The fiscal management of Canadian Premiers was recently reported in a publication dated January 23, 2025 titled “Measuring the Fiscal Performance of Canada’s Premiers, 2025” (Fraser Institute).
It makes for interesting reading and would explain much of this Province’s motivation for the disastrous Churchill Falls MOU. The Fraser Institute studied the recent spending, taxes and debt of each of the provinces and ranks Newfoundland and Labrador’s Premier as the worst by far in the country. In fact, Furey is the only Premier to receive an overall failing score of under 35 out of 100. The next worst province was BC Premier EBY at 54. Even Quebec Premier Legault managed to pass with a score of 54.
One may ask, what does a poor failing record on high government spending, high taxes, and high deficit and debt performance have to do with the MOU? It is no secret that the Furey administration has been spending extravagantly and piling up debt. In fact, since taking office in August 2020, the Furey administration has accumulated more debt than any other Premier in our history, a staggering $8.7 billion. Borrowing has averaged over $2 billion/year. As was explained in the blog post entitled “MOU, the Mystery of 5.9 and the 1969 Contract“, the recent MOU is also all about more debt. The difference is that this new debt will all be underwritten by Hydro-Quebec and will carry enormous costs to our people.
The MOU extends the 1969 contract for Hydro-Quebec. The funds Hydro-Quebec advances to NL starting this year which extend to August 31, 2041 are all borrowed money. The funds are all repaid dollar for dollar under the MOU (the analysis that proves this was included in The January 17th post) in each of the years following 2041. Hydro-Quebec maintained their 0.2 cent/kWh until August 2041. In addition, Hydro-Quebec continues its access to Churchill Falls power at a significant subsidy from NLers beyond 2041 through to the end of the new fixed contract, to 2075. The Furey government is in effect taking much of the future value from the resource to spend in the interim. While our Government presents a story that it will use some of the advanced funds to pay down debt this is clearly not logical. The borrowing cost from HQ will be much higher than the interest cost on regular government debt – 5.8%+ from HQ versus about 3.4% on average for the $8.7 billion the Furey government has borrowed over the past four years. The conclusion being that it would save NLers much more if the Government took less advances from Hydro-Quebec because the interest cost will be much lower.
The MOU is really no different than if the Furey administration were to negotiate advances from Exxon Mobil for oil. They could get advances on oil royalties for the next period of years and agree to lessen the royalties in the future to repay Exxon Mobil, with interest. The MOU is exactly that, it is borrowing the value of the resource to spend and use today and deprive those in the future that value. The MOU is doing nothing to improve the fiscal position of the Newfoundland and Labrador. It is much more likely that it will actually worsen our fiscal capacity by increasing spending while at the same time diminishing future generation’s ability to pay for our ongoing fiscal mismanagement.
The citizens that are really paying the cost of this folly are those who cannot vote in the Province today. They are the children and grandchildren of the current taxpayers. Unfortunately, we are the ones deliberately robbing their futures. Unlike the previous generations of NLers who were unknowingly duped by Quebec in 1969, the current generations are knowingly putting their children and grandchildren through the same misery that those before them have endured.
The MOU is even more shameful because while we are giving away our resource value, and borrowing against its future value, we are knowingly continuing to give away our resources to subsidize electricity for the citizens of Quebec for another 51 years. The electricity rates of Quebecers are only half of what they are in Newfoundland and Labrador and the Furey government is guaranteeing that the subsidies will continue from our resource at Churchill Falls to 2075.