Hard tax tough to swallow
Budget 2016 hikes taxes, lays foundation for deep cuts
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.