ST. JOHN’S, N.L. – Newfoundland and Labrador’s premier made clear Tuesday his province’s precipitous drop from national economic leader to fiscal basket case, as his Liberal government set a grim course with its first throne speech.
“It’s terrible,” Premier Dwight Ball said.
“There’s no one even close to us when you look at other provinces,” he told reporters outside the legislature. “We’ve never seen this ever before in our history.”
Fixing the mess, and an “unprecedented” $2-billion deficit, will start with a budget in April or May, Ball said. He signalled that everything from tax hikes to job losses and spending cuts are on the table.
Ball also raised the E word — as in equalization. It was a proud day as Newfoundland and Labrador, powered by oil and mining earnings, became a “have” province for the first time in 2008. It stopped receiving equalization payments that Ball now says would come in handy. The complexities of related requirements, however, mean little help is available so far, he told reporters.
“We’re at Ottawa’s door for all the programs that are in place.”
The throne speech talks of “decisive actions” in the short, medium and long term to correct course. About one-third of provincial revenues come from offshore oil earnings. The treasury has been drained since Brent crude prices dove from US$115 a barrel in mid-2014 to hover between US$30 and US$40 in recent months.
The speech read Tuesday by Lt.-Gov. Frank Fagan says a new approach is needed to avoid successive deficits of around $2 billion.
“The choices ahead of us will not be easy,” he read. “Everyone will have to accept some level of sacrifice in the months and years ahead if we are to provide critical services, while restoring accountability and stability to government finances.”
The alternative is to borrow ever increasing amounts with higher interest, says the speech.
It says net debt would top $23 billion in just five years if the province does nothing. It would have to borrow $15.4 billion by 2020-21 — a move that would be like ringing up more than $7 million every day or almost $300,000 an hour, it says.
Provincial Auditor General Terry Paddon said earlier this year that the rate of projected deficit growth is unsustainable in a relatively small province of about 527,000 people. The forecast deficit for 2015-16 of almost $2 billion is more than three times greater than the next highest province when relative economies are compared, he warned.
“This level must be reduced.”
The throne speech acknowledged that urgency.
“Bond rating agencies and major banks are watching the province closely,” Fagan read. “My government is focused on protecting our credit ratings, as we do not want to be paying more for borrowing purposes.”
NDP member Lorraine Michael said citizens who are already struggling should not have to pay for a lack of planning when the province ran surpluses over much of the last decade.
“We can’t use economic difficulties as an excuse for leaving people behind,” she told the legislature.
The throne speech also promises to openly assess the $8.6-billion Muskrat Falls hydro project in Labrador started under the previous Tory government. It was to produce first power next year but has already run over original cost projections and timelines.
“This review will analyze the cost, schedule and associated risks of the project and is the kind of due diligence that is long overdue,” Fagan read.
As bad as the financial picture looks, the province has seen bleak times before. In 1934, the former British dominion of Newfoundland gave up its self-governing status after 79 years in part because of crippling public debt racked up during the First World War.