Prov­ince needs to rein in spending – Premier

The Southern Gazette - - NEWS - BY ROB ANTLE Transconti­nental Me­dia

While the prov­ince is on track for bet­ter than ex­pected fi­nan­cial re­sults this year, Premier Danny Wil­liams is warn­ing gov­ern­ment spending has to be reined in to a “rea­son­able” level.

The pro­vin­cial gov­ern­ment bud­geted to spend $7 bil­lion this fis­cal year.

That’s 63 per cent higher than the Wil­liams ad­min­is­tra­tion’s first bud­get five years ago. Dur­ing the same time frame, the rate of inflation was less than 10 per cent, ac­cord­ing to Bank of Canada fig­ures.

The premier sug­gested the sig­nif­i­cant spending in­creases were nec­es­sary.

Mr. Wil­liams told the ed­i­to­rial board of The Tele­gram last week “We had to do it in the beginning, be­cause we had to play catch up. In all fair­ness to other gov­ern­ments, they didn’t have the cash.”

Rev­enues have grown sharply in re­cent years, driven by peak oil pro­duc­tion lev­els, sky-high re­source prices and lu­cra­tive ben­e­fits deals with Ottawa.

Fol­low­ing years of bud­get sur­pluses, the fi­nan­cial news was ex­pected to be less bright for 200910, with the prov­ince pro­ject­ing a $750-mil­lion deficit.

Mr. Wil­liams said the gov­ern­ment de­cided to pour ad­di­tional cash into in­fra­struc­ture spending to com­bat the re­ces­sion. But he noted it may be time to rein that in.

“Now we’ve got to start to try and find ar­eas where we can con­tain this, and keep it un­der con­trol, so that we’re go­ing to main­tain and keep the lights on in th­ese new build­ings, that we’ve got enough oper- ation­ally.”

Higher than pro­jected oil prices should help drive ad­di­tional rev­enues into the trea­sury, cut­ting the deficit.

The premier noted “Hope­fully, with rev­enues up now, our deficit won’t be as high. If that’s the case, then we’ll start to pull back to rea­son­able spending.”

Mr. Wil­liams replied “good ques­tion” when asked to de­scribe what “rea­son­able” spending is.

“We have to con­tinue with spending that en­ables us to have a mod­ern in­fra­struc­ture, and at the same time try to keep our costs un­der con­trol.”

One of the ar­eas the gov­ern­ment is tar­get­ing will be po­lit­i­cally sen­si­tive.

Mr. Wil­liams in­sisted “We need to try and find sav­ings in health care.”

The gov­ern­ment is spending $1 bil­lion more on health care now than it did five years ago.

“That can’t keep go­ing. If rev­enues are up, we’re okay, we can sus­tain it now. If rev­enues come down, and we start to lose some of the petroleum rev­enues, we get back to $4 (bil­lion) or $5 bil­lion (in rev­enues), then health care is go­ing to have to come back.

“So then all the lay­ered things that have been put in place are not sus­tain­able.”

Halt­ing hikes in health spending may be eas­ier said than done. Re­cent pro­posed lab and X-ray cuts at Flower’s Cove and Lewis­porte led to a pub­lic up­roar, and the prov­ince ul­ti­mately rev­ers­ing the de­ci­sions.

Mr. Wil­liams said the gov­ern­ment needs to “pro­vide cen­tral­ized, good re­gional ser­vices in the var­i­ous ar­eas” while find­ing places to cut or con­trol costs.

On the rev­enue side of the ledger, the premier ac­knowl­edged fore­cast­ing is dif­fi­cult be­cause of the prov­ince’s re­liance on volatile re­source rev­enues.

“It’s a bit of a dog’s break­fast, be­cause your rev­enues are sub­ject to oil prices, to oil pro­duc­tion, to cor­po­rate taxes that are com­ing, to min­ing in­come – for ex­am­ple, Voisey’s Bay has a strike on up there now – so there’s a lot of vari­ables. So there’s a cer­tain amount of es­ti­mat­ing, guess­ing.

“It’s not a term I like to use, but that’s ex­actly what it is. It’s an in­formed guess based on the best avail­able in­for­ma­tion.”

The prov­ince is ex­pected to pro­vide a more detailed up­date on the fis­cal sit­u­a­tion later in the fall.

Danny Wil­liams

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