A budget to drive Newfoundlanders away

Facing a huge deficit, Newfoundland and Labrador chose to heap taxes and levies on its labour force—and send a dire message to its young people

Newfoundland and Labrador Finance Minister Cathy Bennett makes her way past colleagues after presenting the 2016 provincial budget at the House of Assembly in St.John's, Thursday, April 14, 2016. (Paul Daly/CP)

Newfoundland and Labrador Finance Minister Cathy Bennett makes her way past colleagues after presenting the 2016 provincial budget at the House of Assembly in St.John’s, Thursday, April 14, 2016. (Paul Daly/CP)

As expected, Thursday’s Newfoundland budget proved a fount of nausea-inducing numbers—but the most disturbing can be found in the province’s birth and death rolls, not its red-splattered balance sheet.

Since 1971, Newfoundland and Labrador has gone from boasting the country’s lowest median age, 20.9, to its highest, at 45. That’s five years older than the Canadian median.

Why does this stat line matter? Because the script that Finance Minister Cathy Bennett wrote for Newfoundland’s fiscal crisis is sure to make matters worse, driving away the young, hard-working people she desperately needs. Instead of addressing the collapse in oil royalties with an aggressive cut to provincial spending—à la Ralph Klein in 1990s Alberta—Bennett has looked almost exclusively to the revenue side, jacking up everything from provincial income taxes to the fee for licensing an old Edsel. The government even flip-flopped on its recent decision to hold down the HST.

The most infuriating move to many Newfoundlanders, however, will be the imposition of a “deficit reduction levy” ranging from $300 to $900, depending on income. A worker making $49,500, for example, would pay $600; someone making $74,500 (considered middle-income in Toronto) will pay $750. People making more than $202,499 (not unheard of among tradesmen working the province’s mega-projects) will shell out the full $900.

Which brings us to the age thing. Because, symbolically speaking, it’s hard to imagine a money grab more repellent to a working-age person than this “temporary” measure. It as much as admits that the reward for getting a job, working longer hours or earning a long-awaited raise is the privilege of bailing the government out its budgetary bind. Even after hiking taxes on incomes and gas, and after raising fees for insurance, birth certificates and death certificates, Bennett evidently sees no option but to fish in Newfoundlanders’ pockets for whatever nickels and dimes are left.

Some already appear to be voting with their feet. After four years of healthy growth, the size of the province’s labour force declined in both 2014 and 2015. It now stands at about 269,200, down about 5,600 from its peak in 2013.  With their job options dwindling, and their government apparently bent on taking from them whatever it can, young Newfoundlanders are once again boarding planes and ferries in search of brighter prospects.

Did Bennett have other options?

Surely. This is a province where gross provincial spending rose from $5 billion at the start of its oil boom in 2005 to $8 billion in 2015. Per capita, Newfoundland routinely spent 20 to 36 per cent more during that period than the average of other provinces, hiring workers and doling out raises. No one relishes the thought of laying off public-sector workers, or cutting cherished services. But the numbers alone called for a more equitable distribution of pain.

Instead, the government sought to minimize public-sector job reductions, saying it would cut 650 positions from a public service of 46,000. The projected savings from its cost-cutting, alas, will cover just $243 million of what would have been a $2.7-billion deficit. The heavy lifting is instead to be done through a projected $647 million of tax and fee hikes, which are supposed to pull this year’s deficit down to $1.83 billion.

By imposing these burdens, the government hopes it can buy some time, while continuing to fund the services required by a population only beginning to exert the full weight of its need on the provincial treasury—in health care, home-care and ancillary services.

How many working-age people will stay in Newfoundland and keep paying? That, apparently, is a question for another day.


A budget to drive Newfoundlanders away

  1. The way this article is written is delicious. Not the subject mater mind you. But how pointed it is and absolutely true it it rings. One needs only to scan social media in this province to get a sense of the mass exodus that will most surely take place. This Newfoundlander included. Great article. Messy province. Grim outlook.

  2. Not only young people may leave. Pensioners such as myself, who have a good guaranteed pension, fairly good health and are no longer property holders, may start thinking of renting a place on the mainland where taxes are lower and the discretionary income I use to enjoy life is higher.

  3. Why would you expect any but!! from the out of control tax and spend liberals with most Newfoundlanders living on CPP and old age security a tax increase of 3,000$ a person is un imaginable. This premiere is another liberal with little to none business experience but NL voted him in so now you must pay the piper for your decisions.We have roads that you cant drive on,raw sewage being dump into the bays buy almost or all small towns under 1000 residents as we have no sewage treatment facilities and some towns with out safe drinking water.We have third world health care with a hospital over 100 years old in St John’s, western health in Corner brook has buckets to catch rain water coming though the roof in the hallways and a promise to build a new hospital that has taken 10 years to get only the ground work done This Budget will make Newfoundland a waste land. Macleans should do a story on how the standards that Newfoundlanders in the out ports have to live which is slightly above or worse than some of our native reservations.

  4. Well, you folks in Newfoundland voted for the Liberals. YOu can’t say you didn’t see this coming.

    If it makes you feel better, the Liberals did the same thing in ONtario, only they started 11 years ago. And the Country just did the same thing in October of 2015. And don’t worry, once the hole Trudeau is about to dig hits home…..we’ll all feel the same pain you are feeling in Newfoundland.

    If you voted for the idiots who think stealing from you is fine because you voted for them……oh well. Reap meet sow.

    At least we aren’t stuck with the NDP and their LEAP Manifesto.

  5. I agree that the tax and revenue measures in the NL budget were very regressive, but to suggest that they should have slashed public sector jobs is wrongheaded. Public sector employment in the province has been cut by 18% or over 11,000 in the past three years and now is at a record low as a share of total employment, according to labour force data.

    Every 10 jobs cut in the public sector leads to an average of 5 additional job losses in the province — so those types of cuts, while appealing to those who want to share the pain, would would instead magnify it. Better to hike taxes on top income and corporations, which in NL remain below neighbouring provinces and also below what they were a decade ago.

    See the following: https://unionresearch.org/2016/04/14/newfoundland-budget-and-public-sector-jobs/

    • This is dead on, if you want to butcher the economy you could slash government jobs until you’re “revenue neutral” and put us right back where we were after the moratorium. Your economy is the amount of money people are spending in it, you remove 6,000 or 8,000 paycheques from public service and watch how fast all that money stops moving.

      These sort of changes should have been ramped up over years, but the previous government decided to bet on oil staying sky high for years and spent all the revenue while borrowing for a huge project nobody else would insure.

      • Yes, your Greek style approach of stimulating the economy by borrowing money for public sector wages will work. We can just ask creditors to take a hike when the debt payments get too high.
        The Liberal are trying to kill the private sector which is needed to pay for the union/government jobs. It is like Nfld is trying hard to qualify for equalization payments again.

    1. First and foremost I would not focus on jobs. I would focus on people being independent and small business minded. This is sustainable. It means that every person becomes responsible for their destiny. 200 years ago we weren’t “guaranteed” income, welfare, unemployment or jobs. Why should we be now? Being “owed a living” in any way shape or form, is a mindset that sets up a huge waterfall of laziness and disempowerment which ultimately fails individuals, communities, and the economy.
    If there’s no work, go make work and stop expecting someone else to fix your problems. EI and Welfare, mentality and infrastructure are CRIPPLING our people and our economy more than we could possibly imagine.

    2. I would make entrepreneur education free in every possible way. How to build a business, how to pay taxes, how to market, how to globalize, how to export, how to succeed. I would install mentorship programs where every business has a mentor that has “already done it”.
    The spin-offs of that into the economy and into the payment of taxes alone would regenerate the economy. There’s a HUGE world out there and we are no longer bound by this island. Make money online with a business or get a job online. There’s a freelance position for everything right about now – go find it.

    3. Major provincial decisions should be taken OUT OF THE HANDS of government and put BACK IN THE HANDS of people. What about an electronic platform where people provide views on important topics, in respectful ways, and vote on them. This becomes our way forward. I trust our people to do this! We must be responsible for educating ourselves on the topics of the day and ensuring our views are brought forward and implemented. There needs to be an app for that!

    4. Get rid of differing political parties and have all those great people who are committed to the province’s outcome work TOGETHER to develop a province that facilitates the implementation of the all the great outcomes of point number 3.

    5. For disabled, unwell, or sick people. Provide a structure that supports them where they are in every way possible. AND include systems that allow them to work and contribute at the highest levels. A life without purpose is enough to make anyone sick. Rather than Welfare, we should have “workfare” for the 90% of people on welfare who actually CAN and SHOULD contribute in their own special ways. This province needs a lot! Art, community service, parks, playgrounds, single parents need help with their kids, elders need support, and on and on the list goes….Match the place their gifts can be expressed with the needs of our society.

    6. Unemployment is NOT an option at all for anyone. I have to work every season and so should everyone else. As a business owner I can’t say, oh I think I’ll just take off 6 months and get paid by the government. This would eliminate work shortages and the need to bring in foreign workers. There’s a need for jobs everywhere – ESPECIALLY in a small business here in the province.
    If it doesn’t fit with your exact prescription for your life – too bad. It’s income and it’s your livelihood. 100 years ago we didn’t have someone to dish out funds during tough times. Well, it’s tough times and it should not be expected now.

    7. The current budget does not address the fundamental issues which are the cause of our own demise. Negative media is the cause of our own demise. Paying someone to live and work is the cause of our own demise. None of it is sustainable and today we are sitting in the impact of that. What does it take to put two and two together?

    8. The current state of the media would not be permitted. Mainstream media’s role would be to facilitate good news, focus on solutions to current issues, bring forward and educate people on the concerns of the day, and profile people who are succeeding to motivate and inspire others. As parents, that is what we do for our children. There’s a good reason for that – it fosters growth and success and it’s sustainable.

    9. We are powerful resourceful people. Our focus should be on lifting each other up, finding solutions, thinking global, embracing technology. Harnessing our resources. Investing in new energy. Blowing our culture and tourism out of the water – this place is INCREDIBLE. The scenery is unprecedented. The lifestyle is better than that of 95% of the rest of the world. People are giving and kind. We need to be proud of all of that and invite the world in, to come and enjoy it with us on their next vacation!

    10. We are not a “have” or a “have not” province. What we are is whatever we decide we are going to be. It’s really that simple. Once we realize that and take responsibility for our own outcomes, everything works from there. We can’t afford the luxury of blame and finger pointing. We just need to focus on creating an entrepreneurial culture here and get the hell on with it!

    • Not quite sure about the “media” thing, but otherwise, well said. The goal of any government should be to facilitate (i.e. encourage entrepreneurship) and then get the hell out of the way, not to initiate and interfere.

    • You are so right about Newfoundland being a great place to visit. I had one of the best summer vacations ever there. I am an Albertan and I found that that the people are a delight, the seafood is excellent, and the Quidi Vidi beer is great. We spent time in St. Johns and then drove up the coast to Gander. It was fantastic.

  7. Gee, they cut 650 positions from a 46,000 person public sector payroll. That’s sort of like saying you won’t order a sunroof on a $45,000 pick-up truck to make the truck more affordable. Wow.

  8. Two vastly different approaches to similar problems. Newfoundland chooses to tax at every turn to maintain spending. Alberta chooses to pretend the sky hasn’t fallen and just maintain spending. Aside from the obvious question… “Why didn’t anyone consider this might happen (decline)?”, why is it so harmful to consider spending less, putting certain plans on hold, or look for ways to try and save money? Everyone who has ever run a business or household during “trying” times has faced the music and made the obvious decision to at least “try” and gently apply the brakes and tighten their belt.

    • Alberta was in great shape financially prior to the oil collapse. The NDP there can afford to spend like a teenager with a credit card for at least a decade until we have the debt level of Newfoundland. As to whether they should do that it another question. Cutting pay of civil servants by 10-15% is the best approach as salaries take up the majority of spending (Education, Health, etc). The drop in demand and effect on the economy will not be that huge unlike that of expensive electricity and killing our carbon economy.
      I don’t get why the Nfld Liberals want to drive out the private sector aside from qualifying for equalization. Who knows, maybe Alberta will qualify for it too!

  9. I was planning on retiring in Newfoundland after getting out of the army but after seeing this budget its much better for me money wise to stay in southern Ontario. Too bad as this was a big part of my retirement plans but not much point if it costs are so much higher than where I currently live.

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