Bor­row­ing bil­lions not the way to go: CFIB

The Compass - - EDITORIAL -

Last week, the pro­vin­cial gov­ern­ment tabled a bud­get dur­ing a pe­riod of volatile and un­cer­tain eco­nomic times. Canadian Fed­er­a­tion of In­de­pen­dent Busi­ness mem­bers and other small busi­ness own­ers will find lit­tle com­fort in it.

The ‘high-oil-roy­al­ties and spend’ ap­proach has been re­placed with the tra­di­tional “bor­row and spend” ap­proach so many gov­ern­ments of the past have used. Have we not learned any­thing?

Ac­cord­ing to the gov­ern­ment’s main es­ti­mates, op­er­at­ing and pro­gram spend­ing is ex­pected to grow 7.6 per cent in 2015-16. Gov­ern­ment will bor­row $2 bil­lion this year to be partly used for the in­creased spend­ing, with an­other $5 bil­lion bor­rowed over the fol­low­ing four years. This should be wor­ri­some for us all. If in­ter­est rates go up (which they even­tu­ally will) or if the gov­ern­ment’s credit rat­ing goes down (which may hap­pen), debt ser­vic­ing costs will in­crease.

If this oc­curs, there will be less money avail­able for ex­ist­ing pro­grams and ser­vices. To main­tain those pro­grams and ser­vices would there­fore re­quire an in­crease in taxes or more bor­row­ing. A two per cent in­crease in the Har­mo­nized Sales Tax and $7 bil­lion in bor­row­ing could very well just be the be­gin­ning. The ele­phant in the room few want to con­sider is the size of gov­ern­ment and gov­ern­ment spend­ing. On a per capita ba­sis, New­found­land and Labrador has one of the largest public ser­vices in the coun­try. Salaries and benefits are ex­pected to cost $3.5 bil­lion in 2015-16, which is $700 mil­lion more than two years ago. With four years of re­ces­sion pending, gov­ern­ment con­tends that to re­duce its spend­ing by $1.6 bil­lion in three years would put the pro­vin­cial econ­omy deeper into re­ces­sion (not its words, but the point was made).

How­ever, this ar­gu­ment ig­nores the role at­tri­tion and find­ing ef­fi­cien­cies can play with­out harm­ing the econ­omy. There are fac­tors other than eco­nomics be­hind the in­tran­si­gence to re­duce spend­ing.

But there is an op­por­tu­nity with an elec­tion ex­pected later this year. In the in­ter­est of trans­parency and ac­count­abil­ity in the man­age­ment of its fi­nances, the gov­ern­ment should re­lease its au­dited con­sol­i­dated fi­nan­cial state­ments for 201415, as well as its mid-year fis­cal up­date, by the mid­dle of Septem­ber 2015. By do­ing so, New­found­lan­ders and Labrado­ri­ans will have the most up-to-date fis­cal in­for­ma­tion avail­able. Equally im­por­tant, all po­lit­i­cal par­ties would have the same in­for­ma­tion upon which to base their elec­tion cam­paign plat­forms.

Each of the par­ties should take the next six or seven months to give se­ri­ous con­sid­er­a­tion to a cred­i­ble plan that will stem the fis­cal bleed­ing. Such a plan would go be­yond tax­ing and bor­row­ing while wait­ing for oil prices to re­bound to his­toric lev­els. The fo­cus should be on smaller gov­ern­ment and lower gov­ern­ment spend­ing. It is ir­re­spon­si­ble to do oth­er­wise.

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