A Stronger Economy is Possible.
The Province’s Auditor General recently delivered her report on the province’s financial statements for the year ending March 31st, 2019. Quick off the mark, one can hear the beating of the “austerity” drum as we are reminded that we are spending beyond our means, and that means, as the December 19th Telegram editorial states, “Really tough decisions have to be made.”
It’s easy in tough times to feed the argument of excessive government spending and make austerity the optimal solution. There is no doubt that our province faces significant economic and social challenges. We keep hearing the narrative of Newfoundland & Labrador’s (NL’s) “spending” problem. Is that really accurate?
Are we ignoring the fact that NL has the lowest public expenditure per GDP in all of Atlantic Canada?
Does anyone take notice of the other fact that NL has seen its oil revenues decline significantly over the past 7 years, the same period of time that coincides with the 7 consecutive deficits that we have incurred?
Oil has gone from being over 30% of total government revenues to 13.8% of total revenues for the fiscal year 2018/19, mainly due to the volatility of oil markets. That’s a revenue problem. We also produce a lot more oil currently than we did ten years ago.
Our over-dependence and reliance on this sector for revenue has really hurt our economy. Relying on oil to solve our fiscal issues has not worked in the past, so expecting a different result now is not likely.
What about other options?
We remain one of the richest provinces in Canada. Yet, Government is making a choice not to collect tax revenues. The Newfoundland and Labrador Federation of Labour (NLFL) has suggested repeatedly, for the past several years, that government develop stable, fair tax revenues. They have failed to do that so far. Tax rates for large corporations are below its 1990 rate, and below the Atlantic average. The same holds true for top income earners. We need these revenues, so why are their tax rates lowest in all the Atlantic Provinces?
Total expenditures in NL relative to GDP are the lowest in Atlantic Canada. This is despite having a small declining population spread over a primarily rural province, one larger than the other three Atlantic Provinces combined. Framing our fiscal problem as a spending problem while refusing to acknowledge the revenue-based issues we have created is misleading.
We cannot remain dependent on oil as a primary source of revenue. We need a strategy that focuses squarely on diversifying the economy, invests in green jobs and has a stable and fair tax base, so we can weather the volatility that accompanies natural resource production.
We urge government to support industries that create jobs which will also increase government revenues. Using the same solutions that have never worked to build economic growth won’t work this time either.
An austerity agenda is not the solution. We don’t need to see more people look to other provinces for job and opportunities. There are other sound solutions that have worked elsewhere. Maybe it’s time to try those.
Our vision is one where there is good jobs for all, including green jobs, fair taxation based on a person’s ability to pay, quality public services, safe and vibrant communities where people can live, love, work and play; and sustained environments so that our children and grand-children do not ultimately have to pay the price for our neglect.
President, Newfoundland and Labrador Federation of Labour