Budget 2016 - Who
Pays for Rainy Days?
By: Ryan Young
There was doom and gloom hanging in the air of the House of
Assembly yesterday as Finance Minister Cathy Bennett stood to deliver her
maiden budget speech. You could have almost mistaken the event for a funeral.
The only difference being that a funeral would likely be a more uplifting event.
There were more than a few shocked gasps and whispered “oh-my’s” going around
the gallery as Minister Bennett delivered the news and there was a look of
shell-shock on the faces of many advocates and officials that were trying to
digest a very difficult afternoon. If reaction on social media is any indicator
the funeral analogy is quite apt as many people see this budget as the end of
Newfoundland and Labrador as we know it. That may be a bit of a stretch, but
there is no doubt that people are worried about what this budget means for
them.
For many it was not the budget that they expected or wanted.
Most people expected harsh measures but I don’t think many could have predicted
what actually came down. As I wrote in my pre-budget analysis, I was not
expecting any major public service cuts. On that issue I was correct. On the
issue of taxes, however, I was dead wrong. The HST raise will create plenty of
rhetoric in the house after all that Dwight Ball has said to defend his
cancellation of the plan that had been put in place by the previous
administration to raise it by 2 points. You can expect Paul Davis to beat that
horse to death and back again during question period. Minister Bennett pulled
no punches in delivering the bad news, sparing least of all the PC’s who she
blamed for creating the financial mess we are in. Bennett said the tough budget was made necessary by a
"failure to plan" by former governments, and oil royalties that once
accounted for 30 per cent of revenues dropping to just over 7 per cent.
Bennett
promised that a new zero-based budget approach would be taken as we move
towards future budgets. This approach would see future budgets being costed
from the ground up and not based on budgets from previous years. As a show of
good faith cabinet members took a 10% pay cut for themselves. The gesture will
save the province just over $60 000. With a mini-budget planned for the fall
and more bad news expected in 2017, it looks like this is only the beginning of
the rainy days for Newfoundland and Labrador.
So
what does Budget 2016 mean for you?
The
Good
There
were certainly no sunny ways to celebrate in this budget, but despite words to
the contrary by Cathy Bennett this week, it did include a few positive
investments. The province put up about $60 million for innovation and
diversification including funding for culture and heritage initiatives, tourism
marketing, improving rural broadband capability, and research and development.
They will invest a further $13 million to expand opportunities in seafood,
mining, forestry and agriculture. There was also $11 Million earmarked for
planning for the new Corner Brook and Waterford hospitals and an additional $2
million for long term care planning.
Some
of the better parts of the investment plan were strangely absent from Minister
Bennett’s speech in the house. $570 Million was announced for infrastructure
spending but the minister failed to mention the $63.7 Million that was
earmarked for the Trans-Labrador Highway. I had the pleasure of sitting next to
the Mayor of Red Bay in the gallery and she had traveled to St. John’s with the
hopes of hearing an announcement on the TLH. She left feeling that Labrador had
gotten the shaft again. In fact, even though there were several budget
initiatives aimed at Labrador, Minister Bennett failed to mention a single one
of them. It kind of puts the “left-out” feelings of the people of the big land
in better perspective.
There were also a few social spending surprises in the budget. The major announcement was $76.4 million for a new low income subsidy and an expansion of the existing senior’s benefit. Not included in Bennett’s speech but found in the budget highlights were also announcements for $12 million for renovating and modernizing public housing and improved supportive housing. There was also $119 million for inclusive education initiatives and $1 million for an expansion of the existing family court facilities. These are all well needed initiatives but we can’t help but feel that this budget did not go very far to address the extra pressure that will be added to our social systems as a direct result of the financial measures contained in Budget 2016.
There were also a few social spending surprises in the budget. The major announcement was $76.4 million for a new low income subsidy and an expansion of the existing senior’s benefit. Not included in Bennett’s speech but found in the budget highlights were also announcements for $12 million for renovating and modernizing public housing and improved supportive housing. There was also $119 million for inclusive education initiatives and $1 million for an expansion of the existing family court facilities. These are all well needed initiatives but we can’t help but feel that this budget did not go very far to address the extra pressure that will be added to our social systems as a direct result of the financial measures contained in Budget 2016.
The
Bad
An
additional $882 million annually will be raised from Newfoundlanders and
Labradoreans through what Minister Bennett calls a series of “revenue
adjustments”. Personal Income taxes are going up by 2% in each bracket over the
next 2 years. HST is also going up 2 points, despite Dwight Balls previous insistence
that the HST was a “job-killer” when he canceled the PCs plans to raise it just
after the election in November. The gas tax will double with a rise of just
over 16 cents. Tobacco taxes will increase, and there will be over 300 fee
increases and 50 new fees added to government services. HST will be applied to
insurance premiums as well, meaning residents will pay more on their insurance
bills starting this year.
Some
other less than favorable announcements included deferred infrastructure
funding for some schools and capital works programs as well as increased class
sizes in schools. The previous administrations decision to replace student
loans for post-secondary students with grants has been reversed and $14 million
has been cut from the budget at MUN. The province will leave the decision to
keep the current tuition freeze in place with the university.
In
the public service, 450 full time positions were cut from agencies, boards, and
commissions. Another 200 positions in the core civil service have also been
cut, however many of these employees will be restructured instead of losing
their jobs outright. These cuts will have a negligible impact on the overall
bottom line of the province but it is not surprising that they were so few as
the government is about to start collective bargaining with the unions. More
cuts should be expected in the fall.
The
Ugly
The
worst part about this budget is the fact that it puts the burden of past mistakes
squarely on the backs of regular working families. In addition to the tax and fee
increases, the government also announced a new temporary deficit-reduction levy
that will range from $300 per year for lower income earners to $900 per year
for top earners. Bennett promised a rollback of the levy would start in 2018
but for right now each and every worker in this province will have to pay just
a little more. For someone earning $200 000 annually, $900 is a non-issue, but
for a family living on $35 000, $300 will hurt. It is the regular taxpayer left
holding the bag again.
The
government estimates that the average worker will pay an additional $3000 per
year based on their budget estimates. When you factor in the elimination of the
baby bonus and the increases on gas and insurance premiums, it becomes clear
that working-class families will bear the brunt of this budget. For many people
the $1.3 Billion earmarked in the budget for Nalcor will be too much. On top of
all of the increases we will also have to deal with constantly rising power
bills starting this July. When asked if the massive hydro-electric project was
a mistake, Bennett said the risks of cancelling the project are
"enormous" but added, "We're going to make the changes that
allow our government to have strong oversight on that project."
That might be hard to swallow when Ed Martin and his $600
000 salary are still in charge of the ongoing quagmire of construction delays
and cost overruns that is known as Muskrat Falls. Cathy Bennett is very
familiar with Ed Martin from her time as the chair of the Nalcor board and she
should have some first-hand insight into how the corporation is run. Dwight
Ball said over and over before the election that he had faith in the Muskrat project
but not in its management. His solution to the management problem since the
election, however, is to keep everything the same and issue Ed Martin $1.3
billion to spend as he sees fit. This budget might be a little easier to take if it were
not for the gathering shadow that Muskrat Falls has become.
Looking Forward
With an all-in philosophy on Nalcor being made quite clear,
Cathy Bennett has delivered a budget that will be very hard on the working
class people of this province in order to continue the development of Muskrat
Falls. While we all realize that there needed to be strong and decisive action taken
to begin repairing our fiscal outlook for the future, the decisions brought
down by the minister yesterday will have a very negative effect on our economy and
on the confidence of the young families that are left wondering if they have a
future in Newfoundland and Labrador.
While more cuts to the public service are coming, it is
likely that they will be based on seniority and will have an even greater
effect on young families who want to stay in the province. The overall impact
to our economy will reduce our real GDP by 3.2%. For those who don’t follow
economics that translates into less jobs and a decreased tax base which means
that the “temporary” measures outlined in yesterday’s budget may not be as
temporary as the government would like you to believe.
There is some hope for this budget but only if major,
targeted public service reductions follow it in the fall or next spring. If we
can trim another $500 million and if oil goes back up in the neighborhood of
$55 a barrel we could be back to running manageable deficits where any
additional oil revenues could be used to balance the budget or pay down the
debt. In the absence of that, however, this budget falls flat on the backs of
our working families. We, the people, will continue to bear the brunt of loose
fiscal management and be responsible for funding the Muskrat Falls project for
generations to come.
If one positive thing can be taken from this budget it is
that more people may begin to realize that the politics that they wish to
ignore are about to start hitting them where it hurts. People might just begin
to listen to what the politicians are saying and start to hold them accountable
for their actions. Everyone’s wallet is about to get a little thinner and the
only thing we will get out of it is a power bill that is three times higher. The
people who didn’t care before might just start to take notice of what is really
going on in this province. We can’t solve new problems with old ideas and there
is nothing new or innovative to be found in Budget 2016. As far as I see it we
have 2 choices. We can bend over and grin and bear it or we can start to come
together and say enough is enough. If we want our government to be accountable, standing on the sidelines may no longer be an option.
Well said Rogue Bayman as usual the best source of news for whats happening around here.
ReplyDeleteWell, by 2019 we'll be right back in the 1950's where electricity, telephone and cars will be a luxury! Get ready to buy a horse before they pick your pockets clean ,lint and all, we'll surly need it to plough up ground to plant vegetables, back to raising pigs and chickens!
ReplyDelete