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On Thursday, May 6 2021, Moya Greene delivered the long-awaited Premier’s Economic Recovery Team report—offering an aggressively neoliberal vision of Newfoundland and Labrador’s future.
Greene, who is best known for privatizing the British postal service, has proposed an austerity program that combines political and social reforms with a far-reaching economic restructuring plan premised on slashing state expenditures, across-the-board fee and tax increases, privatizing public assets, and breaking public sector unions.
“The Big Reset,” according to the report, proposes “a transformational plan for Newfoundland and Labrador that attempts to tie all aspects of the economy and society together to meet some of the biggest challenges and opportunities ever faced by the province.” Aimed at positioning the province at the forefront of a global, private sector-driven green transition, its stated goal is to “[prepare] our children to contribute more than was expected of any previous generation.”
The six-year plan is anchored in a proposed shift to a green economy based on offshore oil, hydropower, mining, technology, and hydrogen within 20 years. It also proposes restructuring the education system to encourage jobs in the science, technology, engineering and mathematics (STEM) sectors, modernizing governance of both Memorial University (MUN) and College of the North Atlantic (CNA) while reducing operating grants, and amalgamating all four Regional Health Authorities into a single entity and reducing their operating grants by 25 percent.
The Greene Report Sees Red
“Spending is out of control,” Greene writes. “The Government of Newfoundland and Labrador is facing an unsustainable fiscal situation that requires immediate action.” Her refrains are familiar: “[T]he fiscal challenges are entirely of the province’s own doing,” the report says, and “expectations placed on government have to be more realistic.”
The report highlights the province’s well-known economic, fiscal, and demographic challenges. The image it presents is stark: an aging population in irreversibly-declining rural communities, significant dependence on government transfers, a volatile resource economy, burdened by a large debt load and chronically high unemployment rates.
Including both the gross debt of the Province itself alongside its Crown corporations—Nalcor Energy, the Newfoundland Labrador Liquor Corporation, and Atlantic Lottery Corporation—the Greene Report pegs provincial gross debt at roughly $44.5 billion. (This does not include the nearly $3 billion in new borrowing for 2020-21.)
In other words, Greene writes, Newfoundland and Labrador’s gross debt “is the equivalent of (…) $215,000 for every household in the province.”
As an escape from these dire straits, the report proposes four areas of action: reforming provincial governance; planning for a capital-driven green transition; restructuring the healthcare and education systems; and an aggressive austerity program.
Reimagining Government
Reflecting on the experience of the 2016 Budget—when protests across the province erupted following the introduction of an austerity budget—the Greene Report notes that “the election cycle hampers mapping long-term visions and the decision-making to support them.”
A number of remedies are proposed for this. One major recommendation is mandatory balanced budget legislation for all departments, public institutions, agencies, boards, and commissions—with a percentage of ministers’, deputy ministers’, and assistant deputy ministers’ compensation withheld to ensure that departments and other entities meet established targets. This would also include “an external advisory group of experts established to review annual budgets.”
Significantly, the Greene Report proposes that the provincial government must renegotiate compensation packages with public sector unions. The “key elements” it demands are converting pensions “to a collective defined contribution plan in three years” on the model of the United Kingdom; “measures to reduce the payroll base, such as a four-day work week for certain positions… a wage freeze; alternative service delivery models; and development and promotion of work-from-home policies.”
Greene writes that “in the event that a negotiated settlement is not possible, the Provincial Government should use legislation that will be effective.”
The report also recommends that the provincial government should eliminate Nalcor Energy and merge its components into Newfoundland and Labrador Hydro—with an eye, ultimately, to the “transition of [NL Hydro] to a private entity.” It also recommends abolishing the Oil and Gas Corporation and selling the provincial government’s oil and gas equity interests when oil prices rise.
Industrial Revolution 5.0
Underpinning “The Big Reset” is the observation that “climate change is the predominant global challenge and energy policy issue of this century.”
“Newfoundland and Labrador is not immune to the effects of climate change and has a responsibility to contribute to a global solution,” Greene writes, adding the climate “challenge is, at its core, a technology challenge to transition to green energy.”
“This shift will involve a massive global redirection of capital, resources, energy knowledge development, and technology,” the report says. “Newfoundland and Labrador must be part of this intensifying movement.”
To this end, the Greene report proposes creating a 20-year “Green Economy Transition Strategy.” This would include packaging “the Churchill River resources as a single opportunity, including Muskrat Falls, Gull Island, and the 2041 contract on the Upper Churchill” as well as developing “an inventory of other hydro opportunities on the Island and in Labrador, as well as wind and other renewable energy opportunities in the province.”
It also recommends “accelerating the transition to electric vehicles,” encouraging “green investment in [so-called] low emission oil and gas,” encouraging “low carbon mining,” “developing policies that assert the Province as an equal custodian of its historic and adjacent marine resources for the benefit of communities,” and encouraging “local economic development initiatives that are community-led and that build on local and regional strengths.”
In a notable absence, the province’s agricultural sector is not mentioned in the report.
This shift towards a “green economy” in the province is to be financed through a “Future Fund” created through 50 percent of annual oil and mineral royalties, as well as the privatization of any public assets and a portion of carbon tax revenues. This fund would only be used to pay down debt and bankroll the green transition, “used specifically for investment in pilot projects or major partnerships with corporations or the Federal Government, not for general operations of government.” It would be overseen by an external advisory group.
Leaner, Meaner Health and Education Systems
The report itself acknowledges that “The Big Reset” will rest on the shoulders of the upcoming generation.
“It is unreasonable to expect the next generation to fund the current system,” Greene writes. “Newfoundland and Labrador’s systems must change in order to address the poor outcomes and high spending across so many areas.”
In a plan to provide more ‘efficient’ healthcare, the report recommends merging the four regional health authorities and expanding the use of telehealth and distance medicine. It also recommends reducing operating grants to health authorities by roughly 4 percent per year as part of the six-year plan.
The proposed operating grant reductions to MUN and CNA would include the provincial government creating a single nursing school for the province, and having CNA develop technology upgrade programs. Included is the suggestion that the post-secondary institutions establish a joint “Centre of Excellence in Green Technology,” which would be financed in part by the province’s Future Fund.
These grant reductions should total $103.9 million over the next six years, with MUN shouldering most of the cuts, the report says. The projected loss to MUN would be $82.3 million by 2027. “A reduction in funding will likely result in higher tuition,” Greene writes.
One of the driving factors that attracts international students to the province is MUN’s low tuition fees. The number of international students has increased in the past 10 years, from seven to 14 percent as of 2019. However, retention rates have been low.
According to the report, immigration retention is one of the key factors in the province’s plan to lean towards STEM employment (and industry), and future immigration programs could be tailored to target high-skilled individuals in this area.
The report includes recommendations to address immigration retention, including working with anti-racism groups in order to create a plan to educate communities and employers on racism in the province.
Don’t Call It Austerity
“The Provincial Government needs to act and demonstrate that it is focused on its finances,” Greene writes. “With a thoughtful, balanced, and well-developed implementation plan this province should be successful in the global competition that is underway for the billions of private sector dollars of capital redirected to green projects, technologies, and creating a forum of expertise.”
The report proposes a 2:1 ratio of expenditure reduction to revenue increases. Despite proposing to sell public assets, slash expenditures, and raise taxes and fees across the board, Greene was emphatic that “this is not an austerity program.”
Some of the “modest” tax raises recommended are increases to the tobacco, gasoline, and payroll tax, as well as an increase to the HST of one percentage point. All personal income tax rates would be increased one percentage point, with an introduction of tax credits for the lowest income group to “offset the increase.” Fees and fines would be increased by 15 percent. The corporate income tax rate would increase by two percentage points.
Wealth taxes are also proposed, with an annual tax of one percent on “wealth exceeding $10 million or an agreed upon threshold.” The report also recommends implementing a minimum property tax on all residences outside of incorporated municipalities, and a separate tax on second residences (outside of the primary residence) valued at $100,000 or more. A tax on luxury vehicles was proposed too, with exemptions for electric vehicles.
The report also proposes working with the federal government to develop new funding mechanisms to aid provincial finances. Beyond revising the Equalization Formula, Greene proposes exploring “the potential of establishing a new institutional federal loan facility that would replace the Bank of Canada’s Provincial Bond Purchase Program to enable provincial governments to borrow 10- and 30-year bonds at federal borrowing rates.” It also suggests modifying the Canada Health Transfer “such that it provides a higher percentage of provincial and territorial health care expenditures.”
Greene also proposes the province should “reduce its core expenditures by five percent, with no expenditure growth for six years.”
It proposes reducing operating grants to MUN and CNA by 30 percent over six years; reducing operating grants to the Regional Health Authorities by 25 percent over six years; “[reducing] administrative costs for the K-12 system and [allocating] these additional funds to classrooms to support the teaching of math, technology, science, computer science, and the promotion of entrepreneurship;” reducing operating grants to Newfoundland and Labrador Housing and Legal Aid by two percent; and reducing operating grants to other government agencies by 20 percent.
“The Big Reset” also recommends the province privatize a number of its other assets in whole or in part. It suggests bundling, and either selling or creating, other long-term concessions in its motor vehicle and registry of deeds systems; selling all or a majority interest in the Newfoundland Labrador Liquor Corporation (as well as reviewing how the province taxes alcohol); and selling the Marble Mountain ski resort and all related assets.
With the PERT report finally out, Greene’s recommendations are now in the Liberals’ hands. An interim report had been scheduled for release on Feb. 28 but was delayed indefinitely following the Covid outbreak that plunged the 2021 provincial election into chaos. The final report was originally scheduled to appear on April 30.
It is unclear what impact the report’s recommendations will have on the next provincial budget, scheduled for May 31. On May 5, Finance Minister Siobhan Coady told media that there will be public consultations on the report’s contents, and that this process “will hold a tremendous amount of weight.”
With files from Antonia Whelan and Justin Brake.
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