“Another Way Forward” is a policy document recently released
by the NL Employers’ Council. It is a response by the province’s largest
business organization to our desperate fiscal crisis. It purports to contain suggestions
for a “better way forward” than the one released last year by the Ball Administration.
taxation on both business and individuals, cuts to government programs and
services, and a reduction in public sector employment by attrition.
dollars in spending and we would still have:
the largest spending per capita
the highest paid public service and
the highest spending on health and education of
any province in Atlantic Canada.”
document cites statistics from the Conference Board of Canada which makes
several assertions. Here are some:
Government could reduce spending by $1.1 billion
and we would still be the most expensive government in Atlantic Canada.
Wages in the core public sector are 28.6% higher in
NL than in the rest of Atlantic Canada.
Government spends more on sick leave than on road
Government could reduce health care spending by
$473 million and still have the highest per-capita health care spending in
$103.6 million in savings could be achieved by
reducing the number of educators and NL would still have the highest number of
educators per student in Atlantic Canada.
In 2014-15, per-student University spending in NL
was $8,360 higher than the Atlantic Canadian average.
by $1.1 billion by 2022.
well-intentioned; a good beginning. Indeed, notwithstanding our high-spending
ways, the average person might see the NLEC Plan as a fairly draconian recipe for
avoids a full discussion of the depth of the crisis and, hence, offers only an
incomplete remedy. The issue is important because some, including this Blogger,
believe that the provincial debt has already reached the tipping point of what
to finance our debt — including the shortfall in funding to keep the Muskrat Falls
project solvent — must be repaid from general revenues.
write-off of the asset to be funded via an asset sale (i.e. NL Hydro, offshore oil
related royalties, shares in CFLco), then the Plan is completely silent on the
$400 and $500 million, depending on whether you accept the Government’s or
PlanetNL’s figure (which, by the way, is supposed to accompany 17 cent per kWh
power and its associated impacts) — puts a big question mark on the whole NLEC effort.
Director, Richard Alexander, in the Q&A session with the media was the word
“bankruptcy”, confirming that that level of concern is actually uttered in some
business boardrooms, even if softly.
community, their behaviour around Muskrat being akin to mindless ‘boosterism’; the
group as a whole seemingly oblivious to the harm inherent in bad public policy.
In contrast to the St. John’s Board of Trade, the NLEC is far more expressive
of what thoughtful, constructive, skilful and rational people can contribute.
Alexander, whose public policy skills would have been pilfered by a smarter
government long ago.
some of the most profitable — corporations in the province. It is true that
they have been sounding alarm bells on the fiscal front for some years. But
they also possessed the intellectual and financial capacity (especially Fortis
Inc. and NL Power) to expose the risks of the Muskrat Falls project… and they didn’t,
knowing nevertheless that the Williams/Dunderdale Administrations were taking
us into an abyss.
it is important to note that any plan of austerity hurts not just those on the left
of the ideological spectrum with whom the business community is typically perceived
at odds, but it hurts those on the right and in the centre, too.
the economic analysis of the Canadian public policy group, “The Conference
Board of Canada”. Corporate Research Associates also conducted interesting
opinion research on the fallout from high taxation — though, to be frank, I found the questions
to be leading and therefore to artificially bolster the NLEC’s quest for lower
taxes. The full text of “Another Way
Forward” is found at this Link.
did not create the fiscal problem, its ‘tax and spend’ approach is not just
counterproductive but will inspire both companies and individuals to leave the
increased taxes and fees to citizens by nearly $900 million. At the same time
the government increased spending by $223 M.”
many people reacted poorly to the Ball government’s tax plan, and to that
extent they have value.
(above) are dissected based on age demographics, not surprisingly the younger
folk — the earners — indicate the greatest propensity to leave the province.
deficit reduction levy and the gas tax. There is a self-interest component,
too. It wants a reduction in corporate income tax and the payroll tax. The hit to
government from those tax reductions is estimated at $322 million which the
group proposes would be implemented by the third year of a four-year strategy.
NLEC’s bugaboo. While no one likes
taxes, especially when they are a comparatively higher than in most other
jurisdictions, they are hardly a new experience in this province.
and businesses may vote with their feet, I find that the emphasis on taxation
constitutes a weakness in the NLEC’s alternative plan and undercuts the urgency
of the fiscal crisis — something no one should toy with at this late date.
we owe must be repaid, tax cuts on the scale NLEC that proposes will not be
possible — certainly not without a major asset sale and possibly not even then,
given the uncertainty of the market value of some of those assets — and the
public should be ready to fight any such attempt anyway.
Every group claims that they are essential to attract business and investment.
But no group — including NLEC — has shown which businesses, prior to Cathy
Bennett’s 2016-17 tax package, were attracted to this province over the past
decade, except by the feeding frenzy of a megaproject environment.
like those far more diversified. The implication is that their success is due
to a low-tax strategy, an argument having dubious underpinnings.
economy of Ireland when demographic and geographic factors are considered? Admittedly,
the case is hard to prove, but it is incumbent on the NLEC to show that cuts in
spending — in order to facilitate tax reductions — will not chew away at the
“bone” of NL society as opposed to just the “fat” of the bureaucracy and
whatever government touches.
offer testimony to the pervasiveness of our fiscal condition — especially the
lack of spending discipline. The next six Exhibits from the NLEC document tell their
own convincing story:
distorted by a megaproject environment overlain by a decade of unbridled
government spending, low interest rates, a lack of political leadership and the
expectation that OPEC, not local restraint or common sense, will continue to finance
(as JM characterized them) our ‘drunken sailors’.
that will “make Newfoundland & Labrador the most attractive place to live,
work and do business in Atlantic Canada.”
successive governments and Muskrat Falls have run down the clock on our ability
to keep on borrowing.
reference to the amount borrowed annually for capital account – borrowing for which is “rolled over” without regard for the lifespan of the assets financed.
make clear if its numbers reflect several years of forecast reduction in GDP. It
notes the Government’s reliance on high prices for oil, but it makes no
accommodation should those prices reverse their modest upward trend. It
acknowledges that debt servicing exceeds what we spend on education but it
fails to show how, in a low inflation environment, we can pay down the debt in
order to get those interest costs down.
to shock a tender public; that by giving emphasis to a combined plan of tax
reductions and cuts to public sector jobs they would have a better chance of
gaining public support for their ‘less spending, less taxation’ initiative.
we explain to the public the dire state of our fiscal crisis?
along with the cost of “rate mitigation” — a figure of around $2 billion is
appropriate for the chopping block. No one wants to contemplate the human cost
associated with a problem of this proportion, but the number should, at least,
give focus to how badly people have been misled.
proposal — and there are many — should not be dumped because the plan has shortcomings.
such a serious attempt to address the issue as has “Another Way Forward”: not
Memorial University, not NAPE or CUPE — the latter awaiting more
‘unsustainable’ wage improvements from a government lacking the spine to say
governance has run the gamut from looney to corrupt. The public deserves to be
told of the predicament, else there will be no urgency for change.
and evidence of one organization’s capacity to tell truth to power.
How can the Plan be improved?
One hint: the NL Employers’ Council – as do others – needs to address the culpability of the Federal Government in the creation of the Muskrat Falls mess. Ultimately responsible are Williams, Dunderdale and senior executives of Nalcor. But only those who have stayed tuned out from the beginning will deny a federal role in the debacle.