The
Government’s first Budget, one entitled “Restoring Fiscal Confidence and
Accountability” will do nothing of the kind. It is, in brief,
something akin to a “sick joke”; except the April “fools” are the ones the public just
elected.
This is a
Budget which the Liberal Government’s PR builders assured would reflect the
beginning of some political leadership, absent so far; the kind that would rectify Tory incompetence.
What the
province got, instead, was the blunt artistry of a clique of deceivers.
The
Government has confirmed, again, Nalcor CEO Ed Martin is firmly in charge.
It takes no
great mind to figure out the singular agenda of Finance Minister Cathy Bennett,
even if it is lost on union leaders of NAPE and CUPE, that the Province took a very retrogressive step, yesterday. Instead of stepping back, this Liberal
Government has actually advanced our collective march over a very steep fiscal cliff.
Let’s begin
here:
-
There
was no progress made on the deficit
-
Operating
and borrowing expenses have actually increased, not decreased, from almost $8.1 billion to
$8.5 billion.
-
Government
went deep into the pockets of taxpayers, reportedly to the
tune of around $3,000 annually; higher for others.
-
Nalcor
gets $1.3 billion (after getting $760 million in 2015/16); the new sum is the
equivalent of the total tax grab estimated at $863 million plus another half
billion
dollars.
-
This $1.3 billion is added to the $1.8 billion operating deficit, and to $570 million
for
Capital Account; all of which will have to be borrowed.
The
Government has to be absolutely stark raving mad!
Possibly, the
public will come to that conclusion, too.
Still, taking
those Budget outcomes on their face isn’t enough; the public needs to know
their implications beyond the immediate loss of the purchasing power they will
suffer from higher taxation.
Let’s take a
short walk, not through what the hundred or so PR people have written, but through the fiscal realty
behind the Government’s numbers and how those decisions, likely, got made.
It is a picture
that starts as a $1.3 billion “ransom note”, in the form of a demand to the
Government, from Nalcor.
The timing was
not accidental. The Nalcor CEO, seeing hundreds of millions of dollars melting
like a June snow, in Goose Bay, the Muskrat Falls project near broke, and with Astaldi ordering plane tickets to Milan, Martin would have painted a stark image for the
Premier. It would have contained plane loads of workers returning to the Island, hundreds of pissed-off
contractors, some of them Liberal donors, a government on the hook for hundreds
of millions, a Federal Loan Guarantee in jeopardy; then there’s Nova Scotia…
Martin would
have laid it on thick. The Premier is no match for him!
That is why the
script that the Minister of Natural Resources blurted out on Tuesday, was so
disjointed. Siobhan Coady, in the rush, forgot (or didn’t know any
better), that Ball’s decision ought to have been linked to the $1.6 million EY
Interim Report.
Coady could
only remember the threat to contractors, and our commitment of cheap power
to Nova Scotia.
It
didn’t matter. By then, Ed Martin had the assurance of the $1.3 billion, anyway.
Now, for Part II.
Likely, the
reader is not aware how Budgets are created. Indeed, why would they be familiar
with such an obscure process, especially how specific decisions get made?
You will
recall, however, the Finance Minister’s reference to Cabinet’s involvement;
“line by line”.
Bennett was
confirming Cabinet’s singular involvement. Historically, proposals for Budget
expenditure reductions go to Cabinet for approval. In contrast, revenue generation measures do not.
That
is because those decisions may have a bearing on companies listed on the stock exchange, and for reasons relating to “leaks” and
confidentially.
Hence, revenue decisions are made almost exclusively between the Finance Minister and the Premier.
Hence, revenue decisions are made almost exclusively between the Finance Minister and the Premier.
Notwithstanding any “line-by-line” diligence they might have contributed, the Cabinet gave little to the Minister in
terms of expenditure cuts. The facts are easily summarized:
- The
current account deficit, again, is unsustainable at $1.8 billion.
-
450
positions outside, and 200 positions within the “core” public service, have
been
eliminated – not people – but positions, some currently unfilled; a rounding
error in
relation to the public service “bloat”, which has been created since
2007.
-
The
Capital or infrastructure Account, is $570 million even though the historical
average, prior to 2007 and oil fever, is around $300 million. So,
infrastructure, is still
double the historical norm.
-
Heath
and Education which, combined, represents 70% of spending on operations,
was
virtually untouched; the few cuts minor relative to the size of the budget for
those
services.
-
The
“Sunshine List” comprising all the people living off the public teat, earning
$100,000 to $800,000 annually, the ones with political clout, who work in and
meet in
the same circles as those of influence, are untouched; there are no
wage reductions,
virtually no job losses.
The overpaid and the bloat remain.
Do those decisions not seem peculiar to you, in a time of fiscal crisis?
Do those decisions not seem peculiar to you, in a time of fiscal crisis?
There is only
one conclusion; one that seems to exist whether due to, or in spite of, its newness: this Government is in a state of chaos!
Even as the Province’s bankers threaten to turn off the
money supply, the Premier was unable to achieve consensus over virtually any
expenditure reductions!
The Cabinet,
uncooperative, is signifying the Premier carries far less weight than their
commitment to his election promises.
Ball is a ditherer. Cabinet Ministers know he pales at any hint of disagreement.
But, there is a
bigger elephant in the room; one not nearly as expendable as the Premier. That’s the bond rating agencies.
They represent
the lenders; the very people on whom borrowing for Muskrat Falls, and deficit
financing, depends. The Premier understands that much.
This dilemma takes us to Part III of
the saga unfolding inside the new Government.
The Premier,
having capitulated and agreed to pay the $1.3 billion “ransom” to Nalcor, and finding
himself with a Cabinet unwilling to take the political “heat” for Tory
malfeasance, is left to consider his options.
There aren’t
many. In fact, there is only one: sock it to the taxpayers.
And that is
exactly what the Premier did: a gas tax increase of 16.5 cents per litre, a “temporary”
deficit reduction levy (aka the Muskrat Falls Tax), 2% increase in the HST,
and a veritable register of hundreds of additional taxes and levies; all adding up
to $860 million.
But, the
Premier and his Finance Minister had a problem. $860 million was not enough for the lending agencies, when an equivalent
sum, plus another half billion, had gone to Nalcor.
Ball had to
offer the lenders more.
His solution was simply to buy time to get Cabinet on side; offer the Lenders a “supplemental” Budget later this year, when cuts could be made without Nalcor in the room. Promise them something, next year, too. Make it a problem for, yet, another day.
His solution was simply to buy time to get Cabinet on side; offer the Lenders a “supplemental” Budget later this year, when cuts could be made without Nalcor in the room. Promise them something, next year, too. Make it a problem for, yet, another day.
As a result, what the Finance Minister delivered, yesterday, was harsh. Very harsh. Rather than tackling the fiscal crisis, Bennett has only made it worse:
The
financial impact of all those taxes has been equated with an annual cost of
$3,000 for an “average” family; for some, the cost will be even higher.
What the public
has to digest is that this financial “hit” is just a beginning. It is not the
end. It is not even the beginning of the end.
Before it is too late, the public needs to ask: how much more can we take. Will I have to pay another $3,000 in taxes this Fall? On top of all those additional taxes, how deep will public services be cut? Those questions might now get asked.
Before it is too late, the public needs to ask: how much more can we take. Will I have to pay another $3,000 in taxes this Fall? On top of all those additional taxes, how deep will public services be cut? Those questions might now get asked.
Yet, Ed Martin, having gotten another $1.3 billion, will state with even greater authority, next year, 'there can be no going back, the province has too much into Muskrat'.
So, the public is stuck between a rock and a hard place; first, by a Government held
to ransom, by an incompetent and out-of-control Crown Corporation; second, by a dithering Premier, and a Government out of touch with realty.
They cannot even count on an elected Opposition to represent them, the Tories having created the problem, and the NDP too small and ineffectual.
They cannot even count on an elected Opposition to represent them, the Tories having created the problem, and the NDP too small and ineffectual.
The public
can take this fiscal assault and do nothing, in which case they will have signed on for more.
Or, they can draw
a line in the sand by taking one single large step:
The public needs to tell the Premier to fire his Finance Minister and to craft a new Budget.
Else, we will all be broke.
The public needs to tell the Premier to fire his Finance Minister and to craft a new Budget.
Else, we will all be broke.