Monday, 14 November 2016

THE WAY FORWARD A FISCAL DUST CATCHER

One of the most important revelations in the Ball Government’s policy document The Way Forward and there are very few is that it recognizes they have a spending problem. Yet it constitutes neither road map nor resolution for the province’s fiscal woes. Recognition of the problem, alone, is not enough.

Says the document:
“This fiscal problem was not caused by a drop in oil prices, but was instead exposed by the decline in oil prices. The past decade has been marked by an incredible increase in Government revenue… Even in 2016-17, Newfoundland and Labrador has the highest per capita revenue, and the highest per capita program costs among provinces. We cannot treat our current situation as only a revenue problem. Our province has a spending problem.” (p.3)

Still, it is peculiar phrasing it seems no one discovered they were out of water until the well went dry!


Given the size of the fiscal nightmare, one might reasonably expect The Way Forward to point to a definitive and sizeable set of initiatives to achieve spending cuts. It does nothing of the kind.

Consider the part that deals with fiscal targets. It says only that the government is “committed to… exceeding the target for the 2016-17 deficit and maintaining our commitment to return to surplus in 2022-23.” (p.5)

Return to surplus should imply an average reduction in spending of around $300 million in each of the next five fiscal years. Including for this year, additional borrowing of around $5 billion will be needed just for the operating account. Not a pretty picture.

Then, too, this year’s deficit was reduced from $1.83 billion to $1.58 billion not by decision-making, but chiefly because oil production and the price were higher than previously forecast. Six years to a balanced budget is a very long period especially when you consider that the government offers no benchmarks of achievement, except to report following each of the plan’s nebulous “three phases”.

Of course, the drafters do not take care to say that mid-way through the plan a general election will be held, that funding for capital accounts and for the Muskrat Falls project will continue. Essentially, government has given itself the luxury of delaying fiscal redress for an indefinite period as if that is an option.

One might be prepared to cut the government some slack if its retrenchment proposals contained some specific amounts of targeted savings. Other than the proposed reduction in leased office space and a cut in boards and agencies by 20% chump change in the larger context we are left with a litany of generalizations: “Adopt a Flatter, Leaner Management Structure”, “Reduce Silos in Government Operations”, “Utilize Zero Based Budgeting” none of which inspire thoughts of a government preoccupied with crisis.

The Way Forward is not a document constructed in the Department of Finance - it is not even available as a financial document on the department's web site. This is the creation of a handful of PR types with access to Tourism’s glossy photographs. It demonstrates no knowledge of what the solutions to a spending crisis should look like. Many of the financial, economic, and administrative references are matters that constitute merely the ongoing minutiae of a large organization.

Normally I’m not looking for humour in documents like this one. We have Mark Critch, Mary Walsh, and others to provide entertainment in that department. Still it is impossible not to guffaw at this line:

“For years, our province had a strategy of strategies with purpose-built programs and special offices… the model has resulted in an expensive, complex and crowded suite of programs and services. Public sector efficiency has not been top of mind.”

Imagine defining unbridled waste and mismanagement as a “strategy of strategies”.  This is surely a tip-off that the government plans to replace all the people in the Department of Finance with the Office of Public Engagement!

The Tories applied neither a “model” nor a “strategy” to spending.  The money tap facilitated a feeding frenzy between senior bureaucrats and politicians. They spent it all and borrowed even more, with not a thought to consequence.

70% of government spending is claimed by health, social services, and education. Still, the document notes:

High levels of investments in recent years did not budge many of our most important outcomes in health and education. Despite increasing health care spending by $1 billion and K-12 and post-secondary education spending by $400 million, an increase of 58 per cent and 44 per cent respectively over the past ten years, many of our indicators remain well below the national average.” (p.2)

So who has been minding the store in those departments and are they still there?

Against this backdrop, imagine how nebulous any claim to better “outcomes” is, or to the idea of “more from less”. The Way Forward commits “to address gaps in our system, strengthen existing programs and services” and to “improving health outcomes”. This is essentially rhetoric not a prescription for surgery on excessive spending.

Equally, a “Task Force”, “Collaboration”, and the commitment to “Modernize” in the case of the College of the North Atlantic all likely necessary offer no evidence of a government beset with a bond market breathing down its fiscal neck.

The glossy brochure did not even acknowledge the financial or economic implications of a doubling in the cost of electricity as if that event won’t have devastating effects on purchasing power and on the quality of life for thousands of people.

Rather than a “GPS” for a province in trouble, The Way Forward is another dust catcher. It will thrill only the faint of heart.

10 comments:

  1. Oh my. Just thinking about the deficit and accumulating debt makes me sick to the stomach. Things will only get worse with the crowd in power now. We are saddling our youth with a problem that may have no solution other than bankruptcy...unless radical steps are taken to cut spending. We need a leader who will start cutting spending and doesn't care about what anyone things about him or her...any home grown Donald Trump types out there?

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    1. Yes you have Danny Williams your own demagogue, remember?

      He got you into this mess! Want more of the same do you?

      Your prescription borders on masochism.

      Delete
  2. On the eve of his termination as Consumer Advocate, Tom Johnson filed his report on the Nfld Power Rate Application. He stated that both Nfld Power and Nfld Hydro had failed in their energy Conservation Plan. Johnson called for targets to be set, and customer incentives. While he was right on their failure of the Conservation Plan,his last minute conversion got no traction with the power companies or the PUB. And serious conservation and efficiency it is inconsistent with the boondoggle Muskrat, which Johnson endorsed. Furthermore, targets being set is little more than PR if there is no consequence to not meeting the targets.
    In Ontario, the Minister of Natural Resources issues a Mandate ordering the power companies to reduce Peak Demand on the system. Here we just keep buying more gas turbines and building boondoggles.
    Recently we lost our only ice cream manufacturer, with a loss of nearly 200 good paying jobs. I had wondered what role future energy costs here might play. For fish plants and ice cream making, freezing equipment use significant energy.
    This month issue of the Plumbing and HVAC magazine has a story dealing with industry`s need to use heat recovery opportunities. They highlight the story of heat recovery of processes like pasteurization in a diary. The photo shows the use of the state-of -the -art CO2 heatpump system recently installed in a dairy, which is justified despite having fairly long paybacks.
    If these measures are prudent for industry and Peak Damand reduction in other provinces, is it any wonder that we lose industry here when we are on the road to double our energy costs, and the necessity to increase our Peak electricity Demand to justify Muskrat.
    What genius is overseeing the fallout of high electricity costs for our industry and manufacturing here. Where has Ball addressed this in his WAY FORWARD. Seems rather backward. Impact on residential customers is one thing. Impact on business and industry is a double wammie.

    Winston Adams
    If these

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  3. I too have wondered how the 'Way Forward' trite addresses this issue. We have not yet scratched the surface of the misery we are facing. What sane businessman would want to pay the pending increased operating costs for electricity. His only solution - layoffs or move. The dire economic snowball picks up speed & people will cry for a pay rise to cope. And what about all those street lights? Will my property taxes increase on top of all the other taxes? Government here seems to think the taxpayer well is self filling. Fools.

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  4. We are doomed...

    There is no small irony that despite his nationalistic trite, Danny Williams greatest legacy will be implementing the unsustainable increases in government spending which will force us to go begging to Canada.

    DW was a disaster as a premier.

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  5. First, I am struck by the convoluted and impenetrable language/jargon used by the report's authors, as reported here and elsewhere. Second, there seems to be no adequate confrontation with the Muskrat Falls issue. If the project cannot be stopped, it has to be managed in such a way as to minimize its impact on the average consumer.

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    1. Seems the only way to minimise the impact on the average consumer is to actually stop the project: put it ON ICE as recently suggested on Uncle Gnarley. Then assess if even the transmission line is worthwhile, given the reduction in our energy needs going forward, and the cost of energy improvements for our housing to reduce energy needs further. If we have wasted 7 billion , why waste 15.

      Delete
    2. Well put Anon. Don't forget that if the spur fails it will be 15 billion (18 is more likely now) with nothing to show for it but Danny's monument high and dry and devastation downstream.

      Why Nalcor continues to be allowed a free hand without scrutiny is astounding given the stakes.

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  6. This is the creation of a handful of PR types with access to Tourism’s glossy photographs.

    You noticed, too?

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  7. Funny how the pics used in the document are of rural newfoundland, the same rural newfoundland the present and all past governments had a hand in destroying. Ironic...this document is just job creation for a bunch of ad executives. So sick of this place and our leaders. :(

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