most vulnerable by preserving entitlements such as welfare benefits, New Zealand Superannuation and Working for Families. We took steps to help stem job losses and keep young people connected to the world of work.

To do that, the Government absorbed much of the shock of the recession by significantly increasing borrowing.

At the same time, we curtailed low-quality spending and were able to turn around deeply worrying medium-term debt forecasts.

Now that we've come through the recession in reasonable shape, the Budget this year will focus squarely on building higher and sustainable economic growth.

I will talk more about the Budget a little later.

But let me say that growth really does matter. It matters because it's the only way New Zealand can create the jobs, the higher incomes and the better living standards Kiwis deserve.

We also need to show New Zealanders that there are opportunities for their families in this country - so they don't have to move to Sydney or London.

It's good that New Zealand has come out of the recession in better shape than most other countries. The economy here has grown in each of the past three quarters, although the road to recovery will remain bumpy at times.

In New Zealand, the dire immediate threats of the financial crisis have passed. There is no doubt that we have benefited from the relatively strong performances of China and Australia through the recession.

Moreover, New Zealand businesses proved to be resilient and the Reserve Bank here moved swiftly in its monetary policy response.

And finally, we cannot underestimate the enormous advantage we enjoyed by having strong banks and therefore avoiding the hugely expensive taxpayer-funded bank bailouts required in the United States and parts of Europe.

Focus on new jobs and growth

So, despite New Zealand having come through the recession in reasonable shape, our long-term economic challenge remains as acute as it was a year ago.

That's particularly so with unemployment at more than 7 per cent and predictions that it will fall only slowly as the recovery takes hold. Every new job created and every existing one saved gives one more New Zealander choices and opportunities.

Many New Zealanders have had no wage increases for up to two years.

In the longer-term, sustainable jobs will be created only when people have the confidence to invest in productive businesses so they can expand and take on new staff.

There is still a perception that New Zealand's economy was growing strongly before the global financial crisis. That perception is wrong.

In fact, New Zealand's economy is not much bigger now than it was in 2005 - and it was already in trouble before the global recession.

In the three years before the Lehman collapse in late 2008, the economy grew by less than 1 per cent a year. This was less than half our trading partner average, and less than one-third of Australia's growth rate.

During this time, the growth we did see came from all the wrong places.

Output from exporters and import-competing industries, often termed the tradeables part of the economy, is now about 12 per cent smaller than in 2005.

So we've had five years of severe export recession.

In fact, overall the tradeables sector has not grown at all since 2002 - and in that time Government spending has accelerated and New Zealand's indebtedness to the rest of the world has grown significantly.

New Zealand's habit of spending more than it earns has accelerated in the past five years.

New Zealand's total external debt has ballooned from $130 billion to about $170 billion over this period. This is forecast to approach $250 billion by 2014.

Government debt by global standards is relatively low, but increasing sharply. On the other hand, private sector debt is much higher.

As a country, we must finance that debt on world markets, when other countries are also borrowing heavily and global financial markets remain fragile and far from stable.

For New Zealand, that is a significant vulnerability.

Our other vulnerability is our lop-sided and under-performing economy.

Government spending has ballooned, growing 50% in the five years to 2009, more than twice the nominal economic growth. As the tide of global growth went out, the costs of this have been laid bare.

The property market soared, and is now in a long term correction. It has absorbed too much of New Zealand's productive capital, for too little gain.

This legacy has both an economic and a human cost. The economic cost is obvious. The human cost is everywhere: New Zealanders who have lost their jobs, have decided to live abroad, or families who are struggling.

So we have a clear choice: We can continue to muddle along, handicapped by these imbalances and falling further behind other countries.

Or we can set our sights higher and create the kind of country the Prime Minister spoke of soon after taking office.

Recession costs to the Government

Like the rest of New Zealand, the Government has a vested interest in getting a better performing economy.

The fiscal costs of the recession and the previous Government's big spending increases are evident in the deep red ink flowing through the Crown's own financial statements.

The latest published forecasts in December show the Government borrowing about $240 million every week for the next four years to roll over existing debt and to fund growing deficits. 

Net core Crown debt was forecast to more than treble to $65 billion by 2014. And the Crown's annual interest payments are expected to double to $5.9 billion by 2014 - equal to the combined annual budgets of police and law and order.

And the December forecasts predicted the economy would shrink by 0.4 per cent in the year to March 2010, before growing by 2.4 per cent in 2011 and 3.2 per cent in 2012.

The updated economic and fiscal forecasts for the Budget are still to be finalised.

Having said that, it's clear that the economy is recovering slightly more strongly than the Treasury forecast in December and that growth is predicted to strengthen further in the year ahead.

This reflects a continued recovery in the global economy; rising world demand for commodities improving our terms of trade; and some higher business and consumer confidence.

However, risks remain for New Zealand - and it will be some time before GDP recovers to previous levels.

We are not yet seeing the traditionally strong bounce out of recession - where the exchange rate falls, primary producers in rural areas reap the benefits and enjoy higher incomes, which eventually flows into the cities.

The recovery from the recession of the past two years appears slower and more tentative.

And we still face some economic headwinds: The global recovery remains fragile; our high exchange rate against the US dollar and the pound is hampering exporters; and New Zealand household finances are extended.

So the domestic recovery, although welcome, is quite patchy across different sectors and from region to region.

This slightly better-than-expected economic outlook won't bring any dramatic changes to the fiscal forecasts accompanying the Budget, compared to the December forecasts.

There may be slightly stronger revenue and slightly lower spending on income support, but nothing that significantly eases our medium-term fiscal pressures.

That means several more years of Budget deficits and increasing debt - and certainly no dramatic reduction in the $240 million that we need to borrow each week to roll over existing debt and to fund ongoing deficits.

So it's critical the Government continues to responsibly manage public finances on behalf of taxpayers. We can't take our eye off the ball.

Freeing up low quality spending

The Government will continue to weed out lower quality spending. We will live within the $1.1 billion annual operating allowance for new spending we have set ourselves, and restrict annual increases in this figure to 2 per cent from 2011/12.

In the Budget last year, we identified $2 billion of lower quality spending over the subsequent four years to redirect into higher priority areas.

In this year's Budget, we will find another $1.8 billion of low quality spending between now and 2014 for reprioritising into higher priority initiatives.

That's a significant sum of money we're making available for priority areas such as better healthcare services, better education and keeping New Zealanders safe.

I said in last year's Budget that most Government agencies will receive no budget increases over the next few years. And in this Budget, I will say the same thing again.

Not because they don't deliver worthwhile services, but simply because we cannot allow debt to escalate further.

It's clear from the work we've done so far that there is considerable scope to provide better public services by improving processes, removing duplication and reallocating resources from low quality spending to improve frontline public services.

It's about doing things better and smarter, after a decade where new funding flowed freely and constraint wasn't required.

We shouldn't forget that the money we spend on behalf of taxpayers comes from the weekly PAYE taxes of hard-working New Zealanders.

Public service chief executives are coming to terms with this reality. The Government has given them time to prepare their agencies to provide better public services with little or no new money over the next three or four years.

I want to get the Government back into budget surplus as quickly as possible, because surpluses give us choices.

For example, surpluses give us choices to invest more in public services; to pay down public debt; to resume contributions to the New Zealand Super Fund - or to do any number of other things.

As long as we run deficits, we don't have those choices.

The Government's economic programme

So what is the Government doing to meet these considerable challenges?

We've embarked on a substantial programme to arrest New Zealand's economic under performance of the past decade.

It has included a multi-billion investment in infrastructure such as roads, ultra-fast broadband and electricity transmission.

We're reviewing regulations and cutting red tape, and we're improving education and skills. And, as I've said, we're lifting productivity and improving services in the public sector - with the core Government making up about a quarter of the economy, we want to get our own house in order.

Our starting point is that we need to change the incentives so resources go towards productive investment, savings and exports - and away from the unsustainable consumption, borrowing and government spending increases of the past decade.

Some of the policies we have promoted - for example, government spending restraint or plans for tax reform - have not met with universal support.

However, this Government is prepared to make the difficult calls where they are necessary.

We are taking a balanced and pragmatic approach to lifting economic growth.

It would be futile to launch a one-off package of big-bang reforms that pleases a few commentators, but sparks an overwhelming public backlash.

We've seen this happen in New Zealand before. History shows this approach has been followed by extended periods of economic policy inertia and - most damaging of all - economic underperformance.

Instead, we're embarking on a consistent programme of considered, broad-based reform, year after year. This is what Australia has done over many years.

Goals of Budget 2010

Let me now turn to the Budget.

The Budget next month will set out the next steps in that programme. Budget 2010 will have four main goals:

• Lifting the long-term performance of the economy - to deliver New Zealanders the jobs, increased incomes and better living standards I have already alluded to.

• Reform of the tax system - to make the system fairer, more sustainable and more supporting of economic growth. I'll speak more about tax in a moment.

• Better delivery of public services to meet New Zealanders' expectations of modern public services, while at the same time recognising the ongoing pressures on taxpayers.

• Maintaining firm control of the Government's finances - so we can return to Budget surpluses and pull back our rising debt.

All of these goals are inter-linked. Keeping a tight rein on government spending, for example, helps ease pressure on the exchange rate.

This in turn helps rebalance the economy toward the tradeables sector, lifting long-term growth, creating sustainable jobs and boosting incomes.

Tax reform

I'd now like to spend a little time now talking about taxation. Developing a growth-enhancing tax system is one of our economic policy drivers and it is also a goal for the Budget.

Tax reform has been the subject of considerable public and media debate over the past 12 months, which is a good thing. I don't think I've seen such an open and constructive process around such an important policy area before.

Our decisions about tax changes will be announced in the Budget - and I won't pre-empt them today.

But I can say there is a compelling case to rebalance our tax system to support our goal of tilting the economy towards savings, investment and exports and away from borrowing, consumption and investment housing.

Taxation has a pervasive influence on both the economy at large and on decisions made by individuals.

Remember: we have an economy where we're spending more than we earn. Tax is one way to change people's choices and help turn that around.

So any tax changes need to contribute to a better-performing economy, more jobs and higher incomes for families.

The starting point for the Government is that lower personal taxes across the board are a good thing because they give people incentives to work hard, improve their skills and get ahead here in New Zealand.

We have this opportunity at a time when many other countries will be forced to increase taxes. This is an important competitive advantage for New Zealand.

But this will not be a lolly scramble. We simply cannot afford one.

Our tax package will be broadly cost neutral, with a focus on fairness.

We are committed to protecting the most vulnerable, while improving New Zealand's long-term prospects.

The Prime Minister has said that any tax switch involving cutting personal taxes across the board and raising GST to 15 per cent would leave the vast bulk of New Zealanders better off. That will definitely be the case.

Any increase in GST would be accompanied by immediate compensation for low and middle income earners, beneficiaries, superannuitants and people receiving Working for Families.

Additional regular adjustments for other ongoing inflationary pressures would be provided as usual.

As I mentioned in Parliament yesterday - Statistics New Zealand has independently calculated that increasing GST to 15 per cent would increase the price of goods and services subject to GST by 2.22 per cent.

A product priced at $100 excluding GST currently sells for $112.50. If GST were increased to 15 per cent, that product would sell for $115 - an increase of 2.22 per cent - not the 2.5 per cent some commentators have assumed.

Secondly, Statistics New Zealand has also confirmed that an increase GST to 15 per cent would raise overall consumer inflation, as measured by the basket of goods in the CPI, by 2.02 per cent.

This is because several consumer items, such as housing rentals, mortgage payments and school donations - which together make up about a tenth of the consumers price index - are not subject to GST.

It's also important to remember that actual CPI inflation in nine of the past 10 years has been higher than the inflationary impact of the GST increase the Government is considering. 

In addition, under the tax package being considered, superannuitants and people on lower wages would also receive income tax cuts. As we've said, we are looking at income tax cuts across the board, not just for people on the top marginal rate.

So it will be important on Budget Day to look at the tax package as a whole, rather than individual components in isolation.

Our opportunity to stand out from the crowd

Finally, I would like to end today on a note of optimism.

The global recession has presented New Zealand with an opportunity - probably one that comes along only once in a generation.

We will stand out from other countries if we come out of this challenging period with low debt and low tax rates by world standards. 

We will stand out from the crowd if we deliver a rebalanced economy with growing exports and higher-paying, sustainable jobs.

And we will stand out in the eyes of New Zealanders if we provide the financial security and opportunities for hard-working Kiwis and their families to get ahead here in this country.

If we achieve those things, the John Key-led Government will have done New Zealand a great service.

Thank you.

Infrastructure Minister Bill English and Corrections Minister Judith Collins in a press conference, with media Q&A, announcing the Government's intention to commission a new prison at Wiri that will be designed, built and operated under a public-private partnership.

The Government intends to commission a new prison at Wiri that will be designed, built and operated under a public-private partnership, Infrastructure Minister Bill English and Corrections Minister Judith Collins announced today.

The approximately 1000-bed male prison on land owned by the Department of Corrections at Wiri in South Auckland is subject to consents and the successful completion of an open tender process. It will be the first PPP undertaken by this Government.

Mr English said the Government was open to greater use of private sector expertise if it delivered enhanced services and better value for taxpayers.

"Appropriate use of public-private partnerships can introduce new design, financing, maintenance and operating techniques that provide better services and value to taxpayers," Mr English said.

"International experience suggests that building a new prison at Wiri using a public-private partnership will offer savings of between 10 and 20 percent over conventional methods over the 25 to 35-year life of the proposed contract.

"Those are substantial gains that will leave more money available for other vital infrastructure priorities like schools, hospitals and roads.

"Raising productivity in the public sector - including through better procurement and management of major assets - is an important part of our economic plan.

"This Government has provided a big infrastructure funding boost, but we are committed to spending that money wisely in all areas, including Corrections.

Ms Collins said an additional 2270 prison beds were needed by 2019 to cope with forecast growth in prisoner numbers and the need to replace ageing existing prisons.

"In order to have a world-class corrections system, we need exposure to world-class innovation and expertise," Ms Collins said.

"A custodial PPP is an opportunity to inject new ideas and new innovations into the corrections sector to enhance public safety, improve rehabilitation and lower costs.

"Currently it costs an average of $91,000 to keep a prisoner for a year. I think that we owe it to taxpayers to actively find ways of reducing those costs while improving standards and security across the board."

The proposed prison will operate within the current Corrections framework. All prisoners will remain the responsibility of the Chief Executive of the Department of Corrections.

The prison will have to comply with all relevant New Zealand legislation and international obligations.

Prisoners will still have the right to complain to the Office of the Ombudsmen. The Office of the Auditor-General can at any time, investigate the way Corrections is managing its prison management contract.

The Government is committed to a strong focus on rehabilitation and reintegration of Maori offenders.

"I would expect that the successful private provider will include Maori representation and/or Maori-specific services such as rehabilitative programmes," Ms Collins said.

A range of PPP models were explored by the Government. A custodial PPP, in which the private sector designs, builds, finances, maintains and operates the new prison, was found to deliver the best relative value for money.

Public consultation will begin shortly on resource consents. The tender process will begin before the end of the year and the prison is expected to be operational by the end of 2014.

PPP prison questions and answers

What decision is being announced today?

We are signalling the Government's clear preference for a public private partnership for design, construction and operational management of a new prison. The final decision will be made in about six months. 

Why pursue a PPP arrangement?

It provides the opportunity for cost savings and to enhance our overall service delivery in the prison system. It can do this by bringing together both private and public sector expertise to get the best outcomes possible for the public and for offenders in a way which would not otherwise be possible.

International experience suggests a custodial PPP has the potential to offer savings of between 10 and 20 percent over conventional procurement methods over the 25 to 35-year life of the proposed contract as well as delivering more innovative prison services.

How will savings be achieved - will this be through reducing the number of staff, or what they are paid?

There are potential savings on all aspects of the project; design, build and operation. It is important is that the contract with the new provider will clearly set out the outcomes required. The private provider will suffer financial penalties if the conditions of the contract are not met. This is a strong incentive for ensuring adequate staffing levels of kept.

What is New Zealand's past experience with private prisons?

Under the previous National Government Auckland Central Remand Prison (ACRP) was successfully managed by the private sector until the arrangement was stopped by Labour on ideological grounds. Having the private sector also design and construct the prison is a logical extension of that arrangement.

In 2004, filled to maximum capacity with 360 inmates, ACRP had one suicide and only three serious assaults - a low level of serious incidents for an institution of this type. Only 5.5 per cent of inmates returned positive drug tests, compared with over 20 per cent in the public sector.

Many of the innovations introduced by the private manager at ACRP were adopted by Corrections and continue to be used at prisons throughout the country.

How long will the contract be for?

Typically such contracts are for 25-35 years to make them financially viable for a private sector consortium. If the consortium does not deliver against the requirements of the contract, then it will incur financial penalties. This is a significant incentive to perform.

What will it cost?

The capital and annual operating cost will not be known until after the open tender process and negotiations with the successful consortium.

How will the Government ensure prisoners are well treated?

The Chief Executive of the Department of Corrections remains accountable for everything that happens in privately operated prisons - placing privately managed prisons clearly within the ambit and under the oversight of the State. These prisons will operate within the corrections system, not in parallel to it, and the accountability mechanisms set up within the Corrections (Contract Management of Prisons) Act 2009 clearly recognise and facilitate this.

Under the Act, prisoners remain in the legal custody of the Chief Executive of Corrections at all times. This will not change when the prisoner is held in a prison operated under contract by a private sector consortium.                                     

The Chief Executive remains ultimately accountable for the acts or omissions of the consortium. This will drive a rigorous performance management regime. 

Measures will be put in place to make sure standards are being maintained and are actively monitored:

• The consortium must comply with all our laws.
• There will be prison monitors in each prison to act as Corrections' Chief Executive's "eyes and ears" and ensure the consortium is complying with the law and the contract.
• Special monitors can investigate any specific issues or concerns, including the suspicion of corruption or criminal activity in a prison.
• Ombudsmen will continue to investigate complaints made by prisoners and would be notified of any serious incidents in a prison and actively monitor the investigation of these incidents.
• Prison inspectors will continue to ensure the safe, fair and humane treatment of offenders. They would continue to interview prisoners, and resolve complaints as they do now. They would continue to investigate every death in custody, and may investigate other serious incidents.
• The consortium will need to report regularly and in depth to the Chief Executive of Corrections so any issues and trends can be identified early and resolved. Serious incidents (ie escape attempts and prisoner deaths) must also be reported immediately to the Chief Executive. 

Will this be an American type prison?

No. This will be a New Zealand style prison. The prison will be designed, built and run in accordance with New Zealand's legal requirements.

How will the Government ensure the prison is fit for purpose in terms of how it is operated?

Here in New Zealand the legislation sets the standard: a private sector consortium will need to perform as well if not better than existing prisons. There will be measures in place to make sure standards are being maintained and are actively monitored. Work is underway to determine the exact outcomes expected from the consortium and these will be built into the contract.

How will the project be funded?

The final cost and timing of payments for the prison will depend on the commercial negotiations with prospective providers.

Is the Government considering other PPPs?

Yes, the Government has already signalled its intention to consider PPP arrangements for other areas of the State Sector, for example, in education.

How big is the prison?

Present thinking is that the new prison will provide approximately 1000 beds. 

When will the prison be complete?

It is anticipated the prison will be operational by the end of 2014.

What will be the role of Maori?

It is expected that the private provider will include Maori representation and/or Maori will be involved in providing Maori specific services.

How will the Government ensure there is a focus on rehabilitation?

The exact rehabilitative and reintegrative outcomes expected from the consortium will be built into the contract. The consortium will need to perform as well if not better than existing prisons. Active monitoring will ensure standards are being maintained.

When will work start on the prison?

It is anticipated construction work will start in the second half of 2012 following completion of an open tender process and that the prison will become operational by the end of 2014.

Will there be an open tender process?

Yes. An Expression of Interest (EOI) will be issued in the fourth quarter of this year, followed by a request for Proposal (RFP) before the middle of 2011.

Will the tender be open to New Zealand companies?

Yes. In particular there are likely to be opportunities for local companies and organisations to be involved in construction and some services such as rehabilitation programmes. It is likely, for example, the private provider will include Maori representation and/or Maori specific services.

Why are you building a new prison?

An additional 2270 prison beds will be needed by 2019 for forecast growth in prisoner numbers and the need to replace ageing prisons.

Will the public and staff have the chance to express their views?

Public consultation on private sector management of prisons took place when the legislation enabling contract management of prisons was passed in Parliament in 2009. Those with an interest had the opportunity to make submissions to the Law and Order Select Committee when it was considering the draft legislation.

Who is doing the work?

An interdepartmental steering group led by Corrections, and including representatives from Treasury, SSC, DPMC, a Maori adviser, a commercial adviser and an international PPP expert will oversee the work which is carried out by a specialist project team.

Where to from here?

Corrections is currently establishing its steering group and project team, which will prepare for the tender process and related documentation. Over the next week an RFP will be issued seeking commercial/financial advisers to support the project. It is expected that an EOI will be issued in the fourth quarter of this year, followed by an RFP before the middle of 2011.

New Zealand has agreed to lend the International Monetary Fund (IMF) up to US$1 billion (NZ$1.34b) if the world faces another economic crisis like the 2008/09 global meltdown, Finance Minister Bill English says.

"New Zealand's commitment is a part of the US$550 billion expansion of the IMF's financial resources to make the IMF better able to support the international financial system during times of significant crisis," Mr English says.

The commitment will only be called upon if needed and only if the IMF has exhausted all other options.

"This is a clear way of showing that New Zealand is doing its part as a member of the international community. We are doing this to support and protect the global economy that New Zealand depends on to survive.

"This is part of a backstop arrangement. We don't have to provide the funds now but this commitment does create a contingent liability for the Crown, which will appear on the Government's books later this year," Mr English says.

New Zealand is one of about 40 countries contributing to the IMF in this way. The contribution is in line with our economic size and similar to New Zealand's other contingent liabilities to the IMF, which total US$1.4 billion.

Included in those liabilities is US$265 million lent to the IMF as part of a range of measures to help it support countries facing balance of payments problems caused by the global economic crisis.

The New Zealand Government has expressed its deepest condolences to Poland and its people on the tragic events of today, Acting Prime Minister Bill English says.

"Our thoughts are with the entire Polish nation on the passing of President Lech Kaczynski and his wife Maria Kaczynska, along with so many senior and deeply respected Polish figures who have devoted their professional lives to their country."

Mr Kaczynski and his wife died today, along with many others, when their plane crashed while landing in western Russia.

"This tragedy will be felt deeply by the people of Poland," Mr English says.

"The New Zealand Government shares its sympathy with the Polish community in New Zealand and around the world as they grieve."

The New Zealand Government has sent a message of condolence to the Polish Government and the people of Poland.

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.