A Credible Beginning

The budget presented on Thursday tells us how serious the Liberal government is about balancing the books within the current mandate. It was preceded by tough talk from the minister and the premier about the challenges facing the province.

Policy announcements in advance continued to set the tone. Fees are to be increased on a long list of services. Some parks spending will be cut. Neither of these produce much in the way of savings but they added to the tone-setting.

Minister Whalen’s pre-budget Chamber of Commerce speech mentioned the sizable cost of refundable tax credits for the film business, provoking all manner of intense media reaction from the industry, from producers to the hair stylist for Trailer Park Boys.

It may be true that big rebates are needed to compete with other jurisdictions. But what matters is how the return on this investment in jobs compares to others. The payments appear to be eight to ten times the size of payroll rebates used by NSBI, most recently to support up to 500 new jobs with the Royal Bank. Whether that difference makes sense for taxpayers is not clear. In the meantime the industry has condemned the announcement that 75% of the continuing program will only be available as a credit against income taxes.

The Yarmouth Ferry, for which the only possible justification could be job creation, has been transferred to the Department of Transportation and Infrastructure Renewal. New Minister of Business Furey, whose role includes looking over the economic impact of spending in other departments was quoted as saying “”Government can’t write a cheque to keep every business alive.” We can only hope.

The Government began to put real substance behind its commitment to rationalize government functions, most significantly with the shrinking of the Department of Rural and Economic Development and Tourism into the Department of Business. That name suggests a more tightly focused mandate for the Invest Nova Scotia Board than the wooly list provided a year ago.

Of greatest significance, retiring allowances will be curtailed and salaries frozen for three years for MLA’s and 1,930 non-unionized civil servants. (My article last week incorrectly said that the premier had rejected a freeze. In fact he had rejected the notion of reductions.)

That sets the table for comparable proposals for public sector unions. Many in the public sector feel that they are reasonably paid in comparison with comparable workers in other provinces. That is often true, although other provinces have been moving in the same direction as this budget, and some have been more complete in their pension reforms.

But, as the minister noted, Nova Scotia has had Canada’s weakest economic growth for the last twenty years. Private sector incomes have grown very slowly. According to Statistics Canada unionized wage earners in Nova Scotia, the vast majority of whom are public sector, saw hourly wage increases averaging 3.6% in the 12 months ending this March. Other workers have average decreases of 2.2%.

Provincial workers are allowed to take up to 18 sick days a year, four days to attend appointments, and another five days to care for a sick family member.

Very few private sector employees have big incomes, stock options, or fancy benefits. Most of the jobs are in sales and service; business finance and administrative occupations; trades, transport, and equipment operators.

Most have no pension plan; those who do typically have a defined contribution program. No-one compensates a lobster fisherman who has the flue and can’t go out during his prime season, or a sales clerk who misses a shift to take care of her kids when they are too sick to go to school. None of the private sector workers receives a retirement allowance.

These are the neighbours of public sector workers. Both groups pay taxes, both groups make important contributions to our province. But the imbalance of benefits is very hard for the private sector workers to accept.

It will nevertheless be surprising if the government can achieve its collective bargaining goals within the existing legislative framework for civil servants, which calls for binding arbitration when no agreement is reached. Government has every reason to worry how that might turn out. The legislation needs to be changed.

The budget speech does not confront the issue, but perhaps it is not the right vehicle for introducing the topic. It is clear that the same kind of decisiveness shown this week will be needed.

Failure to achieve the necessary wage restraint will mean continuing deficits in spite of all the tough choices government has made on other matters. Success will mean that the government is on a credible path to fiscal sustainability.


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