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Liberals’ austerity budget will hit most vulnerable hardest

By: Hans Rollmann and Justin Brake | April 15, 2016

Despite reassurances by government that all Newfoundlanders and Labradorians will share the burden of addressing the province’s $1.83 billion deficit, critics say the Liberals’ first round of austerity is disproportionately targeting the marginalized and least privileged first.

Finance Minister Cathy Bennett delivers the 2016 budget speech on Thursday, April 14. Photo by Brian Carey.

On Thursday the provincial government introduced an austerity budget that critics say will disproportionately impact marginalized groups and the most vulnerable people in the province, while failing to make strides toward developing a healthy, sustainable and more equitable economy.

In her budget speech Finance Minister Cathy Bennett said that in order to address the province’s $1.83 billion deficit, “every Newfoundlander and Labradorian — wherever they live and whatever services they use — will have to be part of the solution. Indeed, some will have to do more than others, to ensure we mitigate impacts on the most vulnerable in our communities.”

Budget 2016 contains hundreds of millions of dollars in “revenue measures” via higher tax rates and fee hikes for the people of the province. 

With revenue measures of $647 million in 2016-17, annualizing to $882 million, Newfoundlanders and Labradorians will find themselves paying more for everything from journeyperson exams to salmon licenses to ferry rides. 

At the same time the budget eliminates support programs such as the Home Heating Rebate and provincial HST tax credit—replacing them with a new Newfoundland and Labrador Income Supplement—and cuts significant funding from a range of public services and agencies. Post-secondary students are hit through a combination of cuts to the university and cuts to student financial aid, while youth and the cultural sector are also facing significant reductions in government support.

While direct public sector job losses are smaller than some anticipated, Department of Finance officials said Thursday the budget’s spinoff effects could result in between 2,500 and 3,000 job losses in both the private and public sectors.

And there’s likely more to come; Minister Bennett warned that “there’s continuing actions that need to take place and more actions that will be announced” in the budget update this fall. 

But even before it’s fully unveiled, the Liberals’ austerity program is already poised to widen the inequality gap in the province.

Status of women

St. John’s Status of Women Council Executive Director Jenny Wright called the budget “disheartening” and “awful,” saying the provincial government placed “absolutely no gender lens” on their budgetary decisions.

Wright said it’s a well-known fact women are disproportionately affected by austerity budgets “because we’re the largest users of services, we do the bulk of unpaid labour and are essentially the lowest paid. So we were hoping to see some things that would correct that reality, which is very stark in Newfoundland and Labrador, and we didn’t see any of it.

“Because we make less money our ability to access services is already highly diminished, so when fee increases are placed on [those services] it becomes a huge barrier to us. We access more services through healthcare, childbirth, mental health and addictions. We’re often the higher users of those services, which is often a direct result of living in poverty. So when those services are cut, then women suffer under that.”

Wright also said when barriers in accessing services are created for women who have children, “then you have two generations living in poverty.”

Specifically, Wright lamented the looming closure of four rural courthouses, which she said are crucial for women trying to escape domestic violence.

“Some of the smaller women’s centres [in the province] are trying to support women leaving domestic violence with no social workers, no courthouses, no services — nothing. They’re writing emergency protection orders and have no way of ensuring those women are protected, so that is hugely alarming for us,” she said.

“The ability to get timely charges laid becomes problematic, getting somebody in front of a judge, or for bail hearings, or making sure protection orders are enforced, or the lack of sheriffs to deliver and enforce those things are a huge problem.”

Wright also said the fee hikes that span 13 government departments and agencies will negatively affect women and their families.

“We keep hearing about how the sacrifice has to be made by everyone,” she said. “Low-income families cannot pay these fee increases, which have doubled and tripled in some cases, whether it’s certificates, driver’s licenses — these things add up huge.”

She took issue with the government’s new Deficit Reduction Levy, a temporary tax that targets individuals earning annual salaries of as little as $20,000, which is roughly what a full-time minimum wage worker earns.

“The status of women has a direct impact on the economy,” Wright continued. “So the more women you have continuing to live in poverty, the more detrimental that is for our economy. Cathy Bennett could have forced pay equity legislation, which would have [increased] women’s economic status a great deal, and we would have needed services less and enhanced the economy through day to day activities of being able to purchase and being able to take jobs and work and [afford] childcare. There was absolutely no talk of that and it is really frustrating.”

Indigenous Peoples

Despite the fact they face some of the biggest barriers to living equitably among the people of the province, and in light of Premier Dwight Ball’s promise to work toward reconciliation with Indigenous people in the province by implementing the calls to action outlined in the Truth and Reconciliation (TRC) report, Indigenous groups received no targeted investments to improve their quality of life. In fact, Labrador’s Inuit and Innu saw cuts to important subsidies and services.

The provincial government cut the $50,000 Foodlift Air Subsidy that made fresh produce and healthy foods more accessible for people living northern Labrador communities, opting instead to reinvest a bit more than half that money in a new program that will “promote nutritional and artistic endeavours of Aboriginal Government/Organizations in Labrador.”

Nunatsiavut President Sarah Leo responded to the news almost immediately, issuing a statement immediately after the budget announcement saying Inuit communities “are among the most impoverished in Newfoundland and Labrador, and the cuts announced in this budget will only add to the growing economic disparity that exists between Nunatsiavut and the rest of the province.

 Many of our people are not going to be able to adequately feed their families or have any quality of life. — Nunatsiavut President Sarah Leo

“Many of our people are not going to be able to adequately feed their families or have any quality of life,” she added, naming the Air Foodlift Subsidy, ferry rate hikes, a shortened coastal marine shipping season, 100 percent increase in the cost of medical travel, the elimination of the Home Heating Rebate program for low-income families, and a $200,000 funding cut for the clean-up of Polychlorinated biphenyls (PCB) contaminated areas in Hopedale.

“These cuts are distressing,” Leo said. “They were made with no consideration whatsoever to the health and wellbeing of our people and our communities. They will stunt economic growth and development and make it very difficult for many to make ends meet.”

The government also cut its $43,000 annual grant for Labrador youth who travel to the Island to participate in the annual YC NL conference, and eliminated its $75,000 sport and recreation grant to the Sehshatshiu Innu Fist Nation Band Council.

When asked why the government wasn’t taking steps in the budget to fulfill its promise to Indigenous people in the province, Bennett said we “may see things like that reflected in a supplemental budget” and defended the absence of improved supports for Indigenous Peoples by claiming the Liberals “don’t have the information” yet to implement the TRC calls to action.

“It would be irresponsible for me to say that we have a dollar amount. We have to wait until the work is done so we know what the costs are and then we can make sure that we invest that money appropriately.”

Post-secondary education

While overall funding for the College of the North Atlantic was reduced by almost $2 million, Memorial University (MUN) will face a $14 million cut to its regular operational grant. Significantly, government is also backtracking on the provincial grants program. Last year government finally completed the process of converting the former provincial student loan program into a system of non-repayable grants in an effort to try to reduce student debt. This year, government has reverted to a partial loan scheme, meaning student debt will grow. It’s a move that drew strong criticism from Canadian Federation of Students Newfoundland and Labrador Chairperson Travis Perry.

“The grants program and tuition fee freeze have been proven to work in our province. They’ve proven to reduce student debt and ensure graduates are able to go out and start a family, purchase a home, pursue entrepreneurial activity. It was incredibly exciting to see just a year ago that we were the first province in the country to entirely eliminate student loans in favour of non-repayable grants; it’s something that students and the people of this province celebrated, and it’s a model that other jurisdictions across the country, including the federal government, are moving toward. So to see our provincial government take a step backwards and further burden our most vulnerable students with increased debt loads is definitely very concerning.”

Photo by Justin Brake.

Advanced Education and Skills Minister Gerry Byrne (right) said Thursday he thinks MUN can maintain its tutition freeze following a $14 million cut in government funding to the university. Photo by Justin Brake.

The fate of post-secondary students’ tuition fees remains in the same uncertain limbo it did last year. While the budget documents don’t specifically name the tuition freeze, when pressed on the matter Bennett and Advanced Education and Skills Minister Gerry Byrne said the intention is for MUN to use the money to maintain the tuition freeze for all students. 

“We want to maintain affordability and accessibility, and maintain the tuition freeze,” said Byrne. “The bottom line is that I think with the additional resources, the increase in resources, to maintain the tuition freeze, that is in the realm of the possible.”

When asked whether government expected MUN to maintain the freeze only for Newfoundland and Labrador students, Byrne replied, “no, we have no expectations. We’ve provided the envelope…at $4 million for Memorial University. That was the pattern for maintaining the tuition freeze for all students… We’ve provided the resources to maintain the tuition freeze.”

Memorial President Gary Kachanoski was evasive on the matter, saying MUN’s budget is “complicated,” and that they need to “have to look through [the] numbers in detail to figure out which components have changed and which ones we’re going to have to react to.”

Fees are set by the university’s Board of Regents, which Kachanoski said will meet in May to discuss the budget cuts.

Perry was adamant that the government is not off the hook on funding to MUN.

“I think the provincial government is not able to absolve itself of blame if tuition fees do go up. We know that the tuition fee freeze that was introduced over a decade ago was mandated by a Liberal government, and they mandated it upon the university. We know the provincial government has a large role to play in setting tuition fee policy, so now to say that it’s up to the university I think is not wholly true.”

Job losses and privatization

Government is eliminating 200 jobs, and 450 ‘full-time equivalents’ in public agencies, boards and corporations. But finance officials said they expect spin-off job losses to be in the range of 2,500-3,000. Union leaders are furious and feel the Liberals deceived the people of the province.

“Just three or four months ago the Liberal Party was seeking election to form the government [and] was saying to the people of Newfoundland and Labrador, to public sector employees, and that came right to our convention and said to four hundred delegates: ‘We will not lay anybody off,’” said Newfoundland and Labrador Association of Public Employees (NAPE) President Jerry Earle.

“Just a few months later they’ve laid off hundreds of people. And when you lay off people, it’s usually young people. That’s jobs that should have been filled, should have been filled by graduates of our college, by graduates of our university. That’s not going to happen now. So where are those young people going to go? We’ve got a demographic problem in this province. Are they going to leave our province?”

While the budget did not feature any explicit announcements concerning privatization or public-private partnerships, labour leaders warn that the budget lays the framework for privatization six months from now and in the 2017 budget. Bennett said in her budget speech that phase two of the Government Renewal Initiative will involve “partnerships with the non-profit and private sector.”

“There’s no doubt in my mind they’re going to explore those areas,” said Newfoundland and Labrador Federation of Labour President Mary Shortall. “There’s no doubt in my mind that they’re bracing for that, and again that is the wrong way to go. It will cost taxpayers more money, it’ll be less service, it’ll have a negative impact on the economy and on the consumers of the services that are going to be privatized.”

Canadian Union of Public Employees (CUPE) President Wayne Lucas concurred.

“They’re talking about P3s; they got it in their booklet so we’re going to be back at this process again in October and again this time next year so I think the worst is yet to come.”

Taxes and levies

A range of new tax measures have been announced but will impact various income earners differently. Government is looking to raise an additional $632.4 million through taxes. Nearly a third of the new tax revenue will come from increases to personal income taxes. Government is not introducing any new tax brackets but increasing rates for all existing tax brackets. The increases range from one percent for the lowest two tax brackets ($0 to $70,295) to one and a half percent for the top two tax brackets. 

The lack of progressive tax hikes on the wealthy angered labour leaders and social justice advocates like Bill Hynd, an organizer with the Social Justice Cooperative Newfoundland and Labrador (SJCNL). 

“Why is it we can’t have a progressive tax system? Even the federal Liberals said we’re going to grow the economy, we’re going to ask more from the upper echelon. This [budget] doesn’t do that. Instead it spreads it all around as if we’re all going to be affected equally. So what we see is a budget that’s going to inconvenience some wealthy people, but it’s going to really hurt poor people.”

Gas taxes are going up: a 16.5 cent per litre increase effective June 2. The two percent HST increase—introduced last year by the Davis Government then repealed by the Liberal government—is back. Corporate income tax rises one point to 15 percent, bringing Newfoundland and Labrador within one percentage point of Nova Scotia and Prince Edward Island.

 What we see is a budget that’s going to inconvenience some wealthy people, but it’s going to really hurt poor people. — Bill Hynd, Social Justice Co-op N.L.

The government’s new Temporary Deficit Reduction Levy taxation scheme will see individuals pay a different rate depending on their taxable income, with several different scales. Those earning $25,000 will pay $300, while anyone earning more than $202,500 pays the highest amount, $900. The less one earns, so much as it’s more than $20,000, the higher percentage they pay. For instance, a low-wage earner bringing in $25,000 annually will fork over 1.2 percent of their annual income, while a person earning $202,500 will pay 0.44 percent of their income. The more a person earns, the smaller percentage of their income they share through the new levy.

Shortall was scathing in her assessment of the program. 

“It’s a flat tax, it’s regressive, it hits those middle-income earners and low-income earners the worst, and again it’s the people who make more money proportionally who don’t pay their fair share.”

Lucas further highlighted the new levy’s inequity, saying “somebody who’s making $50,000 a year [is] asked to pay this levy to help with the deficit, but a millionaire only pays $900. So there’s no equity there whatsoever.”

Government says the Temporary Deficit Reduction Levy will “begin to phase out over three years starting in 2018.” But when asked whether the levy would continue if government fails to achieve its deficit reduction targets, Bennett refused to commit. 

“I intend to hit the targets,” she stated.

Rural Newfoundland and Labrador hit hard

With the cuts to services and increased fees, many in the rural parts of the province are going to face hard times. In addition to the increases in fees—many of which will impact outdoor activities, from parks to T’railway to camping and fishing—the reduction in rural services has labour leaders worried. Earle pointed to the looming closure of eight Advanced Education and Skills (AES) offices. 

“That’s offices that people rely upon when they’re facing difficulties, when they’ve lost their job and their EI is running out. That’s where they need to go. When you close those offices in rural communities, now those people are going to have to travel greater distances. And the ironic part about that is they’re also removing $2 million [from Transportation and Works’ budget for] 24-hour snow clearing.

“So here in Newfoundland and Labrador, where for six months of the year our highways are treacherous enough, we’re going to reduce 24-hour snow clearing and now expect people to be on the road traveling greater distances because they’ve removed offices. They’re closing court rooms in four communities across Newfoundland and Labrador, taking decent paying jobs out of those communities. I think some of the rural communities should really be speaking out, saying you are hitting us hard and you promised no job losses and you are taking services away from those communities. We find that offensive.”

“We’ve got to get out there and say ‘no’!”

Labour and social justice activists responded loudly and critically to the budget. 

“We’re not happy at all,” said Shortall. “It’s leading us down a track that’s going to bring horrible layoffs and no economic recovery.

“There’s a lot of impact on seniors, on young workers, on students, on rural Newfoundland and Labrador. We have always advocated that in a downturn in the economy you need to have stimulus spending. There’s none of that here. There’s very little physical spending, a lot less than before, no social spending whatsoever. Instead you have increases in fees, elimination of programs that assist seniors and young workers, so it’s not working to stimulate the economy.”

“I’m in shock right now,” said Lucas. “I don’t think this budget did anything — it never took any of our suggestions of how to stimulate the economy.

“They’ve missed an opportunity for our youth, for younger generations here in the province to think ahead and hope that they may get a job. Instead I think people are going to start packing up, moving out of the province again.”

 Those who benefitted the least from our economic prosperity are those who will bear the greatest burden of the situation that we’re in right now. — St. John’s Centre MHA Gerry Rogers

NDP MHA Gerry Rogers said Thursday the Liberals’ first budget demonstrates the government’s lack of understanding of how austerity perpetuates inequality or its willingness to facilitate inequality.

“Those who benefitted the least from our economic prosperity are those who will bear the greatest burden of the situation that we’re in right now,” she said, criticizing the personal income tax increases, which she says aren’t progressive enough.

“When you look at the amount of taxes the higher income brackets are paying, they’re still minimal compared to the rest of Atlantic Canada. And when you look at Alberta, Alberta is saying, you know what, some of those who’ve benefitted the most are going to have to help out a little bit more right now,” she continued. 

“That’s not what this budget is doing. What this budget is doing is [saying] those who haven’t benefitted the most are going to have to suffer more disproportionately for the situation that we’re in.”

Rogers said the role of government “bean-count line by line,” but to “make sure we can prosper through an economic plan that looks at the future, that looks at diversification, that gets people working, that helps people be the best that they can be.

“I was looking for a government that had a vision, not a government that will say we’re all in this together so we all have to suffer. It should be, we’re all in this together so let’s get on the raft together and let’s start rowing in the same direction, let’s look at the horizon and see where we need to go and how to get there. That’s not what this budget is doing.”

“It is an austerity budget, it’s not a growth budget,” said Hynd. “It’s not an investment budget. It’s actually a cut budget. I’m hoping people realize we’re going in the wrong direction.

“People may say ‘oh it’s not so bad’ because it does have this low-income benefit and a senior benefit [but] 50 fees are being added and 30 are being modified so everything you need in your day to day life you’re going to be paying more for. And major cuts for low-income people. The [subsidy for] over-the-counter drugs, they’ve cut that, and that’s going to save the government but that’s going to hurt a lot of people who rely on that program. I’m hoping people realize we’ve got to get out there and say ‘no’ now, and say an even louder ‘no’ in six months, and an even louder ‘no’ in a year.”

The Social Justice Co-operative is planning a demonstration for 1 p.m. Saturday at Harbourside Park in St. John’s to oppose the austerity budget.

“It’s worse than expected,” organizers said on the event’s Facebook page. “Everyone is affected by tax increases, fee increases, cuts to grants and to post secondary, cuts to K-12 education, job losses, and on and on.

“There is understandably a good deal of anger, and we hope you will join us on Saturday at the demonstration to turn that anger into action.”

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