The Newfoundland and Labrador Employers’ Council is hoping to press public discussion on provincial budgeting and the kind of action the new Liberal government should be taking, releasing its own “shadow budget,” ahead of the provincial Budget Day Thursday.
Work of three Conference Board of Canada economists was poured into the “shadow budget” — ultimately more of an outline on spending, with suggestions on how the Liberal government might bring the province’s financial situation into check.
It does not get into recommendations on specific programs that might be cut, or call for spending reductions for specific staff in the public sector, but does provide high-level targets, meant to be compared to what gets released in the actual 2016-17 budget and beyond.
COLUMN — These aren’t paper cuts
The employers’ council “shadow budget” states the province should reduce program expenditures by $1 billion over four years — a roughly 15 per cent cut from 2015-16 levels of spending.
The majority of cuts should come in the first two years, they state.
To start, spending apart from health care and social services should be considered, beginning with operational spending in education.
“Newfoundland and Labrador spends $2,300 per person more than the average of the other three Atlantic provinces on non-health areas of government. This gap has widened since 2009,” notes the eight-page budget-related document.
It calls for a deep dive on wages and benefits in the public sector and job cuts, noting the province had 28 government employees (excluding health and education) for every 1,000 people in the province in 2014, compared to the Canadian average of 25.
The “shadow budget” calls for cuts to education spending, while providing numbers that combine both K-12 and post-secondary spending. Together, the call is for government to find $375 million in savings over three years.
As expected, given the significance to the bottom line, health care is also targeted.
“Adjusting for age, Newfoundland and Labrador spends $1,000 per person more on health care than other provinces in Atlantic Canada (25 per cent higher). Reducing healthcare spending to the Atlantic Canada average today would save $549 million,” it states.
The Newfoundland and Labrador Employers’ Council is endorsing a harmonized sales tax (HST) increase of two per cent, but only a temporary one.
The council is also recommending a 10 per cent consumption tax increase, affecting alcohol, tobacco and gasoline.
The council recommends no increase to other personal and corporate taxes. And, it suggests any tax increases could then be removed as the province finds its feet and returns to balanced books — the target for that being 2019-20.
“Our approach to this, we believe, is fairly balanced,” said employers’ council executive director Richard Alexander, in presenting the work, at the Capital Hotel in St. John’s.
Alexander told The Telegram action was the call and there would not be objections if that included cuts to programs issuing incentives for new business.
"Is there room to find 15 per cent cost savings in government spending? Absolutely," he said.
A collection of the council’s board members and business minds were in attendance for the release.
“I certainly agree with it. I think the government really needs to move quickly. If I have one thing to say ... I think they have to move quickly. They can’t just procrastinate and sit on this (situation),” said Karl Sullivan, after the news conference.
Seafood producer Bill Barry was all for the recommendations, saying it was past time for more aggressive action by government.
“We have had a problem with management in this province for a long time,” he said.
“The numbers that you see and the state that we’re in are a direct reflection of politicians directing and spending the — bankrupting the future generations of Newfoundlanders and Labradorians because we’re not prepared to live within our means and within our capability. My concern is we’re really as a drastic tipping point. If something is not done soon, I really, really worry about the future of this province.”
Barry was also critical of the handling of the massive Muskrat Falls hydroelectric infrastructure project.
“It’s going to bankrupt the province,” he said.
“When I look at the future of Newfoundland and Labrador, as I look for it, I see a significant increase in our unemployment rate, I see a significant increase in our taxation rate, I see a doubling of our electricity rates. Where does that put us as an economy?
“Having said all of this, we can’t all leave the province. We have to start thinking about where we go from here. The first thing I think all of Newfoundland and Labrador should do, we should support the current government to make some real change.”