The Houston Government’s First Budget Must Demonstrate Discipline
Posted December 10, 2021
Nova Scotia’s new government was elected on August 17th. It is off to a good start but tough decisions lie ahead.
Premier Houston has worked to be inclusive. He invited the other provincial party leaders and all Nova Scotian Members of Parliament to participate in a meeting about the Atlantic Loop, which would provide much needed renewable power from Quebec or Labrador. He appointed former Liberal minister Geoff MacLellan to chair the housing panel.
He has removed the handcuffs on the Public Accounts Committee’s ability to pursue matters that could reflect unfavourably on the government, returning the legislature to its intended role.
The Progressive Conservative platform had housing reform as a secondary issue. Houston delivered a prompt and detailed response.
In October the province introduced detailed measures to address homelessness and more affordable housing for low wage workers. Houston correctly diagnosed the problem as a shortage of supply. His useful policy response will necessarily take years to become fully effective. The decision to impose itself into Halifax’s housing development process was regrettable but necessary.
Improving health care delivery was the cornerstone of the party’s promises. The first step was to dismiss the board and CEO.
Since then there have been initial efforts at recruiting and retaining more health care professionals, reducing waiting time for ambulances, opening new care facilities in Parrsboro and North Sydney, and expanding virtual care services. The cost of the additions when the promised services are fully added is $204 million.
A separate portfolio of initiatives on mental health is estimated to cost a further $102 million for a wide range of services newly funded by government. The actual cost is likely to be higher because the assumptions about what will be covered by private sector employees will prove to be too optimistic, particularly as the years pass.
New long term care facilities will cost $300 million. Annual costs for added staff and increased wages add $121 million yearly. Another $64 million is earmarked for improving internet and roads. Education initiatives add a further $82 million.
In addition to capital spending the program calls for an annual increase of more than $550 million for public services.
There are also two ill-considered economic development initiatives. The Nova Scotia Loyal program will use taxpayer dollars to subsidize purchases of Nova Scotia products, 10% for food and 3% for other items. Using wildly improbable assumptions about the impact on purchases the platform claims that the $100 million cost would create 18,000 jobs at an average salary of $52,200.
In the second proposal corporations will get offsets in their tax bills for money spent on pay increases or hiring new employees, costing $140 million. This is horribly inefficient because most of what is being subsidized would happen without the handout.
Perhaps when these ideas were developed earlier this year there was a perception that job creation was urgent. Today it is not. The latest news reports have employment at pre-pandemic levels and employers struggling to find workers.
Another puzzling proposal is to apply punitive taxation to out-of-province land-owners. Perhaps there will be some utility for discouraging the small number of vacant properties, but it will otherwise have numerous unintended consequences.
For example a Nova Scotian homeowner may be working in Alberta, or as a member of the armed forces posted to Ottawa for two years, with the intention to return after her retirement and to rent the house in the meantime. Does Houston want to drive away all out-of-province cottagers? Either way the tax as proposed will not deliver the projected $150 million in tax revenue.
The signature achievement of the McNeil years was to bring provincial finances into balance. That was subverted by the considerable cost of battling covid which hopefully will subside in the coming year.
As with provinces that had poorer fiscal track records Nova Scotia’s spending on health care did not keep up with demographic change. Much of what Houston now proposes is needed.
Fiscal discipline matters. The extra money needed for health care and seniors means that the province must be especially prudent in other matters.
The 2021-2022 Liberal budget projected a deficit of $545 million in the current year reducing to a breakeven position on 2024-2025. By that time the net debt of the province would have grown 35% to $21.2 billion, about $20,000 per Nova Scotian.
The Progressive Conservative platform’s plans would add service costs of more than $550 million per year. Its job creation initiatives are neither cost-effective nor needed. The sustainable revenue from taxes on out-of-province homeowners will be a small fraction of what is projected.
The 130 page platform document was commendable in detailing the ideas and showing how they were costed. Many of the estimates were necessarily guesses. In developing his first budget new Finance Minister Allan MacMaster will have the full resources of the department available. He must be willing to discard proposals that are found to be unworthy on closer examination.
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