Monday, 8 February 2021


 Guest Post by Ron Penney

In my recent guest blog, the Timing of the Next Provincial Election, I urged Premier Furey to await Dame Moya Greene’s interim report, due at the end of February, and her final report due at the of April, before calling an election. 

Not surprisingly, that advice was ignored and the resulting campaign is exactly what I had worried about. One conducted in total denial of the reality of our situation. 

As former Premier Smallwood used to say, “the first job of a politician is to get elected, the second job of a politician is to get elected, and the third job of a politician is to get elected.” You get the point. 

Premier Furey, while a political novice, has taken this to heart, with advice no doubt from a certain former Premier considerably more experienced than him in running successful campaigns. 

As a result, the election campaign has been fought on the wrong premise, which is that we have pots of money to spend on new programs and projects, when the truth is we are facing financial ruin, exacerbated by the imminent doubling of electricity rates arising from the completion of the Muskrat Falls project, perhaps at the end of this year. 

When Premier Furey appointed Dame Moya Greene to examine our fiscal plight, supported by an advisory group, I thought it was a good idea.  (As I pointed out in my last blog, it is her report, not a committee report, which is an unusual approach.) 

But in order for this to work the Premier needed to demonstrate to us that he was seized with the problem, that he understood it, and that he would immediately show us by his actions and policies that we had to start to exercise restraint. As an extremely popular leader with a high approval ratings he could have done that without likely effecting his electoral prospects but instead he chose the age old tactic of buying us with our own money or, more correctly, buying us with someone else’s money, since all new expenditures will have to come from borrowed money. 

Ron Penney
So, for example, there have been a flurry of new expensive programs, such as $25 daycare, an unnecessary PET scanner in Corner Brook, and 4% wage increases in recent collective agreements. The latter will cost an additional $140 million a year, which we also don’t have and will have to borrow. 

As the old adage says, “if you find yourself in a hole, stop digging”, meaning that if you are in an untenable situation it is best not to take measures to exacerbate it. 

It is something most of us understand in our personal lives but fail to recognize in our collective lives, which is where responsible politicians should come in. 

Having the election now, in the absence of the Greene report with irresponsible public expenditures, and promises, has had an insidious effect on the other political parties as they strive to match and surpass the promises of the incumbents. 

The best example is the Corner Brook PET scanner where the donation of $2 million to the Western Memorial Hospital is surpassed by the PC promise to fund the entire cost, even though we are told that one PET scanner is sufficient for a population of one million. 

I may be naive but surely if the people of the west coast were in possession of the facts about our dire fiscal straits they would recognize it is a promise that can’t be honored. I say that knowing full well that there is great resentment of what is perceived to be favoritism to St. John’s, not without cause. 

We have also embraced the latest fad of private partnerships to build public works, such as the new hospital in Corner Brook and mental hospital in St. John’s. While we avoid borrowing up front to build those new and costly facilities, there will be annual costs paid to the private partners to compensate them for their investment, which will further add to our deficit once those projects are completed. 

So we are having an election without paying any attention to the elephant in the room,  which is our unsustainable structural deficit, approaching  $1 billion dollars a year, a net debt of over $16 billion, which doesn’t include the $5 billion, and counting, we have borrowed to pay for our “equity” in Muskrat Falls, and our debt ratio to GDP of 55.7 %, the highest in the country. 

This is all before we figure out how to pay for the $7.9 billion we have borrowed for Muskrat Falls. 

The Liberal Party Platform ignores our fiscal problems as do the platforms of the other political parties, one of which, that of the NDP, has no cost estimates at all. Both the Liberal and PC Platforms will add tens of millions of dollars to our annual deficit, which we will also have to borrow. 

At some point, probably sooner rather than later, our credit rating will reduce our debt to junk bond status and interest rates will go higher, assuming there is still someone foolish enough to lend us the money. 

The Leader of the Progressive Conservative Party has raised the specter of bankruptcy, no doubt following the J. Paul Getty saying “if you owe the bank $100 it’s your problem, if you owe the bank $100 million that’s the banks problem.” There may be some truth in this but our problem is that we don’t just have one problem, we have two, our structural deficit and our Muskrat Falls problem. I very much doubt that the federal government will look after both of those problems for us. We will have to fix our fiscal situation ourselves and use the federal loan guarantee to fix Muskrat Falls. The Government of Canada is complicit in Muskrat Falls but we have created our fiscal problem by ourselves. 

For those of you who are interested in a more detailed analysis of our fiscal situation compared to other provinces I refer you to the recent report of the C.D. Howe Institute entitled The Rock in a Hard Place: The Difficult Fiscal Challenges Facing Newfoundland and Labrador

One of the most remarkable pieces of information coming out of this analysis is that had we kept our rate of increases in public expenditures to the average of the Maritime provinces we would have accumulated a fund of $10 billion!

Some will reject the work of a right leaning publication but the authors are only repeating the message of our own AG and the Parliamentary Budget Office of Canada.

We have been profligate, having the highest per capita revenues in Canada but with the highest per capita expenditures.

The right and principled approach would have been to await the Greene Report and had an election based on the reality of our situation with our choice been based on the response of our political parties to the report.

Instead we have an election based on an illusion.

But the jig is nearly up and an already bad situation made worse by an unnecessary election called too early. Political opportunism at its worse.

I’m torn as to what to do. If we had a provision in our Elections Act that in order for an election to be valid over half of eligible voters would have to vote I would be tempted not to vote at all, the first time ever since I’ve been eligible to vote. But we don’t, so I will trudge to the polling station on Election Day yet again, in the forlorn hope that we will eventually get a politician who will tell us the truth and act accordingly.