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GUEST COLUMN: Small businesses keeping an eye on minority government


By Vaughn Hammond

It’s official. With the judicial recount confirming Labrador West as a win for the New Democratic Party (NDP), Newfoundland and Labrador has its first minority government since 1971. This is something of which Newfoundlanders and Labradorians have little experience.

The question from small-business owners is: what does this mean for them?

Small businesses in the last four years have had a difficult time as the cost of doing business far outpaced the ability to generate revenues.

The 2016 Budget still stings. And the 2019 Budget, currently making its way through the House of Assembly, isn’t much help.

Sure, the elimination of the Retail Sales Tax (RST) on automobile insurance is good news, but the government should have eliminated RST on all insurance premiums (about $100 million).

When government is asked to eliminate the RST on insurance, it comes back with “OK, but how would you replace that revenue or what service would you cut?”

One good place to start is looking at the government’s $115-million “investment” in jobs and industry development announced in Budget 2019.

Instead of continuing with its failed strategy of picking winners and losers, consideration should be given to providing broad stimulus to the economy through tax reduction. Put money back into the pockets of more small businesses and allow them the opportunity to create jobs.

Small-business owners are also looking at the government’s growing debt.

Despite the Hibernia dividend agreement money, the debt will grow by $855 million in 2019-20. Payments on the debt are forecasted to be $1.4 billion, which is almost equal to the revenue personal income taxes are expected to bring in.

Small-business owners are also wondering if the government can meet its target of balanced budget by 2022-23. They have every reason to be concerned. In the last four years, the government may have reduced the deficit by $1.3 billion, but it did so by increasing tax revenue and higher oil royalties. Spending actually increased over that period.

To meet its 2022-23 targets, the Canadian Federation of Independent Business (CFIB) estimates the government will have to find $1.1 billion in inflation-adjusted savings. It raises an important question: is this something a minority government can actually achieve? If spending continues to rise and oil royalties are lower than expected, then inevitably taxes will have to increase to meet those targets. It boggles the mind to think what higher taxes will do to the provincial economy.

Further, small-business owners are beginning to brace for the anticipated increase in electricity rates when Muskrat Falls power comes on line.

CFIB has calculated the effect on small business could be an additional $180 million a year. Unfortunately, the mitigation plans put forward thus far contain too many uncertainties and they do not address the growing costs of Muskrat Falls development beyond 2021.

In light of this, one major policy concern possibly coming from this minority government is a $15-an-hour minimum wage.

It is conceivable the Liberal minority government will negotiate a move to a $15-an-hour minimum wage in exchange for support from the NDP. Such a move would cost small-business owners about $8,500 per employee per year, if offsetting measures are not put in place. Several small-business owners have been clear it is a significant threat to their very existence.

CFIB members will be watching this minority government closely.

They will be looking for sound decisions to help them grow and create jobs. They deserve nothing less.

Vaughn Hammond is Director of Provincial Affairs in Newfoundland and Labrador for the Canadian Federation of Independent Business. He writes from St. John’s


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