On Oct. 31, Finance Minister Tom Osborne responded to the Newfoundland and Labrador Employers’ Council report entitled “Another Way Forward,” which pointed out that taxes in Newfoundland and Labrador are too high for the province’s good.
As predicted, the massive tax increases are not generating the revenue the Liberals projected. Why not? Because high taxes mean less consumer spending power and less business investing power, crushing the very economy you’re trying to sustain, let alone stimulate.
So, how do you meet your fiscal targets while keeping taxes low?
First, you rein in spending. The Liberals’ initial Budget 2016 actually increased program spending, had massive tax increases and identified no balanced plan to bring down spending over a reasonable period of time while driving economic activity and capital investment. An initial promise to reduce spending in spring 2016 was sidelined in fall 2016, and to date, no clear fiscal plan has been identified.
The recent auditor general’s (AG) report states that by 2022-23, under the Liberal plan, spending will be reduced by only 2.3 per cent. In 2016-17, program expenses were reduced by only $68 million. By contrast, the PC plan in 2015 was to continue to reduce public expenditures by taking full advantage of areas like public service attrition (only eight hires for every 10 retires, to save $300 million to $500 million); assessing new service delivery models to complement attrition; using private sector investment to build public infrastructure; and clearly laying out moderate tax increases for the short term.
The AG stated the current government is forecasting $1.1 billion in increased revenues over the next six years. Almost 27 per cent of this growth is expected from oil (predominantly increased oil prices) and the remaining 73 per cent from other sources (including expected profit from Muskrat Falls).
Second, you grow your revenues by growing the economy. When jobs decrease, people leave and transfer payments fall. The solution is to create a climate for job growth so people can stay, encourage people to move to our province, and as a result revenues grow.
We have seen important economic opportunity slip away in the past 24 months. Our province lost the $400 million fisheries investment fund when relinquishing minimum processing requirements for the European Union, getting nothing for giving up MPRs. The current government was silent when the federal government invested in a state-of-the-art Ocean Frontier Institute at Dalhousie University in Nova Scotia, despite our government's longstanding investment in Arctic opportunity development for leading-edge companies.
They lost future offshore economic benefits when Husky Energy was let off the hook for building the agreed-to $150 million gates to a graving dock in Argentia, which would have ensured ongoing work for our people in offshore activity for decades to come. They stumbled badly in completing a $250-million project that our government signed with Grieg for new aquaculture investments and growth in the industry and to supply companies that can drive our rural communities.
Opportunities to grow our natural resource sectors have been left on the table while our people are moving away to find jobs.
Third, you stand up for fairness. The PC party always believed we are an equal partner — which means speaking up for federal programs, offices, infrastructure and investment. As well, it means fighting for our fair share of vital transfers from the federal government.
Newfoundland and Labrador was proud to come off Equalization a decade ago. But when revenues suddenly fall off — as they did when oil prices plummeted — equalization is there to ensure Canadians, wherever they live, can have reasonable services at reasonable taxation. Instead of standing for fairness alongside oil-producing Alberta and Saskatchewan, the Ball Liberals forced our people to bridge that gap through massive tax hikes.
In addition, our current government quickly accepted the feds’ offer on the three per cent annual increase in health transfers, unwillingly to argue that with our demographics and low population density, we are not like the rest of the country in service delivery.
This is not the way forward. It is a string of contradicting messages, which amounts to no plan. After almost two years in government, their fiscal plan is no way forward.
Keith Hutchings, MHA Ferryland
Opposition finance critic