GNL LOST IN PUBLIC POLICY WILDERNESS

The Furey Administration’s decision to cut $20 million from funding for offshore seismic surveying, a program ostensibly intended to enhance bidding for explorations rights in the offshore oil sector, is the right one. Unfortunately, the decision is a pause rather than a cancellation.

The distinction is self-evident, but at issue is that the Government of Newfoundland and Labrador really hasn’t spent five minutes on the broader public policy questions of how best to pare the expenses of the Government in pursuit of the balanced budget objective described in the PERT Report.

Cancellation, rather than pause, should have been an easy decision in this case, because more objective industry players, which do not include either OILco or NOIA, will remind that majors and supermajors - Suncor, Equinor, ExxonMobil, Chevron and others - are cash rich again, and more than capable of performing their own seismic programs. Global oil prices are replenishing their coffers, enabling them to pay down debt, buy back shares, and in some cases, double the dividends to their shareholders.

This issue should be viewed in conjunction with Government’s recent referral to the banking firm of Rothschild of an unconfirmed number of assets for valuation. Together, the decisions confirm that provincial public policy remains a haphazard, ill-defined, even kneejerk process.

Some would argue that the Government deserves some slack in its approach, that they have good intentions but lack the skills to prepare or misunderstand the benefits of a more transparent path of public policy execution.  If Furey was using his truncated approach to deal with the fiscal crisis, that would be another reason to reserve judgment on his Administration’s intentions. But anyone who saw CBC reporter Peter Cowan’s interview with the Premier, “Here and Now” 7 January 2022, would have heard the Premier say that he has always said that “it is going to take five to ten years to get out of the position we are in.” If that is the case, he has concluded that he is dealing with an unacceptable trend, not a fiscal crisis. That is inconsistent not just with the spending practices of the last decade, but with the reasons he employed Moya Greene and established PERT.

Nevertheless, if his thesis is the correct one — the urgency for swift action no longer a factor — this only bolsters the rationale for why the public should now be witness to a government-wide policy and program review.

In other words, the public should now be witnessing not the employment of an appraiser, but the analysis of a Government that has thought through the public policy implications of program changes and asset divestitures.

That is not the same as saying that some of the potential asset sales aren’t prudent or that the Government should not seek advice on how to proceed. Rather, the public interest dictates that they have a right to understand any fallout from those decisions, positive and negative, most especially if large asset sales — like Bay d’Espoir or the Upper Churchill — are being contemplated. That is the basis of transparent democratic government.

Any smaller asset sales, such as those mentioned in the Finance Minister’s release (namely the liquor corporation, registries, and the Marble Mountain ski resort), require a similar focus for very good reasons — before they reach some valuation consultancy. 

If the Premier and his Ministers believe that there are no implications worth communicating, I suggest that they are in the wrong business.

Consider: Are there any implications for western Newfoundland’s tourism economy if Marble Mountain is transferred to private hands? Is Government prepared to sell the asset to the highest bidder notwithstanding the winner’s financial capacity to absorb possibly large and long-term losses? Can the tourism sector afford Marble’s closure if that is a consequence of the divestiture?

Are there no public policy implications for the sale of registries either? No issues of privacy? No considerations of oversight?

How about the public policy issues related to the sale of the Liquor Corporation?

What is the future of the Corporation’s dispensation and management of liquor licences and the shape of continued tax revenues? Is Government giving up only the retail platform while maintaining the wholesale and warehousing components? What of the manufacturing/bottling side of the operation and the jobs that go with it? Will an entity strictly engaged in retailing be permitted to close any tangly bits on which they lack expertise? If the whole enchilada is privatized, what is the relationship of a private operator and the Agency stores located in rural NL?

All those questions contain a public policy component, and they affect not only the terms of any sale but the valuation of the asset on offer, especially if Government chooses to retain certain parts of them or attempts to hold particular elements of control. None are particularly insurmountable in a public interest context. However, each question contains implications which the public has a right to know now, not after the assets are sold.

Rothschild should not be making any of those decisions; that is the role of Government. That is why the referral to Rothschild is premature.

What of the returns from those asset sales, the small ones like the Liquor Corporation, or larger ones, like our hydro assets? Will they be used to draw down the huge public debt? Or will Government continue to spend $2–3 billion annually in excess of revenue, making the process a charade that will render the province worse off in the future?   

The Premier claims that the deficit has been reduced to $596 million. The figure is, at best, fanciful. His Finance Minister has never explained why the last Budget indicated a “cash” deficit of $1.66 billion which was twice the amount Government reports on an “accrual” basis! Neither this, nor the lower deficit figure claimed by the Premier, reflect borrowing for the Capital (infrastructure) Account, the near-term impact of huge spending on Public-Private Partnerships (P3s) or the shortfall in revenue necessary to sustain Muskrat Falls financing and operating costs, even after Federal “rate mitigation” assistance is accounted for.

As you can see, it is tough to cut the Government slack when it continues to misrepresent the province’s true fiscal position. And chooses a boorish approach to public policy.

An informed public makes better choices, even if the result is push-back and protest.

A Government that misleads will not be capable of controlling or curing their whiplash when, inevitably, reality’s outcome starts to bite.