The Hamm government releases its provincial budget today. The finance minister has already told us that it will be balanced. But this is not a particularly difficult task given increasing federal transfers and own-source revenue. The real challenge for the minister is how well he addresses the social and infrastructure deficits that have accumulated over the past decade.
We have a serious problem, Nova Scotia has not been making the investments needed to support a vibrant sustainable economy and the less fortunate in our communities. For most of the past decade, local and provincial governments in Nova Scotia have had the lowest per capita social and infrastructure investment of all the provinces in Canada – $1,500 (16.8%) less per person than the Canadian average in 2003.
We experience the consequences of this every day, from the state of our roads to the time spent waiting for services. Demand for food bank services is increasing. Income assistance benefits continue to decline in real terms and rates of household and child poverty remain high in an economy increasingly reliant on low wage jobs. Its time for the Hamm government to focus on the real needs of Nova Scotians.
The Nova Scotia Alternative Provincial Budget (APB), released last week by the Canadian Centre for Policy Alternatives, makes proposals to help the finance minister make the most of the provinces’ scarce resources.
1) No cuts to corporate or personal income tax. As Nova Scotians know tax cuts disproportionately benefit the wealthy and are paid for by all of us, especially the more vulnerable in our communities, through decreased public services. By decreasing revenue, tax cuts also undermine the provincial government’s ability to balance the books.
2) All budgetary surpluses should go to public services, social programs and supporting a sustainable economy. The surpluses will not be large enough to meet all expenditure pressures but it’s a start. Any new expenditures, in fact all expenditures, need to be tied to accountability initiatives that allocate spending based on need, and that measure and report on the effectiveness of investment in public programs and communities.
3) In the short term we can’t afford to make any debt repayments. When and if the $830 million offshore accord windfall arrives, it makes good fiscal sense to make a one-time payment on the provincial debt. This will result in a substantial reduction in the debt and in debt servicing costs – providing more than $50 million annually to support public services.
But surpluses in the immediate future will not be large enough to allow for debt repayment. A far greater return will result if all surpluses, for the foreseeable future are allocated to programs and infrastructure. Such investments will contribute to the well-being of citizens and future generations and a healthier environment.
The Finance minister has stated that not paying down the debt would concern bond rating agencies. Perhaps, but these aren’t the folks to whom the provincial government should be accountable. Besides, just by keeping the debt at its current level, the provinces ability to manage the debt improves – the debt relative to the size of the provincial economy (debt to GDP) decreases and the proportion of total expenditures going to paying interest on the debt decreases. This will address the concerns of the bond rating agencies.
4) The Alternative Budget also recognizes the need to get serious about the environment. During its first term, the Hamm government made much of the hard choices that it made to balance the budget. Well there are many more hard choices to be made such as taking decisive steps to wean ourselves from our growing consumption of fossil fuels. A recent Statistics Canada study found that in 2004 - “[s]harp price hikes at the pump did not deter drivers from buying 2.1% more gasoline. This partly reflects the growth of SUVs to 17% of Canadian auto sales.”
The Alternative Budget proposes a “Hummer Tax” that would increase registration fees for new gas guzzling vehicles and a 2 cent a litre increase in the gasoline tax. Not popular, but necessary. The money raised through these measures would be dedicated to initiatives that encourage decreased fuel consumption, such as public transportation and technologies that decrease gasoline consumption. This initiative would need to include supports for low income Nova Scotians and for citizens in rural areas that have no access to transportation alternatives.
The provincial government needs to focus on strategies that work rather than ideological experiments that jeopardize the well-being of individuals and communities. Curtailing expenditures, cutting taxes and paying down the debt may play well with the chamber of commerce and at the Halifax Club. But these aren’t the folks paying the highest price for such fiscal choices. It is time to move to a more pragmatic approach that balances fiscal prudence with the promotion of the public good.
John Jacobs is director of the Nova Scotia office of the Canadian Centre for Policy Alternatives and a co-author of the Nova Scotia Alternative Provincial Budget. Copies of the Alternative Budget can be accessed at (www.policyalternatives.ca).