AG’s report sounds the alarm

James McLeod
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Things are really, really bad in Newfoundland and Labrador.

Auditor General Terry Paddon — File photo by Keith Gosse/The Telegram

Albeit in restrained language, auditor general Terry Paddon is sounding the alarm about the government’s fiscal position in a report released Friday morning.

Paddon points out that the government’s economic forecasts are overly optimistic, and that deficit spending is out of control.

“Newfoundland and Labrador’s deficit as a percentage of GDP for 2014-15 is 2.9 per cent — over 2 times greater than the next highest province,” he wrote. “The forecast deficit as a percentage of GDP for 2015-16 is expected to increase substantially to 6.5% - approximately 3½ times greater than the next highest province.”

Paddon observed that the forecast increases to provincial debt in the next five years will be more than double the net debt.

The government’s forecasts surrounding future revenue and economic activity are also too optimistic, Paddon said.

Employment boosts from new oil developments might not happen, and new revenue from offshore production is iffy too.

“The Province is forecasting revenue to grow by $1.1 billion over the five-year period to 2020-21,” the auditor general’s report said. “This growth in revenue is dependent on the Province achieving the economic growth that it has forecast and the levels of oil production and oil price outlined in the December 2015 Economic and Fiscal Update. Considerable risk surrounds the Province being able to achieve these targets.”

Paddon said, in order to turn things around, the Liberals will likely have to consider breaking two of its signature election promises.

He pointed out that 50 per cent of all program spending goes to salaries, and despite the fact that the Liberals flatly promised during the election that there would be no layoffs, Paddon said there’s no other way to significantly reduce spending.

“The Attrition Plan, currently targeting to reduce the workforce by approximately 3.0%, or 1,420 persons, will not be enough to achieve the expense reductions necessary to significantly reduce the deficit,” the report says.

Similarly, the auditor general’s analysis directly questions the Liberal promise to reverse a planned increase to the provincial sales tax.

“Increases to personal income tax and the HST, along with other consumption taxes, such as gasoline tax, and corporate income taxes, will have to be considered as part of a balanced package to achieve Government’s deficit reduction objective,” he said.

On Twitter @TelegramJames

Geographic location: Newfoundland and Labrador

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Recent comments

  • Harry
    January 29, 2016 - 15:55

    @dave - Yeah, but we got more than 'our' piece of the oil. We got pieces of oil that haven't even been pumped out of the ground yet - that your grandkids and mine are entitled to when their turn rolls around. We'd all like government to do more for us but we also trust they'll behave responsibly - that they won't bankrupt the province. That's what Danny, Davis and Dunderdale all failed to do. Ball didn't create this mess but I agree - he'll be very unpopular a few years from now because people will blame him for cleaning it up.

  • dave
    January 29, 2016 - 14:23

    Let's remember, it was the people of this province that wanted more spending. We all wanted our piece of the oil. Very few voiced concern about the increased spending. And if Ball makes a serious effort to control spending then you'll hear the people howl. The people get the government they deserve.

    • Oh my
      January 29, 2016 - 17:23

      Who is ultimately responsible though?? Nice try.

  • How about an inquiry into PC bungling?
    January 29, 2016 - 13:10

    @Dermis Probe will you stop already with the BS apologies for your buddies in the old PC government. The voters tossed them out and still they can't shut up for a second.

  • Graham
    January 29, 2016 - 12:45

    Can you all see now why Ross Wiseman walked away from the mess he helped create. NO ACCOUNTABILITY. Great job Ross

    • Kev
      January 29, 2016 - 13:32

      As did Danny Williams, and a whole chunk of his cabinet ministers who finally woke up to the mess that he had created. How is Galway going, I wonder?

  • Public Servant #1
    January 29, 2016 - 12:38

    We should all be thankful that we have one public servant that is truly serving us all as citizens. The AG is telling it like it is - it is too bad that we do not have other public servants informing the public in other departments of Government. Either they are too afraid of their political masters or they are incompetent. It is time that the people are informed month by month, quarter by quarter, what the real fiscal situation is - " Without the Rose Coloured Glasses" that would be a great start to transparency. It would be great to get Mr. Paddon to review Muskrat Falls so we could be told truly what it is costing? What our electric bills are going to be per KWH when it gets finished? How much subsidy Nlers will be paying for the power going to Nova Scotia? But I guess that would be asking too much

    • Paul
      January 29, 2016 - 13:17

      Agree with you but if they do all that, they'll be out of jobs next election. We, the people, don't like the truth when it's not in our favour. We seem to like being kept in the dark because it's easier to whine and complain that way and make electoral decisions based on what we 'think', not what we know.

  • A sincere thanks
    January 29, 2016 - 12:25

    Thank you Danny, and Davis, and Dunderdale, and Marshall, and of course, Kent, in fact, the whole pc party, for your wonderful contribution to the status of the province today. Lest we forget, indeed.

    • Paul
      January 29, 2016 - 12:43

      May as well thank the people of the province as well. They're the ones silly enough to elect a liberal government who said they weren't going to fix anything but keep spending. Where did everyone thing the money was going to come from..thin air? As usual, you get what you reward.

    • Dermis Probe
      January 29, 2016 - 13:01

      I recently saw an ad from a New England power company extolling the virtue of its use of environmentally friendly hydro-power from Canada. Couple that with Coderre's recent stunt vis-a-vis pipe lines. Let's take narrow-viewed partisanship out of the equation. Rick Mercer's recent rant was spot on: To paraphrase: the mandate of federalism is being trampled upon.

    • Oh my
      January 29, 2016 - 17:26

      Paul, kinda like electing those negligent and greedy PC goons, once led by the Saviour of Newfoundland Himself.

  • Sam
    January 29, 2016 - 12:22

    It took a change in government to wake up the auditor general. This financial mess has been brewing for years and now we're just about in over our heads. Someone should check with our former PC brain drains Paul Davis and Stevie Kent to ask how this could have happened under such stellar leadership. And does anyone out there still not see through the BS they fed everyone and why we didn't see an update on the budget before the election was called.

    • Indigo
      January 29, 2016 - 16:30

      Well, you never saw the BS Dwight Ball was feeding you before the election, so I guess you've answered your own question. As long as you keeping blaming the previous governments, nothing will change.

  • Fred
    January 29, 2016 - 12:08

    He also points out that government has more control to reduce the deficit through lower spending than it does through taxation (difficult to predict the actual revenues) or relying on the price of oil. Nowhere does he point out that previous tax cuts are responsible for the deficit, and spends almost all his time talking about increased spending and the drop in oil price.

  • Bill Westcott
    January 29, 2016 - 10:48

    And we are about to spend $6 million dollars on tourism ads?

    • Dermis Probe
      January 29, 2016 - 12:03

      “When times are good you should advertise, when times are bad you MUST advertise.”

  • Dermis Probe
    January 29, 2016 - 10:16

    If there ever was a time for non-partisanship, it is now.

  • Me
    January 29, 2016 - 10:14

    The govt website shows 750,000 in grants to 3 companies. The money is from a venture capital fund managed by Pelorus Venture Capital Ltd. Is there anybody in govt that could manage it.? "Clockwork Fox Studios develops educational games and technologies HeyOrca enables marketing agencies and their clients to seamlessly collaborate on social media Sentinel Alert is a safety software company designed to help industrial companies reduce worker accidents." Should we spend money on this considering our crisis is unprecedented??