The NL Employers’ Council released a provincial Shadow Budget on April 13th, developed with research conducted by the Conference Board of Canada.
The Conference Board examined spending in NL as compared to other provinces on a per capita or per GDP basis. They also measured the economic impact of tax increases and spending reductions to specific program categories, and made recommendations for NL to return to a sustainable fiscal position. Based on this research the Employers’ Council developed a Shadow Budget recommending expenditure and revenue targets for government over the next four years. This budget will provide a framework to evaluate the 2016 Provincial Budget.
- Reducing expenditures by just over $1 billion would bring spending levels back to approximately 2008/2009 levels, and would represent a 15% reduction from 2015-16 spending levels.
- This Shadow Budget recommends implementing the majority of these expenditure reductions upfront in the first two years, to reduce the cost of debt servicing in future years.
- This $1B in savings should be achieved through permanent reforms to how government delivers programs and services. Centralization of services, use of technology, and partnerships with the private sector should be utilized.
- The Shadow Budget recommends a temporary 2 percentage point increase in HST along with temporary increases in other consumption taxes. A temporary tax increase will keep pressure on government to restructure program and service spending to be sustainable long term, while mitigating the short term economic impact of more drastic expenditure reductions.
- Personal and corporate tax rates should be maintained, as increases in these taxes in difficult economic times could have significant long term implications on the economy.
The combination of cost savings and revenue generation measures presented in this Shadow Budget would allow government to return to balance in 2019-20, with a surplus of $140 million. The return to balance budgets as soon as possible is extremely important. Debt servicing costs are projected to eat up 21 cents of every dollar of revenue coming into government by 2019-20 if nothing is done.