Hard tax tough to swal­low

Bud­get 2016 hikes taxes, lays foun­da­tion for deep cuts

The Compass - - SPORTS - BY JAMES MCLEOD TC ME­DIA BUD­GET 2016 The Tele­gram

The 2016 pro­vin­cial bud­get landed with a thud on Thurs­day af­ter­noon, and Fi­nance Min­is­ter Cathy Ben­nett looked an­gry when she spoke to re­porters - an­gry at the Tories who left her a fis­cal mess, an­gry at Nal­cor En­ergy and its multi­bil­lion-dol­lar Muskrat Falls project, and, most of all, an­gry for the choices she had to make.

A cou­ple of hours later, in the lobby of Con­fed­er­a­tion Build­ing, ev­ery­one else was an­gry, too. There was some­thing in the bud­get to hate for ev­ery­one: pub­lic-sec­tor unions wor­ried about lay­offs, poverty ad­vo­cates wor­ried about tax and fee hikes, aus­ter­ity hawks said the spend­ing cuts didn’t go far enough and op­po­si­tion par­ties hated the lot of it.

The main thrust of Thurs­day’s bud­get was diplo­mat­i­cally called “Rev­enue Ac­tion” in the govern­ment’s press ma­te­ri­als, but it re­ally just amounted to mas­sive tax hikes across the board.

De­spite ex­plic­itly promis­ing not to raise the HST, and de­spite can­celling the pre­vi­ous Tory govern­ment’s HST hike in De­cem­ber, Fi­nance Min­is­ter Cathy Ben­nett went ahead and hiked the sales tax by two per­cent­age points.

The govern­ment also dou­bled the gas tax, raised ba­si­cally ev­ery other tax it has and hiked hun­dreds of fees - every­thing from mo­tor ve­hi­cle reg­is­tra­tion to ferry rates.

All of this buys the Lib­eral govern­ment a bit of breath­ing room. The deficit is now fore­cast to be $1.83 bil­lion for the up­com­ing bud­get year, al­most $1 bil­lion lower than the $2.7 bil­lion it would have been if no ac­tion had been taken.

But if the govern­ment is to re­turn to sur­plus by 2022 as fore­cast, there will have to be deeper spend­ing cuts in the fu­ture.

Part of the blame for the abysmal fis­cal sit­u­a­tion lies with the price of oil. This year’s bud­get is based on an oil price of $40 per bar­rel, which is a huge drop from well over $100 a bar­rel just a few years ago.

But Ben­nett said the lion’s share of the blame rests with the pre­vi­ous Pro­gres­sive Con­ser­va­tive govern­ment.

“The for­mer ad­min­is­tra­tion, even in the dy­ing days of their govern­ment, saw fit to spend at a rate that was higher and un­sus­tain­able and in a cir­cum­stance when they had six years of deficits out of 12, they had passed peak oil, they had passed peak oil price, and they failed to make the de­ci­sions that needed to be made,” she said.

Cabi­net min­is­ters are tak­ing a 10 per cent pay cut.

The job cuts are rel­a­tively re­strained - for now - with the bud­get elim­i­nat­ing 650 jobs in the core civil ser­vice as well as arm’slength agen­cies, boards and com­mis­sions.

This, too, is a bro­ken elec­tion prom­ise. Four months ago, Premier Dwight Ball was on the hus­tings, cat­e­gor­i­cally and em­phat­i­cally as­sur­ing vot­ers that he would not lay off civil ser­vants.

Some of those po­si­tions are al­ready va­cant, and some other job cuts will be cov­ered by at­tri­tion, so it’s tough to put an ex­act num­ber on how many peo­ple are get­ting pink slips.

“We want to min­i­mize job losses and keep peo­ple work­ing,” Ben­nett said. “Our govern­ment will not be of­fer­ing early re­tire­ment in­cen­tives as a method of work­force re­duc­tion. We must fo­cus pub­lic money on de­liv­er­ing crit­i­cal pub­lic ser­vices.”

Deeper cuts are com­ing, though. A “mini-bud­get” will be de­liv­ered some­time in the early fall with fur­ther cuts, and even more slated for 2017.

Ben­nett’s bud­get speech spoke of “govern­ment and de­part­men­tal re­or­ga­ni­za­tion, ef­fi­cien­cies through ma­jor pro- gram re­view and re­design, con­sol­i­da­tion of func­tions within the pub­lic sec­tor, and part­ner­ships with the non-profit and pri­vate sec­tor.”

There was an an­gry edge to Ben­nett’s voice when she talked about what she ex­pects to see from the var­i­ous arms of govern­ment in the fu­ture.

“The days of hav­ing a cul­ture of spend­ing and not be­ing rev­er­ent to the pub­lic purse are over,” she said. “And we are ex­pect­ing all those en­ti­ties to sharpen their pen­cils and go through all their oper­a­tions in a way that is re­spon­si­ble.”

She had es­pe­cially harsh words for Nal­cor En­ergy, the be­he­moth Crown cor­po­ra­tion cre­ated by the pre­vi­ous ad­min­is­tra­tion. Nal­cor’s be­lea­guered Muskrat Falls hy­dro­elec­tric project is over bud­get and be­hind sched­ule, and re­port­ing by The Tele­gram re­cently shed a light on huge salaries be­ing paid to many work­ers there.

“Since its cre­ation in 2007, tax­pay­ers have in­vested over $2.25 bil­lion yet have re­ceived no div­i­dends,” Ben­nett said.

“The pre­vi­ous ad­min­is­tra­tion al­lowed Nal­cor’s or­ga­ni­za­tional struc­ture, com­pen­sa­tion and ben­e­fits pack­ages to grow be­yond what tax­pay­ers would con­sider rea­son­able, par­tic­u­larly given our cur­rent fis­cal and eco­nomic cir­cum­stances.”


Fi­nance Min­is­ter Cathy Ben­nett de­liv­ers the pro­vin­cial bud­get Thurs­day in the House of Assem­bly.

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