The Premier’s Speech: From Triumphalism to Despair

McLeod, Telegram Reporter, diligently recorded and transcribed the Premier’s
Remarks to the delegates at the P.C. Convention in Gander on the morning of
October 13, 2012.  It was an important
speech, dealing with, among other issues, the fiscal situation of the Province.    

The Premier was
obviously troubled by the Province’s diminished financial position, a realization
brought on by oil prices that are more inclined to the $100 mark than to the
$124.12 per barrel ‘Budget plug’ her Finance Minister’s used last March.  With one third of Provincial revenues dependent
on the higher number, the Minister’s forecast deficit, this year, of $258.4
million is likely to grow, by the Premier’s own reckoning, to $600-700 million and
$1 billion next year.

interrupting production on the Terra Nova and White Rose platforms, was known
at the time the Budget was delivered. The date for the end of offset payments
under the Atlantic Accord, a reduction in annual revenue of $536.1 million in
2012-13 and beyond, has been known since the deal was struck in the 1980s. 

What did the Premier say in her Speech?  This is one excerpt:

“Let me
tell you, we’re spending too much money…. We are. And we’ve got to get a handle
on it. …Do you know that in Newfoundland and Labrador, we spend almost $5,000
per person more than any other province in Canada in providing services to the
people of Newfoundland and Labrador. 
Four thousand seven hundred dollars more”.    

McLeod, Telegram Reporter commented on the Premier’s next volley.  Remarked, McLeod: “She also said that oil
revenue has led to citizens being cavalier about government spending, because
the funding isn’t coming out of their own pockets”.  Said the Premier:

“We want to keep taxes low. We want people to drive money
back into the economy, but I’m going to tell you a startling fact now, because
there’s a downside to that. When people don’t pay a whole lot of income tax and
so on, then sometimes you can get a little benign about your advice to
government. Yes, give ‘em a higher raise. Yes, build that. Yes do that. Yes,
yes, yes, yes. And you’re easily able to say yes because there’s no direct
consequence to you. If your taxes had to come out of the pocket to pay for it,
then maybe we would have a little more sober reflection about some of the things
we’re doing”.

These are sober
thoughts.  Problem is, I don’t get the
impression she is blaming herself.  Nor
is the Premier ready with a course of action. 
Let me add some context here:

Government of Danny Williams ratcheted up both capital and operating
expenditures in a significant way in 2003 and it has gone on unabated since
then, even under Dunderdale.

debt of the Province, is $10.8 billion (including the pension deficit); the third
highest per capita provincial debt in Canada, after Quebec and Ontario.

provincial public service is bloated; in the absence of any meaningful
population growth, positions have grown by an average 3.8% annually for most of
the period since 2003.

budgeted expenditures always at the margin of affordability, any hiccup in oil
production or prices, results in greater deficit financing (borrowing).

of Muskrat Falls will require that the Government raise roughly $3 billion for its
equity share of project financing.

cost overruns will add to the provincial debt. 
MF cost overruns could be significant, if other mega projects serve as
meaningful benchmarks, as I believe they do.

It is one
thing to craft Budgets that require government to operate at the margin, as
Williams/Dunderdale have done, but ‘you can’t have your cake and eat it too’.

If Dunderdale
is determined to proceed with MF, simple prudence should dictate an approach to
spending that creates ‘fiscal room’, allowing Government to play defense in the
event the project does not go entirely as planned. 

Choices should
have been made both on the capital side and on the operating side of the
Budget. Of course, the Finance Minister would not have been permitted to use his
favourite dart to forecast oil prices, nor would the Premier be able to say
“yes, yes, yes, yes” (as she allowed in her remarks) every time some group or
some community demanded that their infrastructure deficit be sated. And, yes,
the last general election might have been slightly less of a cake walk, as a

Now, the
Government is in a tight spot.  If it is
to dodge the fiscal bullet that awaits them, not just at Muskrat Falls but
right now, as a result of unbridled government spending, the time for action is

Indeed, timely
decisions were required at least three or four years ago. Yes, the Province had
an ‘infrastructural’ deficit, roads and bridges were in a poor state of repair;
but, with offshore oil revenues, it had the ability to correct that problem
without causing a ‘structural’ deficit, without bloating the bureaucracy.  It had choices.  It simply lacked the political will to control
expectations or to make sensible decisions.   

Now the
Premier, in mortal fear of backtracking on MF, refuses to be mindful of the
cliff edge to which she is heading; she is determined to proceed with sanction
and to play along the margins.  Trouble
is, play there too long without a parachute, she may just fall off, taking the
Province with her.  And, fiscal
discipline is a good parachute.

When oil is
the only potion, it is tough to rely on magic. Like Ron Weasley in Harry
Potter, the Premier’s well used wand no longer elicits the desired result, no
matter how good her intentions.

The next
part of the Premier’s Speech runs the gamut, from triumphalism (things are great and they can only get better) to despair (could all this fun possibly be be over).   Added the Premier (underlining is mine):

“We had an interesting time in government
during the last two years, and I’m really proud of our record. We continue our
tremendous investment in infrastructure in this place, almost a billion dollars
a year, year-over-year-over-year, we’ve invested almost $9 billion in
infrastructure since 2003, in roads, in schools, in hospitals, in aquaculture,
in the economy. It has been absolutely tremendous and you can see that
investment. We went through a recession and we hardly felt the bump in
Newfoundland and Labrador. The world remains so unstable economically;
everybody is waiting for the other shoe to drop. We need to pay attention to
that. There’s only half a million of us in this place but we earn over 30 per
cent of our revenue from commodities….”

As I continued to read the
Remarks, which James McLeod had patiently transcribed, I had hoped that the Premier
might take some responsibility for the state of affairs in which she had a hand,
that she might set out a prescription for getting the Province’s finances back
on track; that she might propose, silly me, that Muskrat Falls be placed on
hiatus subject to further public review, lest it, and her high spending ways,
send us to the poor house.

Alas, the Premier was harbouring
no such thoughts.        

In such circumstances, a famous
quote from the 19th century, French politician, Alexandre Auguste
Ledru-Rollin might be invoked: “There goes my people. I must follow them, for I
am their leader.”

Des Sullivan
Des Sullivan
St. John's, Newfoundland and Labrador, Canada Uncle Gnarley is hosted by Des Sullivan, of St. John's. He is a businessman engaged over three decades in real estate management and development companies and in retail. He is currently a Director of Dorset Investments Limited and Donovan Holdings Limited. During his early career he served as Executive Assistant to Premier's Frank D. Moores (1975-1979) and Brian Peckford (1979-1985). He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB). Uncle Gnarley appears on the masthead representing serious and unambiguous positions on NL politics and public policy. Uncle Gnarley is a fiscal conservative possessing distinctly liberal values and a non-partisan persusasion. Those values and opinions underlie this writer's views on NL's politics, economy and society. Uncle Gnarley publishes Monday mornings and more often when events warrant.


Bill left public life shortly after the signing of the Atlantic Accord and became a member of the Court of Appeal until his retirement in 2003. During his time on the court he was involved in a number of successful appeals which overturned wrongful convictions, for which he was recognized by Innocence Canada. Bill had a special place in his heart for the underdog.

Churchill Falls Explainer (Coles Notes version)

If CFLCo is required to maximize its profit, then CFLCo should sell its electricity to the highest bidder(s) on the most advantageous terms available.


This is the most important set of negotiations we have engaged in since the Atlantic Accord and Hibernia. Despite being a small jurisdiction we proved to be smart and nimble enough to negotiate good deals on both. They have stood the test of time and have resulted in billions of dollars in royalties and created an industry which represents over a quarter of our economy. Will we prove to be smart and nimble enough to do the same with the Upper Churchill?


  1. Wonderful article, and great finish. And so appropriate. Most people are confused about MF and fear rationing of power, as the Premier has often stated. At present , without full airing by the PUB, most think the risk is ok.So the Premier could say"there goes my people, I must follow them, for I am their leader" So sad. So stupid. W.A.