Wednesday, 13 April 2016

The Honeymoon is Over - Pre Budget 2016

The Honeymoon is Over - Pre Budget 2016

By: Ryan Young

As Finance Minister Cathy Bennett prepares to table her first budget in the House of Assembly tomorrow, the public eagerly waits to see if we will finally be let in on the Liberal “plan.” Dire words came from the minister this week when she said that “not a single happy choice” would be found in Budget 2016. Those are certainly ominous words to hear from a finance minister just a few days before a provincial budget. Based on what we have seen from the Liberals thus far and the admission that the budget will actually be a three-part series that will include the 2017 budget as well as a mini-budget sometime in the fall, I don’t expect tomorrow’s budget to be quite as gloomy as the minister would like us to believe. Certainly there will be a few painful cuts and tax increases, but overall I don’t think that the real pain will come until a year from now when the Liberals finish up their government renewal initiative. Let’s take a look at what to expect in tomorrow’s budget.

Taxes and Fees

Despite the desperate need to raise some revenue, I don’t expect that this budget will backtrack on the Liberals decision to cancel the HST increase. That may come in 2017, but I am not sure that Dwight Ball feels confident enough yet in his shoes as premier to stand up and try to defend that decision in the house. More likely we will see increases on gas tax as well as on so called “sin taxes” such as tobacco and alcohol. You can also expect government fees to increase. Things like driver’s license renewals and hunting license fees could all see a moderate increase in this year’s budget. It is possible that we might see an increase in personal income taxes but that will, again, likely come in the fall or most likely, next spring.

Public Service

The disproportionate size of our public service has to be addressed. Indeed, this province spends half of its expenditures on salaries and benefits for public employees. With the Liberals promising no civil service layoffs as part of their election platform, they will be very wary about any cuts that they make this year. With contract negotiations with public sector unions looming in the very near future it is more likely that the government will, for the most part, leave the public service unscathed in this budget. What we might see from Cathy Bennett is some consolidation of certain positions that have proven to be clear redundancies during the line-by-line assessment of the government books. Most likely though, those positions will be retained and shuffled elsewhere, possibly in positions that have been vacated through attrition. Speaking of attrition, it will be the only real thing that we will hear from the Liberals this year on the issue of the public service. They will outline their continued plan for attrition (which by the way Dwight Ball opposed while in opposition) and promise a broader review of the public service following contract negations with the unions.

Program Cuts

This is the area that worries me a little. With Cathy Bennett telling us that “everything is on the table” we don’t really know what to expect in terms of cuts from this budget. Certainly there are some areas where programs may be outdated, underutilized, or redundant. In these cases it would be wise to consolidate or cut funding to inefficient programs that are not benefiting residents in the way that they were intended. On the other side of the coin, we have to be very careful about which social programs and tax credits that we eliminate without first performing due diligence on what the repercussions of such cuts might be. It will be interesting to see what balance Minister Bennett tries to achieve in her attempt to streamline government programs and services.

No Sunny Ways

Unlike the sunny ways budget brought down by Minister Bennett’s federal counterpart last month, we have already been put on notice that there will be no rays of sunshine from the budget she delivers tomorrow. Doom and gloom is leading the way and even the false optimism and political platitudes that we are so used to hearing at this time of year are strangely absent from the Liberals. One would expect that with so much of the Liberal election platform centering around diversification that we might see a few crumbs to encourage some small scale economic growth. With promises to get work underway for a new Corner Brook hospital and a new Waterford, we might have even expected to see at least some basic expenditure to tell us that these projects are moving forward, even if at a snail’s pace. And what happened to all of that social infrastructure money that was announced in the federal budget? Won’t any of that money be funneling down to our province to fund affordable housing, child care, and clean water initiatives? It is hard to swallow the sunny ways mantra when our own finance minister is singing songs of despair. Maybe the minister is just having us all on a bit so that when the budget comes down she can point to a few sound investments that say to the public that they are not giving up. Yes the situation is bad, maybe even dire, but there is still a province that needs to be governed and you can’t cut your way to prosperity. Growing our local economy was part of the Liberal platform and in order to do that you need to invest in local industry. If this budget fails to provide any new economic investment at all it will make it even harder for Dwight Ball do defend the diversification claims he made during the election campaign.

Hard Times Yet to Come

As we move towards the fall mini-budget and the general provincial budget in 2017 the message from the finance department will only continue to get worst. Muskrat Falls cost overruns, obscene debt servicing payments, and what we can only expect will be a shrinking tax base as even more people seek employment in other provinces and beyond, will force the governments hand at dramatically reducing expenditures. Whether they will do it through across the board cuts (most likely) or through targeted, independent audits (less likely but a better option) remains to be seen. Whatever they decide, they will need to do it soon so that we can all forget the pain before the next election.

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