- 1. Central government programmes
- 2. Regional programmes
- 3. Total New Zealand agri-environmental expenditure
III - SUMMARY OF EXPENDITURE ON AGRI-ENVIRONMENTAL PROGRAMMES
This section summarises New Zealand's expenditure on agri-environmental programmes by both central and local government. Total expenditure on agri-environmental programmes can be interpreted in various ways. A large amount of expenditure relative to agricultural output could indicate the presence of signficant environmental problems in the agricultural sector. Alternatively, large expenditure could indicate the absence of problems if the expenditure is effective in avoiding or remedying problems that otherwise would have been present. Furthermore, depending on the type of policies used, countries with similar severity of environmental problems and similar commitment to addressing them might have very different levels of expenditure. This could occur if one country subsidises environmental compliance while the other adopts a "polluter-pays" approach and requires resource users to bear the cost of meeting standards expected by society.
In the following summary, expenditure is categorised according to the amount of direct support and whether programmes are mainly environmental protection or protection of agriculture from environmental forces. Further analysis of types of expenditure would help to draw policy implications from reported expenditure, and to facilitate analysis of the effectiveness of programmes in conjunction with agri-environmental indicators.
1. Central government programmes
Agri-environmental programmes funded by central government are summarised in Table 2. In addition to total funding for each programme, the table shows the amount which has been attributed to agriculture based on assumptions made by the Ministry of Agriculture and Fisheries. Although Resource Management Grants are for addressing the full range of environmental issues, 1994/95 funding includes a substantial proportion to the Waihou Valley Flood Protection Scheme from which agriculture receives significant benefits. We have therefore attributed 70% of the programme expenditure to agriculture. Of the research on sustainable land management, 40% is related to the topic only indirectly, and some directly-related research is on forestry, so we have attributed 75% of the total to agriculture. In the last two columns of Table 2, this research expenditure is divided equally between addressing environmental effects of agriculture, and protecting agriculture from the environment, though the actual proportions are unknown.
Of the three programmes to protect indigenous forests, we have attributed 50% to agriculture, although the actual figures are unknown. We have attributed all expenditure on the East Coast Forestry Programme to agriculture, because the land being targetted is erodible land currently used for pastoral agriculture. However not all programme payments go to farmers, because some have sold eligible land to forestry investors.
Of the various pest surveillance, response and border control programmes, 50% has been attributed to agriculture. This is based on the assumption that of the target pests, roughly half are of concern to the general public, either for public health reasons or because they threaten flora and fauna. The pest control expenditure on bovine tuberculosis, however, is fully attributed to agriculture. Other government expenditure on possum control for nature conservation purposes has been excluded from this analysis.
The table shows that central government expenditure on agri-environmental programmes in 1994/95 was $151 million (excluding GST), of which $108 million can be attributed to agriculture. Only $13 million was direct support, either as payments to producers or as services provided on individual properties, and $2.6 million of this was under a programme ending June 30, 1995.
Expenditure is divided into two further categories: programmes whose main focus is to protect the environment, and programmes whose main focus is to protect agricultural land and production from environmental forces. Some programmes, such as research, contain components of both, and we have arbitrarily allocated 50% to each category. As shown in Table 2, central government expenditure on environmental protection is estimated at $45 million (excluding GST) in 1994/95, whereas expenditure on agricultural protection and improvement is estimated to be $63 million.
Regional government expenditures are summarised in the following section.
Table 2: Central Government Expenditure on AgriEnvironmental Programmes (NZ$ million) |
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Programme |
Year |
Budget Excl GST |
Agric.
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Amt attrib. to Agric. |
Direct Support** |
Env. Protection |
Agric.
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$million |
factor |
$million |
$million |
$million |
$million |
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East Coast Forestry |
1994/95 |
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2.56 |
2.56 |
2.56 |
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2. Regional programmes
Because there is no central compilation of local authorities' environmental expenditure, and because the authorities use a variety of budget categories, it is difficult to determine how much is spent on agri-environmental programmes at the sub-national level in New Zealand. In addition, financial reporting categories have changed over time as council activities have been regrouped and reorganised. By analysing financial reports from regional councils, however, the Ministry of Agriculture and Fisheries has prepared the following summary of regional council expenditures and revenues.
a. Regional agri-environmental expenditures
Agri-environmental programmes were summarized in the previous section of this report. A summary of regional councils' largest expenditure items of an agri-environmental nature for 1994/95 is presented in Table 3. We have categorised regional programmes as either environmental protection or agricultural protection and improvement, as was done for central government programmes. Soil conservation could arguably be placed in either category. It is here categorised as environmental protection as the emphasis of soil conservation activities has gradually shifted in this direction.
The share of regional council expenditure that is paid directly to farmers is small and confined to cost-sharing elements in some soil-conservation programmes. Some pest control activities are carried out on individual properties and would constitute direct support where partial funding is received from regional council general funds.
Regional council expenditure on environmental programmes relevant to agriculture totalled $157.8 million in 1994/95. Of this, $67.9 million was recovered from users, mainly through direct charges or special property taxes (see next section). The amount of this expenditure which can be attributed to agriculture varies by category. For planning, monitoring and enforcement, for example, we estimate that only between 10% and 30% is attributable to agriculture, whereas for other categories the proportion is much higher. Applying these percentages provides an estimate that regional council expenditure attributable to agriculture is between $71.2 million and $101.9 million in 1994/95, and that roughly half of this is recovered from users.
b. Regional council revenues
Regional council revenue is derived from a variety of sources and is subject to detailed reporting requirements. Most revenue is raised by property taxes, called "rates" in New Zealand. The Ministry of Agriculture and Fisheries has analysed revenue sources of four councils for 1990/91 and 1993/94. The four councils (Waikato, Hawkes Bay, Canterbury, and Otago) accounted for roughly half of all regional agri-environmental expenditure.
In order to focus on external sources of revenue, we excluded from this analysis capital transactions, such as profits from subsidiary operations (eg shareholding in ports or public utilities) and transfers from reserves, among other things, as well as borrowing. As these constitute a significant source of revenue for some councils, care should be taken in interpreting the information below. All of the percentages below would be lower if these capital transactions were included in the calculations.
In 1993/94, 47% of revenue for these four councils was derived from general rates, ie property taxes imposed on all private property in the region, both commercial and residential, urban and rural, although differential rates are typically applied to different categories. General rates increased as a source of revenue from 38% in 1990/91, offsetting in part a decrease in government grants from 21% in 1990/91 to 14% in 1993/94.
"Special rates" are assessed on property in a confined geographical zone to finance specific programmes, eg land drainage or flood control, which benefit land in the zone. Special rates accounted for 21% of revenue for the selected councils in 1993/94. Fees and levies provided 11% of revenue in 1993/94 for the four councils. These include application and other fees associated with resource consents (environmental permits).
The proportion of revenue raised from special rates, fees and levies indicates the extent to which regional council expenditures are funded by those who benefit from the services provided. In 1993/94, 32% of revenues for the four councils were raised from "users," up slightly from 30% in 1990/91. However, the residual "other" category, which also contains some user charges, declined as a source of revenue from 10% to 7%. While firm conclusions cannot be drawn without further analysis of the residual category, it is likely that there has been no significant change in the share of revenue raised from "users" over the period analysed for the four councils.
In the previous section, it was noted that roughly 50% of regional council expenditure on agri-environmental programmes is recovered from users, compared with 32% of all expenditures for the four councils analysed above. This difference can be explained by the high rate of cost recovery for pest control and flood control works, which account for most of the agri-environmental expenditure.
3. Total New Zealand agri-environmental expenditure
Total expenditure in New Zealand on programmes related to agriculture and the environment is estimated at $300 million, of which between $173 million and $204 million is attributable to agriculture. Furthermore, after taking into account costs recovered from beneficiaries of these programmes, total government support to agriculture through environmental programmes is estimated at between $131 million and $148 million. Of this, roughly 40% is for environmental protection programmes, and 60% is for programmes protecting agriculture from environmental forces such as pests and floods. See Table 5.
Approximately $81 million of this expenditure meets current OECD criteria for support for agriculture and has been previously reported to the OECD by New Zealand in estimating its Producer Subsidy Equivalents (PSEs) for various products. This consists primarily of research programmes and the range of central government activities related to pest management. Regional level agri-environmental programmes have not been previously reported.
For comparison, gross agricultural production in New Zealand was estimated at $5,000 million in 1994/95.
Table 5. Estimated New Zealand agri-environmental expenditure, 1994/95 (NZ$ million)1
Budget
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1 Numbers may not add to totals due to rounding.
2 Resource Management Grants are transfers from central to local government, and are included in both categories of expenditure. They must be subtracted to avoid double-counting.
3 Funding for pest control on government land ($5.4 million) plus regional council revenues from programme users or beneficiaries ($68 million).
Source: Tables 2 and 3 above.
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