Reduced spending on social investment will cost Government more

By Shaun Greaves, CEO Presbyterian Support Northern

Budget 2025 is shaping up to be dire for the not-for-profit sector. Finance Minister Nicola Willis has clearly flagged no extra funding and the need for spending to be more impactful.

That’s not surprising. New Zealand has high levels of debt to service, which is economically challenging.

However, spending restraint should not be at cost to social service charities who take up the responsibility of caring for vulnerable New Zealanders hit hardest by a faltering economy.

At Presbyterian Support Northern, we are contracted by the Government to deliver a wide range of social services, as well as disability support and aged care services.

These include Social Workers in Schools, family violence education programmes, women’s refuges, budgeting services, day services for those with dementia and home based support for the elderly, to name a few.

We’re one of the largest providers in the country, yet the level of financial income from government contracts does not keep up with the annual increase in the direct costs of running these contracts. We have seen a consistent year on year reduction in government funding in real terms, and each year this reduction in support impacts the level of services we can undertake for our clients.

On top of this, we’ve had contracts reduced or cut altogether. For example, last year Oranga Tamariki cut contract volumes and reduced our funding by $1.4 million, affecting some 800 clients and resulting in frontline redundancies.

The Government has clearly indicated that it wants value for money from its social investment, and this is a very reasonable expectation.

Using data, analytics and evidence to figure out the best way of intervening early in the lives of the most vulnerable in society is a good thing.

So is working with not-for-profit providers of social services. After all, charities provide cost effective services to vulnerable New Zealanders that, if not provided, would fall on the Government to provide, potentially at a much higher cost.

The Government’s focus on cost restraint is putting unreasonable pressure on charities.   

For example, PSN provides the Lifeline Aotearoa mental health helpline service. We rescued it from going under in 2017 when the Government stopped funding the service. Its value as a frontline mental health and suicide prevention service was clear to us. Today it receives around 90,000 calls and its text service volumes are around 240,000 per year.

However, we are now at the point where we need Government support to keep the service going. PSN has spent $26m to keep Lifeline operating over the past eight years, with both demand for mental health and suicide support and costs rising each year. Currently, Lifeline costs nearly $4m a year to operate, which is not sustainable.

The solution we’ve offered, which aligns with the Government’s co-investment approach to social services, is to go halves. PSN contributes $2 million per year, the Government contributes $2 million. A small price compared to its $2.6 billion mental health budget.

PSN is committed to Lifeline, but we cannot afford to keep Lifeline going indefinitely without renewed Government funding..

Lifeline meets a very clear and overwhelming need in our society that is neither met nor funded elsewhere. If Lifeline reached a position where we aren’t able to continue to do the critical work we do, the load for other mental health support lines such as 1737 would increase substantially and many people seeking urgent mental health support would not receive it. There would be more self-harm incidents, mental distress and other negative outcomes. That cost would be felt in families and communities, and by the health system.

Another alarming pre-Budget signal from the Government was its review of tax concessions for charities. Although Finance Minister Nicola Willis has indicated there will be no tax changes to charities in the Budget, there are still plans to look at changes in future.

One of the questions asked in its Inland Revenue Officials’ Issues paper is whether a charity’s business income unrelated to the charitable purpose should be taxed. Currently, it is tax exempt.

PSN relies on its other income sources to prop up loss making Government contracts. Without the income from these other sources, it would be very challenging to continue to contract with Government to deliver services to the community.

Tax exemptions recognise the positive contribution charities make to the community. Charities provide cost effective services to vulnerable New Zealanders that if not provided could fall on the Government to provide.

Charities need to be innovative in how they accumulate sufficient resources to deliver their services.

Let’s hope that Budget 2025 recognises this and contains a healthy degree of recognition that support for not-for-profits is a cost-effective way of helping the most vulnerable in our communities.

To only focus on cost restrictions will be more costly in the long run and will impact New Zealanders’ health and well-being beyond measure.