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| John Meaney: Rant N' Roar |
A few weeks
ago, the Minister of Finance threw out a forecast deficit of $1.6 billion. In the end, the Budget recorded a deficit
of $564 million.
The Budget
numbers are one thing, but the question most people want answered is: has the
Government reclaimed control over spending now that per capita expenditures have reached 150% of the Canadian average? Have we
backed away from the fiscal cliff? Is
the “10 year Sustainability Plan” a “fix” for bad budgetary behavior? Government Program Spending has increased by 75%, growing from $3.8 billion in 2003-04 to $6.6 billion in 2012-13. It also reflects a huge revenue increase (82% in the same period) much of it associated with high world oil prices. Program spending has far outstripped the CPI (20.4%) or the rate of inflation. Yet, this “austerity” Budget avoided a decrease in spending; spending actually increased by $138 million.
Though nearly
1200 public service positions were eliminated, the savings were insufficient to
prevent another $876 million from being added to the unfunded pension and post
retirements benefits liability. That account
is in deficit a total of $6.5 billion, now the largest slice of the public debt.
In place of
really dealing with the deficit, as promised, the Minister set out to find, not
new, but more generous revenue sources. Higher oil production figures, HST revenues an unexpected
increase in mining revenues, altogether, amounted to $700 million. Hence, the lower deficit figure is the result
of revenue improvements (66%) and cutbacks (34%).¹
The
inescapable conclusion is that, even in the face of axing so many jobs, the
Government has hardly made a dent in a decade old habit of overspending. The problem is clearly huge. Bigger, perhaps, than it realizes.
A couple of
other points are noteworthy.
The former
Minister of Finance squandered a full year, following the election, during
which program assessment and review could have been undertaken. Tom Marshall had no problem boasting the
ability to spend but, when it came time to pare, he couldn’t take the heat
leadership demands.
That may explain
why the cuts to personnel appear uneven. Cutting public servants and programs
is demanding work even for the Minister who took the Muskrat Falls Project all
the way to sanction without having a clue as to why it should be built.
Streamlining the public service can’t be accomplished overnight. One would have to question, for
example, a 50% cut in Sheriff’s Officers. Is it possible one office could be so over-staffed? The figure raises a lot of questions.
In
addition, notwithstanding the revised oil production number, the Government uses $105 oil/barrel based upon it consultants’ “forecast” (the Government
took pains to describe the challenges of pricing crude). A commodity so volatile, should be discounted
by a figure of, at least, 15-25% for budgeting purposes. The discount ought to be part of a plan to secure
protection from both oil price and related currency fluctuation issues (oil is
priced in $U.S). If the average oil price
comes in higher, in one year, the excess revenue can be placed in a ‘volatility’
fund and applied against a shortfall, in subsequent years, when the news is
not so great. The same safe guard
against oil production uncertainty should also be employed. Instead, the Minister used the most
optimistic number he could extract from the new political appointments at the C-NLOPB. The influence of Dr. Locke seems is not in evidence, though with a little adjustment of accent, the Premier will be pleased with her new admirer, even if the new Doctor is not from Latvia.
Has the
Government achieved control over-public spending?
This Budget
has all the earmarks of a round of belt-tightening, where Deputy Ministers
conceded little. Government has yet to figure out how to incentivize them to
“manage” rather than to “administer”.
Have we
backed away from the fiscal cliff? Absolutely not.
What about
the “10 year Sustainability Plan”. It is
a fine document for its general analysis of Government revenues and expenditures and for the statistics. But, little else. It was a better document before the Premier`s
Communications staff hacked at it, with "spin".
Still, it is not a Sustainability Plan. At best, it is a statement of intent. The "Plan" requires separate comment, though I will note one of its chief shortcomings.
The
Government has been on a spending spree, since 2005. Ministers have no experience making the tough
decisions essential in an economy, like ours, where the economic challenges
range from negligible population growth, under-populated communities with
expensive needs, the lack of scale economies and a narrow economic base. A
place like this needs courageous and skillful politicians. They need the
backbone to say “No”.
After a
single Budget, in which the word “austerity” was used, but not applied, it is
difficult to take the Government seriously.
A sensible Minister, one whose return to the Department is measured only
in months, ought to have known, that for a Plan to be credible, its Sponsor
needs a track record.
The
Minister of Finance needs a couple of years, as a minimum, to set out
sensible budget principles, establish targets, show how they can be
achieved and ultimately confirm the essential proof that he can be successful; then, and
only then, might the public's attention to a “Plan” be warranted. He might have profited from What The Premier Must Do. A Budget Primer (Part I) and Part II.
As it
stands, the Minister projects two more years of deficits, until 2015. It should be lost on no one that these years
represent the period when local employment numbers will be at their best, when
all taxes, especially HST, will reach a high point. The Government is forecasting balanced
budgets as construction on Vale ends and Hebron and Muskrat are in decline. The
Government wants us to subscribe to “faith based math”. I ain’t buyin’.
One
reassuring line in the Budget Speech has the Minister counseling that you
should “not borrow to pay for day-to-day expenses and send the bill to your
children down the line”.
If you are looking for certainty in this Budget, you can find it under health care. Even more money is needed; mostly, in the area of amnesia.
¹ Securing the Future A 10-Year Sustainability Plan for Newfoundland and Labrador
