Posted March 18, 2016
The third Liberal budget will be presented in the later half of April. Some of the key issues:
Subsidies to the Film Industry
The Liberals have, so far, been largely faithful to their promise to avoid corporate handouts. DSME Trenton—to which the NDP gave $60 million—closed recently without ever coming close to providing the promised 500 jobs. We should hope that sad experience will beat back any calls for more such “investments.”
An important exception is the film industry. The initial Liberal approach to reforming that program was ill-informed, abrupt, and clumsily implemented. It has been distressing for people in the industry and their families.
Nevertheless, the goal of limiting these uneconomic handouts was essentially correct. The only argument for keeping the film subsidy as it was is that equally uneconomic incentives are available in other provinces.
B.C. Finance Minister Mike de Jong says the province can no longer afford to keep the tax credits for film and TV-productions at their current levels. A 2011 study for the Ontario government reached a similar conclusion.
The revised approach pays 25%-29% of eligible Nova Scotia costs. The key change is that the annual expenditure—which had been $24 million and growing—is capped at $10 million.
There is a steady drumbeat of letters to the editor and fawning reports by CBC claiming that this was a calamitous mistake. To their discredit, the statements of both opposition parties suggest that they would take the cap off. The government was directionally right in its changes and should stand its ground.
There have been several articles proposing a Basic Income Guarantee (BIG), most citing a seventies experiment in Dauphin, Manitoba. The project ran from 1974-1979, but data collection ended after two years. The cost vastly exceeded the original $17 million budget and no analysis was done until recently.
The sparse data suggested that the consequent reduction in employment effort might be modest and there may be positive health and social outcomes.
Advocates argue that a BIG program can be more efficient than existing welfare programs, but the devil is in the details. What is the appropriate level of benefit reduction as people begin to have other income? What age range should be eligible? Most important, what would it cost?
The advocates do not offer responses to any of these, perhaps because the cost of any version will be prohibitive.
A single paragraph in the Ontario budget says they will do a new experiment at a cost of $178 million. Some have argued that Nova Scotia should do likewise. It would be better to have a cost-free learning experience from the sidelines.
In 2014, it appeared that the ferry may have boosted room nights sold in hotels and motels by up to 10,000, at a cost of an eye-watering $2,600 per room night. Likewise, in 2015 we could reasonably infer that 10,000 extra room nights (compared to pre-ferry 2013) resulted from the ferry being in operation. This time it cost “only” $1,300 per night—probably more than five times the cost of the room. Many of those room nights will have been at the money-losing and provincially owned Digby Pines.
The long delay in announcing plans for 2016 suggests that new operator, Bay Ferries, is having difficulty coming up with a satisfactory arrangement.
Like the film industry, the ferry comes with a heavy political lobby. Also like the film industry, there is no sustainable business established by the spending—only the opportunity to spend more. The government must draw a line in the sand for both as to the level of subsidy, and require that the operator be on the hook for any excess costs or revenue shortfall.
Public Sector Contracts
The most important choices revolve around the contract renewals with teachers, health workers, and civil servants. They show no interest in acting on the proposed increases of 3% over four years.
The risk is that the NSGEU contract for civil servants goes to arbitration—which is what the legislation prescribes—in lieu of the right to strike, if there is no agreement. That will not produce an outcome in line for that group that taxpayers can afford, but will inevitably become the model for the others.
The government must be willing to repeal the mandatory arbitration clause if necessary. It already has had one painful experience with a capricious arbitrator in its unsuccessful efforts to bring sanity to the organization of health care unions.
The Liberal government has had admirable intentions, frequently hobbled by poor implementation. The next election is on the distant horizon as the 2016 budget is presented. The first three items above are symbolically important, but we will still be in trouble if we get the three of them right and don’t control public sector wages. Good intentions need to be accompanied by good implementation.
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