Guest Post by Ron Penney

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.

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

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.

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.

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.

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.)

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

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. 

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.

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.

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.

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.

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

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.

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.

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

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.

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.

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

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

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!

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

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

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.

we have an election based on an illusion.

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

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.

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?