REAL POSITIVE CHOICES NEEDED FOR NEW BRUNSWICK

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1 REAL POSITIVE CHOICES NEEDED FOR NEW BRUNSWICK With its Choices document and 2016 Budget, the New Brunswick government appears ready to make the same mistakes that have been made by different governments again and again: cut public services and employment and expect the province s economy and fiscal situation to improve. These types of austerity measures have failed again and again in New Brunswick and around the world. They may not call it austerity, and they dress it up in positive language, but the results will be the same. The Choices strategic program review document claims the government will focus on three priorities; 1) Job creation, 2) Getting our finances in order and 3) Improving services for families. However, of the 32 options presented in the document 75% are focused on spending cuts, contracting-out, privatization or monetizing the government s assets, 25% on tax and increases and not a single one on the government s supposed two other priorities: job creation and improving services for New Brunswick families. Instead, most of these options will reduce jobs and services for New Brunswick families. The former Alward government introduced significant cuts to public spending and services in New Brunswick. This resulted in the worst downturn in 30 years for the province and increased unemployment above rates during the Great Recession. Revenues declined and the deficit increased. The people of New Brunswick rejected these policies and instead elected a government that promised to focus on creating jobs, increasing economic growth and improving public services. Instead the Gallant government immediately turned around and revived the failed and damaging policies of their predecessor. It significantly exaggerated the size of the province s deficit, (weakening confidence in the economy by doing so) and now appears ready to implement more severe cuts that will eliminate jobs, reduce services for New Brunswick families and do more real damage to the economy. New Brunswickers quite rightly want them to focus on what they were elected to do: creating jobs and improving public services. 1 Page

2 / / / / / / / / / /16* 2016/17** 2017/18** Deficit in millions THE FACTS ARE: 1. New Brunswick isn t in difficult fiscal circumstances, nor does it have a spending problem. The real deficit for 2015/16 should be about half what the government originally projected. It doesn t have a structural deficit and is expected to run a surplus in about two years. New Brunswick s public debt per person is in the mid-range for all provinces. The interest cost of servicing New Brunswick s debt as a share of the economy is half what it was 20 years ago. $600 $400 $200 -$200 -$400 -$600 -$800 New Brunswick s program spending at $10,673 per person is in the mid-range of all provinces, almost exactly equivalent to the ten-province average of $10,466 and is identical to its long-term average of 24% as a share of the economy. 2. If anything, New Brunswick has a revenue problem. $0 NB expecting surplus in two years Sources: RBC Canadian Federal and Provincial Fiscal Tables (based on latest reports from provinces), 2015/16* excludes $150 million contingency fund, and 2016/17 and 2017/18 are from the 2014/15 New Brunswick Budget (latest longer-term forecasts available If New Brunswick s revenue share of the economy were at its long-term average, it would have an extra $230 million revenue this year, almost enough to eliminate its deficit. The federal government will provide New Brunswick with an extra $83.5 million in transfer payments next year, which will also help eliminate the deficit. 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Public debt interest as a % of New Brunswick's GDP Sources: Finance Canada Fiscal reference tables, NB Budget, Statistics Canada Cansim table and TD Economics 2 Page

3 Child care Health care and social services Public Infrastructure Education Income tax cut Corporate tax cut Jobs Generated $million GDP impact 3. Instead of cutting spending to deal with a fiscal problem that s been wildly exaggerated, the province should focus on growing the economy, creating jobs and providing better services to families. Public spending provides a much stronger economic boost and creates far more jobs than tax cuts do. Priority areas for investment include: Investing in child care and early childhood education. Quebec s program has created tens of thousands of jobs and pays for itself through higher revenues and lower spending Public Investment Yields Strongest Economic Impact (per $1 Million invested or spent) Reducing poverty and inequality with affordable housing and other increased supports. Poverty has a big cost and inequality is bad for the economy Jobs GDP Investing in green infrastructure, better public transit and social infrastructure including public long-term care. The new federal Liberal government is planning to invest $5 billion more annually in these areas and the New Brunswick government should get with this program. Diversifying the economy and creating jobs by adding more value to our natural resources instead of exporting raw and barely processed materials. Maintain and expand public services and revenue-generating public enterprises. Selling these makes no economic or financial sense and public-private partnerships (P3s) cost much more over the longer term. 4. The spending cuts considered by the government will cause real harm, loss of decent jobs and reduced services for New Brunswick families. For example: Health care. Closing rural hospitals could lead to a loss of 500 to 700 decent jobs in communities that are already struggling. It would also mean the loss of critical health care services that could mean the difference between life and death for individuals and further decline for these communities. New Brunswick has the lowest health care costs per capita of all the Atlantic Provinces, lower than the Prairie Provinces and health care spending that is lower than the national median. With an older and more rural population, needs are greater and so New Brunswick is arguably not spending enough on health care. 3 Page

4 Education. Reducing the number of teachers and educational assistants will lead to a deterioration in the quality of education at a time when the province should be investing more. Educational assistants in particular are the unsung heroes of the school system, working with special needs students to integrate them into classrooms and society. They are also underpaid, with most paid less than $25,000 annually. The cuts envisaged could mean over 100 EAs losing their jobs and hundreds of special needs students losing the crucial help they provide. Privatization of services. Privatization of custodial and other services may lead to some short-term savings, but it will mean lower quality services, dirty and less safe or secure schools and other public facilities. It will also mean decent jobs in these communities being replaced with low wage insecure jobs all for a small savings. Privatization and monetization of public enterprises. Monetization of public enterprises and services such as NB Liquor would be nothing but a cash grab over the short-term with revenue losses over the longer term. This would be in the same spirit of the Ontario government s sale of Hydro One, which will mean an annual loss of close to half a billion in revenues. Bay street financiers are very happy, but it makes no financial sense for the province and the people lose out. 5. The province should introduce progressive taxes to help fund better public services. The province could quite easily generate enough revenue both to eliminate its deficit and to invest in improved public services. Priority areas for progressive taxes include: Restore corporate income tax rate back to 16%: $60 million. This is the same rate as PEI and Nova Scotia. New Brunswick s general corporate income tax rate was as high as 17% until the year Close tax loopholes that primarily benefit higher incomes: $20 million+. The stock option deduction tax loophole, which allows CEOs and other executives to pay tax at half the rate that ordinary people pay on their income from working, already costs the province $20 million a year. Reintroduce the Large Corporations Capital Tax (LCCT) at 0.3%: $50 million. Up until 2005, New Brunswick applied a Large Corporations Capital Tax at a rate of 0.3%. At that time it collected over $40 million a year. It was eliminated over the next four years. Increase royalties on natural resources, including timber and potash so the province generates more revenues and smaller private woodlot operators can compete by selling to mills. 4 Page

5 Introduce a progressive carbon tax at a rate of $30/tonne CO2: $430 million gross, $200 million net after compensating majority of New Brunswick households for their increased costs. The province would generate $430 million from a carbon tax at $30/tonne. A $300 annual green refund cheque for every New Brunswicker would compensate a large majority for their increased costs, leaving a net $200 million for the province to invest in improving the environment, public services, reducing poverty and other areas. Recent New Brunswick history has demonstrated that austerity and spending cuts don t work. Instead they lead to a lower standard of living, economic decline, higher unemployment and ultimately worse public finances. The federal Trudeau Liberal government recognizes this. That s why they re focused on investing in the economy, improving public services, introducing progressive taxes and creating jobs. CUPE urges the New Brunswick government to do the same. It s time to rebuild our province, not to cut it down. Prepared by Toby Sanger, with additional research by Simon Ouellette. mf/cope491 5 Page