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Digest No. 1916

Spending Cap (People’s Veto) Bill 2011

Date of Introduction: 10 August 2011
Portfolio: Regulatory Reform
Select Committee: As at 11 August, 1st Reading not held.
Published: 11 August 2011byJohn McSoriley BA LL.B, Barrister,Legislative AnalystP: (04) 817-9626 (Ext. 9626)F: (04) 817-1250Public enquiries:Parliamentary Information Service: (04 817-9647) Caution: This Digest was prepared to assist consideration of the Bill by members of Parliament. It has no official status.Although every effort has been made to ensure accuracy, it should not be taken as a complete or authoritative guide to the Bill. Other sources should be consulted to determine the subsequent official status of the Bill.


The purpose of the Bill is to limit the annual increase in Government spending by:

  • providing “a formula for calculating an annual spending cap for specified expenses, under which the amount of the spending cap changes each financial year … in direct proportion to the rate of inflation and the rate of population change … and … in accordance with the results of any spending cap referendum relating to that financial year”; and

  • requiring “the Minister to report to the House of Representatives on whether specified expenses incurred in a financial year are within the spending cap for that year” (Part 1 of the Bill, Clause 3 (the “purpose” clause)).


Regulatory impact statement

A regulatory impact statement may be found at:

Main Provisions

Bill binds the Crown

The Bill includes a clause to bind the Crown (Part 1, Clause 6).

Formula for calculating the spending cap

The Bill provides a formula for calculating a spending cap. The spending cap for a financial year is calculated by increasing or decreasing the spending cap for the previous financial year in proportion to the rate of inflation and the rate of population change. The first spending cap is calculated using the total amount of specified expenses that the Treasury forecasts will be incurred in that previous financial year. The Minister must include the spending cap for a financial year in the annual budget policy statement relating to that year and must also include in the budget policy statement indicative spending caps for at least the next two financial years. An indicative spending cap is based on rates of inflation and rates of population change for those years by the Treasury (Part 2, Subpart 1, Clauses 8-11).

Use of the spending cap

The Bill requires the Minister, when presenting the annual financial statements for a financial year to the House of Representatives, to report to the House of Representatives on whether the spending cap for that year has been exceeded. If the spending cap has been exceeded, the report must state why this has happened and what measures will be taken to ensure compliance with future spending caps. The report will also include details of any emergency-related expenses incurred in the financial year and excluded from the operation of the spending cap (Part 2, Subpart 1, Clause 12).

Spending cap referenda

The Bill enables the spending cap for a specified financial year to be increased by way of a binding referendum (a spending cap referendum) which may be initiated by the Government at any time and is conducted under the Referenda (Postal Voting) Act 2000 (Part 2, Subpart 2, Clauses 14-17).

Copyright: © NZ Parliamentary Library, 2011
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