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Budget 2017 poised to increase inequality in N.L., critics say

By: Hans Rollmann and Justin Brake | April 8, 2017

Are the Liberals trying to balance the books at the expense of the province’s most vulnerable?

Finance Minister Cathy Bennett delivers the 2017 budget speech in the House of Assembly, April 6, 2017. Photo by Brian Carey.

The Liberals’ 2017 budget is being described as a “stay-the-course” plan for the coming fiscal year, but critics say that course is one to growing inequality and further procrastination on developing a long-term plan to build a sustainable economy for Newfoundland and Labrador.

The budget, announced Thursday in St. John’s, contains no job cuts, tax increases, or significant program cuts, leading to a general sigh of relief from many. But labour unions, student organizations, women’s advocacy groups, economists and academics say the Dwight Ball government has failed to lay out a fiscal plan that addresses growing social and economic inequities, many of them exacerbated by last year’s austerity budget.

Budget 2017 “compounds the severity of the problems and the panic” of last year’s budget, says Robert Sweeny, a history professor at Memorial University who served as a budget advisor to the NDP Thursday. “They don’t understand that there’s a lot of people hurting badly.”

The Liberals are poised to spend $8.1 billion in 2017-18 and are forecasting a $778 million deficit, down from last year’s $1.1 billion. They say they’re on track to balance the deficit by 2022-23.

While there were no layoffs announced Thursday, Finance Minister Cathy Bennett didn’t rule out efforts to reduce Canada’s largest per capita public service in the coming year, though she did indicate it wouldn’t be done via mass layoffs.

“Staying the course” not good enough

Memorial University economist Allison Coffin says while the Liberals’ plan to balance the budget within six years may sound alluring, the interim failure to make appropriate investments and sow the seeds of economic diversification will have both near and long-term consequences on the economy and the people.

Coffin says the projected continued downturn in the province’s economy, coupled with the Liberals’ plan to keep investments at a relatively steady rate in the coming six years without accounting for the rising cost of living and growing unemployment, will make a difficult situation worse for those who already struggle to make ends meet.

“You’re going to have less money in your pocket but you’re going to have to pay more for everything, so your buying power is going to be decimated,” she says.

The province’s growing income inequality means that while more people are moving from the middle to the top income brackets, those in the lower income brackets remain stuck there, with more likely to join them as unemployment is projected to rise to almost 20 percent in the next few years.

The number of people earning over $100,000 a year rose from 9,890 in the 2010 tax year to 17,350 in 2014. Yet in 2015 the number of people earning minimum wage rose for the first time since 2010, by 900 workers.

Last week the Conference Board of Canada ranked Newfoundland and Labrador as having the fifth highest income inequality in the country.

“We’re not going to have healthier people, we’re not going to have better roads, we’re not going to have more public safety, we’re not going to have better educated people, we’re not going to have access to good jobs,” says Coffin.

Everyone will be worse off as the result of inequity. –Allison Coffin, economist

“As soon as inflation starts to happen, if you have a fixed income, if you’re on a pension, or you’re on EI, or any other [social assistance], or if you’re getting a student loan, your cost of living goes up and that little pocket of money you have is going to buy you less and less and less,” Coffin continues, explaining growing income inequality won’t just impact individuals and families, but the overall economy.

“The more uneven your equity, then the more distorted the economy is, and the poorer rates of growth, and the poorer outcomes that we do have as the result of that. Everyone will be worse off as the result of inequity.”

On Friday the Broadbent Institute released a new study revealing 67 percent of Canadians feel the wealthiest in this country are benefitting from today’s economy more than those with average or below-average incomes. Further, 82 percent of those surveyed said they feel the gap between Canada’s rich and everyone else is increasing. Eighty-four percent said income inequality is a problem.

On the question of who’s to blame for income inequality, 55 percent of survey respondents said “a tax system that benefits richer Canadians,” while 47 percent said “government policies that support big business at others’ expense” and 46 percent said “too much power in the hands of big banks.”

The Liberals raised personal income taxes last year, but have not moved to increase tax rates for those who earn the most in Newfoundland and Labrador, who currently pay lower rates than those in similar top income tax brackets in Nova Scotia, New Brunswick and Quebec.

Budget 2017 neglects marginalized communities

On Thursday Bennett praised her government’s decision to subject Budget 2017 to gender analysis, a first for any government in this province. The Liberals provided a long-awaited increase in funding, to the tune of $400,000, for women’s centres and advocacy organizations.

St. John’s Status of Women Council Executive Director Jenny Wright praised the government’s commitment to gender analysis and the new funding, but said that spread out among all the organizations in need of better support to advance the status of women, the funding won’t do much more than help them keep their doors open. She noted women’s centres haven’t seen an increase in funding since 2011.

“For us, it feels almost like a catch-up, and we’re grateful for that because we’re continuing our work. But we don’t have the funding we need to make real substantive changes to the levels of violence we’re seeing against women, and certainly not to close the gender gap.”

A new Conference Board of Canada report skewers the province on its poor performance in tackling gender inequality. With a gender wage gap of 28 percent, Newfoundland and Labrador ranks the worst in the country for gender inequality. The province was also singled out for being the only one where gender inequality continues to worsen.

“The province’s gender wage gap in 2016 was over 2 percentage points higher than in 2000,” the report noted.

NAPE President Jerry Earle expressed his outrage over the government’s failure to address growing gender inequality.

We don’t have the funding we need to make real substantive changes to the levels of violence we’re seeing against women, and certainly not to close the gender gap. –Jenny Wright, St. John’s Status of Women

“Newfoundland has a D-minus,” he said, referring to the province’s grade in the Conference Board report. “You look at this budget, there’s nothing in there…to address that.

“And in the public service, whether people realize it or not, the public service is made up of over 60 percent women. So again it’s quite concerning.”

Earle said he’s concerned that government’s tough tone in public sector bargaining will lead to demands that will further worsen the province’s gender wage gap.

Wright said the wage gap isn’t the only area of inequity that needs to be addressed.

“Women are staying home because they can’t afford childcare. This is a huge barrier to both women’s prosperity but also the economy. Women are 50 percent of the population,” she explained. “A solid economic policy that looked at providing good, affordable childcare, good tax benefits for the cost of childcare, would be a huge benefit for getting women back to work—we’re not seeing that.”

The budget does include an additional $2 million to support the Child Care Subsidy Program for low and middle income families, and an additional $1.3 million to the Early Learning and Child Care Supplement. But Minister Bennett admitted that more needs to be done.

“As a mom I would love to say that we can take care of it all,” she told The Independent following Thursday’s budget speech. “Childcare is an important consideration in addressing the inequality in women’s pay, and while we’ve done a little bit in this budget there’s certainly more opportunity to do more when the time is right and we have the resources to be able to do it.”

According to Wright, without substantial funding increases to the women’s policy office, without funding for gender-based analysis for all departments across government, and without setting some concrete targets for improvement, the province’s failing score on gender inequality isn’t going to improve any time soon.

“It really feels reminiscent of the federal budget, where yes, we are so happy we get to keep our doors open, but how do we work towards closing the country’s highest gender gap? How do we look at getting women back in the workforce where they want to be and contributing to the economy? We didn’t see any mechanisms for that, we didn’t see any targets for that, and we’ve got a lot of work going ahead.”

Students also take a hit

The province’s post-secondary students also took a serious hit in this year’s budget. In addition to an unanticipated $3 million cut to Memorial University’s operating grant, which follows a $14 million cut last year, government appears to be moving to exclude more students from the tuition freeze.

Last year’s provincial budget lifted the freeze on international students, graduate students, and medical students, leading to a 30 percent fee hike for medical students, a 10.4 percent average fee hike for graduate students, and a 12.8 percent average fee hike for international graduate students. Students living on campus, most of whom come from rural parts of the province, also faced a 30 percent hike for residence fees.

This year, government has allocated funding for a “tuition offset grant” at MUN and College of the North Atlantic “to maintain the existing tuition freeze,” but it’s not clear who that freeze will cover.

In a press briefing Thursday Advanced Education and Skills Minister Gerry Byrne stated the freeze was intended for “any undergraduate or graduate student that’s a Newfoundland and Labrador student.”

While that would appear to put last year’s graduate fee hike in violation of government’s mandated freeze, it has also sparked fears that students from other provinces could soon face fee hikes.

MUN President Gary Kachanoski said the university will be seeking clarification from government on its intentions regarding the freeze.

In addition to fees being hiked on a growing number of students, students are concerned about changes to the provincial student financial assistance program. Until now, student loans were a combination of federal and provincial funding: 60 percent federal, and 40 percent provincial.

Under new rules announced in the budget, the current caps are being lifted and students will be required to max out federal funding for their loans before they can access provincial funding. While this allows the provincial government to save about $10 million by replacing provincial money with federal money, it means that students will face higher debt upon graduation, since money borrowed under the provincial portion of the loan is eligible for grant conversion and other more beneficial repayment options.

On Thursday Byrne acknowledged this important new variable, saying “yes, there will be some consequences as we increase the amount of federal student financial assistance.”

Canadian Federation of Students N.L. Chairperson Alex Noel pointed out that the changes to the loan program come on the heels of a $5 million cut to the provincial student financial assistance program last year.

“That cut had the greatest impact on low-income students. It forced some of the most vulnerable students in our province to take on more debt just to get the education they need to get a job in today’s economy,” Noel told The Independent Thursday.

Youth facing an unemployment crisis

Meanwhile, youth are facing a grim situation in the workforce as well, and labour leaders are concerned there’s nothing in the budget to tackle the province’s rising rates of youth joblessness.

According to the Conference Board of Canada, Newfoundland and Labrador boasts a 19 percent youth joblessness rate, the second highest in Canada. Moreover, the province had one of the biggest spikes in youth unemployment in the country following the 2008-09 recession. Our six percent increase in youth unemployment—bringing us up to 27.6 percent—was second only to Nunavut.

Earle expressed his concern over what this means for youth trying to stay in the province and enter the workforce, and to the economy on the whole.

“We cannot afford to lose a single young person,” he said. “We can’t afford to lose professionals. And what I’m hearing already from people who have lost their jobs [is] they can’t stay around here in this economy. And when they leave, they take their spouse and family along with them. So if you use the multiplier effect…for every person who leaves we’re losing basically three [people], so that’s going to have a negative impact.”

Earle said there’s “absolutely nothing” in the budget to strengthen youth retention.

“If we don’t pay attention to our youth, if we don’t have that strategy to employ and keep our youth here, it’s going to have…a major negative consequence on our province.”

Little progress on reconciliation

Budget 2017 contains $285,000 for the establishment of Family Information Liaison Units to support those participating in the National Inquiry Into Missing and Murdered Indigenous Women and Girls (MMIWG), but no new investments toward Indigenous communities in the province.

Notably, it contains no mention of any progress on fulfilling the government’s promise in 2015 to implement the calls to action of the national Truth and Reconciliation Commission Report. After appointing himself minister of Labrador and Aboriginal Affairs in 2015, in his mandate letter to himself Ball promised to “lead the implementation of the calls to action set out in the interim report of the federal Truth and Reconciliation Commission which are applicable to the provincial government.”

Asked last year how the 2016 budget facilitated progress on reconciliation, Bennett said the government was still working on it.

On Thursday, when pressed on government’s continued silence on its commitment to reconciliation, Bennett pointed to Ball’s agreement to meet with Indigenous leaders at a roundtable this year after a CBC story in late February highlighted the continued problem of disproportionate numbers of Indigenous children in foster care.

Premier Dwight Ball. Photo by Brian Carey.

Premier Dwight Ball listens as Cathy Bennett delivers the 2017 budget speech. Photo by Brian Carey.

“The premier is a strong advocate for supporting our Indigenous communities; we’ve seen his strong leadership in that last fall,” she said, alluding to the premier’s marathon meeting with Indigenous leaders after land protectors occupied the Muskrat Falls worksite in Labrador to demand concerns around methylmercury be addressed before Nalcor proceeded with reservoir flooding.

Indigenous residents of Labrador have repeatedly called for Ball’s resignation as Minister of Labrador and Aboriginal Affairs, but the premier has refused to step down.

Amid an ongoing housing crisis and suicide epidemic in Indigenous communities in Labrador, and after promising to implement the TRC report’s calls to action, outside the funding to support the MMIWG inquiry the Ball Government makes no mention of funding to support the other roughly 30 TRC calls to action it has committed to implementing.

Privatization will increase inequality: critics

Sweeny says the Muskrat Falls cost overruns, now at roughly $5 billion and expected by some to continue rising, coupled with low oil prices, have left the government in a vulnerable position, where privatization may be a tempting way to address the deficit and debt.

But privatizing public services and contracting major infrastructure projects to the private sector will lead to greater inequality, he explains, noting a “shared trajectory” between the Progressive Conservatives during their recent 12-year reign and now the Dwight Ball Liberals “of making a leaner provincial government.”

In 2013 the Kathy Dunderdale PCs privatized Adult Basic Education, a move that led to higher costs and lower enrolment of adults looking to attain their high school diploma in order to move on to post-secondary education.

Sweeny says as the need for public services in education, health care and other areas continues to grow as a result of rising unemployment and other consequences of the province’s recession, “it opens up opportunities [for the government] to redefine what is the nature of public and what is the nature of private.”

When public services are privatized, “leaving things to the market means that people who have enough resources already will be able to…pay for it themselves. But those people in the province who don’t already have those resources will go without,” Sweeny explains.

“When we think about austerity—which is cutting help to people who need it, when they need it even more…people get excluded from the necessary services, and exclusion always benefits somebody,” he continues.

One of the fraught debates in the lead-up to Budget 2017 was over the issue of public-private partnerships, or P3s.

Critics say while P3s may offer up-front savings, they in fact frequently lead to lower quality services and greater long-term costs.

“If you’re in a rural area, and you’re promised a new hospital…people are going to get excited and say well we need that infrastructure,” said Earle. “They’re not understanding what a P3 means. We’re going to get it today. But you, and I, and likely for sure my grandchildren, are going to pay for this.”

That’s not dealing with the debt — that’s giving it to our children and kicking it down the road. –Dawn Learning, CUPE

Earle likened P3s for public infrastructure projects to “a mortgage on these buildings for 25 or 30 years — so we’re going to pay over an extended period. I’m going to be retired and my children are going to take on that burden, and the government of today gets the credit for building a new hospital or long term care facility.”

Government did not mention P3s in its budget but has already announced this year that the new hospital in Corner Brook will be built using public-private partnerships. Last month, Transportation Mininster Al Hawkins announced P3s would be considered for all major infrastructure projects in the province.

When pressed on the issue, Bennett said government will conduct a “value for money analysis” of every infrastructure project to determine whether it would be better undertaken through a public or P3 model.

Her comments did not reassure critics, who say P3s may not only cost taxpayers more in the long run, but would also contribute to growing inequality.

“If there’s a value for money analysis, who determines what the value is?” CUPE National Representative Dawn Learning commented Thursday at Confederation Building, explaining that in recent years auditors general in other Canadian provinces have declared P3s are more costly than building infrastructure with public funds.

“It does maybe allow this government to hide a bunch of debt, but that’s not dealing with the debt — that’s giving it to our children and kicking it down the road,” she said.

Coffin also said she’s “very concerned about P3s,” explaining they could also negatively impact the local construction industry and its workers.

“If [public infrastructure projects] are being built with non-unionized positions, we’re going to have a distortion in the wage rates, it’s going to cause a distortion in the construction industry, you’re going to cause people to move, and you’re going to create jobs that are less stable, have lower wages, and just give less security to those individuals.”

On Thursday Mary Shortall, President of the Newfoundland and Labrador Federation of Labour, said P3s and privatization boil down to one thing: profits over people.

“If you’re going to privatize public services…history has taught us elsewhere in Canada that over time when profit becomes that main motive, and when there’s a fiduciary responsibility to your shareholders to make a certain amount of money, something has to give,” she said. “It’s going to be service, it’s going to be workers, or it’s going to be both.”

Shift in thinking needed, not cultural shift from spending

Sweeny says the government’s responsiveness to P3s and privatization is one of several indicators that the Liberal government shares the same economic and political philosophy as the former PC government, one which has grown in many advanced western capitalist countries in recent years.

“Neoliberalism is the idea that competition in the market is the best way to allocate resources, in a nutshell,” he says, explaining that a lack of adequate fiscal policy aimed at keeping young people and workers in the province is a strong example of neoliberal thinking.

“By not having these plans, like job training and programs to support apprenticeships, and all sorts of concrete programs like that, that leaves it to individuals in the market to make their choice. So the optimum choice for many young people will be to move out of the province.

“As far as the government seems to think—and it’s quite consistent with neoliberal policy—that is appropriate. It would be unnatural and distorting for the government to actually make it worthwhile for people to stay here, because that’s not an optimal allocation of resources by the market.”

On the idea of oil dependency and the government’s rationale for austerity in last year’s budget, Sweeny says it’s also characteristic of neoliberal-thinking governments to deregulate in order to facilitate and enable industrial development in ways that put people and the environment at risk.

He says focusing on the province’s dependence on the oil industry doesn’t present the whole picture of the government’s agency with respect to oil and the volatility of global commodity prices.

“It’s not that we’re dependent on the oil companies, it’s that we’re enabling the oil companies,” he explains, arguing the Ball Government, like the PCs, continue to negotiate a royalty program that ensures oil companies investing in the province’s offshore “get back, with interest, all of their investment before there’s any significant royalties paid out [to the province].”

Sweeny says though the environmental costs of offshore oil, and the industry’s contribution to climate change, are rarely talked about, they are part of the huge cost Newfoundland and Labrador is paying for enabling extractive industries to play such a large role in the province’s economy.

Asked Thursday why the government didn’t include a carbon tax in its budget, Bennett responded, “we’re not required by the federal government to actually start any implementation of a carbon tax until next year, and the expectation is built in to our six year forecast.”

The question we have to ask ourselves after today is: Is [our] life going to be any better tomorrow because of this budget? And there’s nothing in there that really says it will be. –Mary Shortall, N.L. Federation of Labour

Sweeny says former Environment Minister Perry Trimper’s controversial decision to release Grieg’s quarter-billion aquaculture project in Placentia Bay from further environmental assessment—which is now being challenged in court—is a perfect example of deregulating in an effort to accommodate industry while leaving the environment and wildlife at substantial risk.

On Thursday Bennett repeated the notion that government has “a spending problem,” that the province “cannot afford the government services we have now with general revenue alone,” and that “we must continue to reduce spending in the years ahead.”

But Sweeny says the so-called fiscal crisis was, and still is, not inevitable. He says if the $710 million going to Nalcor in this budget, for example, were spent another way, it “would kickstart the economy.”

What’s required, Sweeny and others are saying, is a change in how government thinks about the economy and the possibilities that exist in Newfoundland and Labrador.

“[The Liberals] have a five-year, $3 billion infrastructure plan, and if you look at that there is absolutely no variation from business as normal. They’re not using that to do anything creative at all.

“They have $7.5 billion to spend, and that’s a lot of money — they could reallocate it so that it’s doing things. They could be working with groups in different communities to make it available for different sorts of activities that are responsive to the needs of different regions of a very regionalized province. But they’re not doing that at all.”

Shortall noted that in Budget 2017 “nothing is made clear — nothing about the environment [and] nothing about green jobs. There are a lot of missing things that I think will expose themselves in the weeks and months to come.

“The question we have to ask ourselves after today is: Is [our] life going to be any better tomorrow because of this budget? And there’s nothing in there that really says it will be.”

Sweeny says the Ball Government “doesn’t seem to understand that they have a responsibility to turn [the economy] around, to take the resources that we have and make sure that there’s diversification, there’s sustainability…all of those sorts of things that are necessary, which require some imagination.

“But this is a government without imagination.”

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