I feel it is important to respond to a recent letter to the editor by Craig Westcott, the director of communications for the Official Opposition, regarding the Muskrat Falls hydroelectric project and how it relates to the fiscal situation in Newfoundland and Labrador.
The doom and gloom prognosis put forward by Mr. Westcott is not surprising, since we have been hearing the same negative comments about the economic future of the province from the Liberal party for months now.
Before discussing the project, I think it is important to highlight the considerable improvement this province has experienced since 2003 when the Liberals controlled the public purse and just how far we have come in eight short years.
When this government came into power, Newfoundland and Labrador’s finances were in a very precarious position. Annual deficits were approaching $1 billion and an independent review at the time noted that if significant changes were not made, the provincial debt was projected to reach almost
$16 billion within four years.
The review also noted that infrastructure maintenance had been deferred to the point where hundreds of millions of dollars was needed to bring our schools, hospitals and roads up to acceptable standards.
Our government was forced to make some very tough and unpopular decisions at that time in order to get our fiscal house back in shape.
Our first few years of office saw cuts to the public service and public sector wage freezes, decreases in program spending and a deferral of all non-essential capital expenditures.
To turn things around, we developed a plan and stuck to it. In that short span of eight years, the turnaround that has taken place in Newfoundland and Labrador is remarkable.
Instead of increasing, our debt has actually decreased by almost $4 billion. Of course, that means our debt servicing costs have also dropped, which leaves us with more money to invest in the people and communities of the province.
We have not borrowed in the capital markets for operational purposes since 2004 and only borrowed in 2007 to reduce the unfunded liability in the province’s pension plans.
Our bonds are trading in secondary markets at rates that are at historic levels compared to the federal government and other provinces, a clear indication of how positive capital markets view our prospects.
We are amongst the leaders of all provinces in terms of business investment. We have gone from a “have-not” to a “have” province and more people are working right now in Newfoundland Labrador than at any other point in our history.
This year’s budget will see Newfoundland and Labrador run its sixth surplus out of the past seven years and accordingly there has never been a better time to invest in a project such as Muskrat Falls.
Once developed, these assets will provide a stable, predictable revenue stream which will cover all debt servicing costs.
Mr. Westcott’s comparison of Newfoundland and Labrador to Greece is ridiculous and nothing short of fear mongering.
Greece, which has a debt to GDP ratio of 160 per cent, came to a situation where its economy could not generate sufficient revenue to support its expenses and debt.
Our debt to GDP ratio, one of the primary indicators of the financial health of a province, is among the best in the country and has improved from an unsustainable level of 70 per cent in 1999 to its current level of 26.7 per cent. Compare that also with the U.S., which recently saw its debt to GDP ratio reach approximately 100 per cent.
It is also worth noting that the credit rating agency Standard & Poors, while upgrading our credit rating from ‘A’ to ‘A+’ in 2010 (the highest it has ever been), noted that Newfoundland and Labrador “has a strong liquidity position, reflecting its past operating surpluses and prudent spending practices.”
Using current revenues from non-renewable resources for renewable energy projects for the future benefit of Newfoundland and Labrador is the core of this province’s Energy Plan.
I firmly believe that Muskrat Falls and, ultimately, the development of the entire Lower Churchill will be major pillars of the provincial economy for decades to come.
Investing money today in projects that will provide affordable, stable, environmentally friendly energy to markets at home and in Canada and the United States will ensure a steady income to this province for generations of Newfoundlanders and Labradorians.
Tom Marshall is minister of finance and president of treasury board for Newfoundland and Labrador.
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Don't forget the non-working people who are also living off the public purse such as the pensioners, welfare recipients, EI and non-profit organizations that rely on government grants. We should also include all the private businesses that do a lot of business with government but that is a list too long for here. Pretty well covers us all.