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A good news budget?

By: | March 29, 2014

Two things worth knowing that you might not have heard about Thursday’s budget

Robert Sweeny
Politics by Numbers: graphically raising issues

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Finance Minister Charlene Johnson delivers the 2014 provincial budget speech on March 27.

Media attention has focused on the planks of the provincial NDP’s program with which Tom Marshall and Charlene Johnson are fashioning their new-look Tories. Understandably, who doesn’t like grants instead of student loans, full-day kindergarten, modest increases in income support, and tax breaks for seniors and the working poor?

Altogether these measures account for a little less than 1 per cent of the $7.9 billion in provincial expenditures this year. This column looks at what is happening with the rest.

But first a bit of bad news. The budget contains a number of rather chilling economic indicators. The party is over.

PbyN Budget 2014This year will see growth of a mere 0.5 per cent in provincial GDP. Down, way down, from the 5.9 per cent posted in 2013, but better than the zero forecast for next year and the drops of 4.2 per cent in 2016 and 0.8 per cent in 2017. Next year, capital investment levels off and then collapses in 2016 (-22.8 per cent) and 2017 (-23 per cent). Housing starts will decline this year and next and then go into free fall with projected annual drops of 19.9 per cent and 12.9 per cent. By 2017, the government expects the unemployment rate to have climbed back up to 12.6 per cent.

In 2017, the Tories forecast our economy will be 10 per cent smaller than it was last year. In light of this, do they have a plan?

As the graph shows, royalties from non-renewable resources, consumption taxes and the least progressive income tax this side of Alberta pay for most government expenses. Most but not all, the government will borrow $1 billion this year, and the budget authorizes Nalcor to borrow a further $5 billion for Muskrat Falls. Meanwhile, corporate taxes continue their more than decade long decline, and this year will reach their lowest levels in the province’s history.

This neo-liberal strategy on where we raise our money is balanced by an increasing largesse in terms of where we spend it.

This neo-liberal strategy on where we raise our money is balanced by an increasing largesse in terms of where we spend it. And no, that largesse is not directed to students, pre-schoolers, seniors or the working poor, but to the professional and business communities. The major expenditures on health, education and social affairs are institutional and so relatively constant from year to year. They account for half of government spending. The entire civil service, including benefits, costs only a little more than 10 cents on the dollar, whereas the out-sourcing of professional and other services costs us more than 15.

Now at 60 per cent, doctors do loom large in professional costs. Indeed, 19 per cent larger than only two years ago thanks to the rich agreement signed by the then freshly-minted Premier Dunderdale, but they are not alone.

Although this growing dependency on services from the private sector was fueled by last year’s 1,200 jobs cut from the civil service, it is the product of a decade-long hollowing out of government by our democratically elected leaders. Primarily for ideological reasons, they decided to use our remarkable and quite unprecedented boom in non-renewable resource revenue to finance a self-imposed structural adjustment program. As a result, collectively we will be less equipped to deal with the myriad challenges of the imminent and dramatic changes in our fortunes.


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