Small deficit is big problem for pricey PC and Liberal promises
Higgs tax cut, Holt health-care commitment may not be affordable if giant surpluses become thing of the past
For a few short days, it looked like the two main parties in the New Brunswick election were offering voters a clear choice.
The Progressive Conservatives under Blaine Higgs were selling their sound fiscal management — a record that, after six years of budget surpluses, would allow them to cut the provincial sales tax if re-elected.
The Liberals, meanwhile, vowed to spend $115 million, starting next year, to open 30 new collaborative-care clinics, implicitly telling voters what might be possible if they rejected the PC tax cut.
"We do have a choice to make in this election," Higgs said at a PC nominating convention in Bathurst last week.
"I don't think there will ever be a time where there'll be an election with a clearer definition. … The distinction will be very clear."
But in that same Bathurst speech, Higgs acknowledged the prudent fiscal management at the centre of his re-election campaign now includes a caveat.
Health-care costs, including pricey travel-nurse contracts, "will throw us into a little negative position," he said, previewing a new first-quarter fiscal projection for the 2024-25 year.
New Brunswick Finance Minister Ernie Steeves has been vague about what spending a PC government might cut. (Jacques Poitras/CBC)
The next morning, Finance Minister Ernie Steeves revealed the number: a $27.6-million deficit, based on revenue and spending data from April to June.
It's "pretty small," Steeves argued — just two cents per $100.
Still, the opposition Liberals, long accused of fiscal irresponsibility by Higgs, gleefully threw the accusation back in his face.
"Blaine Higgs has been so worried someone else would take NB back into the red," Fredericton North candidate Luke Randall said in a social media post.
"We knew it would be him all along."
The deficit figure results mainly from $164 million in unforeseen health-care costs, including an additional $97 million on travel-nurse contracts.
Those contracts have proven to be a troublesome story for the PC government, which the Vitalité health authority accused of having rejected other, less costly options.
But equally problematic is what the numbers mean for election commitments premised on a flood of tax revenue like the ones that produced billions in surpluses over four years.
That revenue is levelling off, Steeves said last week, while the pressure to spend more on health care remains "very high."
Higgs told the Tories in Bathurst that if revenue growth has peaked, he'll have to be careful on spending.
"You don't want to get caught when the bottom falls out of the whole thing all at once," he said.
The sudden fragility of the province's budget surpluses isn't a one-year phenomenon, either.
Steeves's budget in March projected a $41-million surplus this year, but even smaller surpluses of $39 million in 2025-26 and $30 million in 2026-2027.
Liberal finance critic René Legacy says the PCs would have to cut services if they kept their promise to cut the HST. (Jacques Poitras/CBC)
That's when the PCs have pledged to cut the sales tax — by one point each year — eliminating around $225 million in revenue in each budget.
The PCs can't forego that much revenue and run surpluses, according to Liberal finance critic René Legacy.
"If he feels that he can still do that [tax] cut, and he's projecting a deficit, either he's going to cut somewhere where money is needed, or he anticipates that there's revenue coming," Legacy said.
Steeves was vague about what spending a PC government might cut.
"We will make the right investments, the right investments of our money in the right places, and we will move this province forward," he told reporters last week.
"As we head into this election, we will tell you the truth. We'll tell you what we can afford and what we can't afford and how we're going to do it. … Trust us. We are working on it."
The awkward questions stemming from the deficit projection cut both ways, though.
It also underscores the fragility of Susan Holt's primary care promise.
The
Liberals, led by Susan Holt, have vowed to spend $115 million to open
30 new collaborative-care clinics if elected, implicitly telling voters
what might be possible if they reject the PC tax cut. (Chad Ingraham/CBC)
The Liberal leader has, like Higgs, pledged to deliver balanced budgets.
Her promise of $115 million for primary care would be spread over three years.
That would make it easily affordable if the province were forecasting surpluses in the hundreds of millions of dollars.
But it's tougher if a Liberal government takes office having to claw its way out of a $27.6 million deficit.
Steeves argues that the deficit projection "highlights the importance of maintaining strong financial management practices," implying only the PCs can fix it.
And Higgs described the figure as a blip that may be smoothed out by the end of the fiscal year.
"I know we can recover from that," he said in Bathurst.
He pointed out that the first-quarter projection is always pessimistic but that sales and income tax remittances from Ottawa later in the fiscal year often improve the picture.
But whether that generates the $225 million to offset a one-point sales tax cut — or to fund the first part of Holt's $115-million expense on collaborative-care clinics — is another question.
And regardless, voters won't know if things are looking up before election day on Oct. 21.
That means Higgs and Holt must bear the deficit into the campaign — a small handicap financially, but a potentially large asterisk politically.
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Thats gonna happen any day now
Where the provinces stand
The fiscal flexibility that a government has to expand spending or cut taxes and remain sustainable is called the fiscal gap. The $46 billion the federal government can spend represents a fiscal gap equivalent to 1.5 per cent of Canada's annual GDP.
The fiscal gap in each province varies. In Quebec, the province could spend an amount equivalent to 1.4 per cent of its annual GDP ($8.2 billion), or cut taxes by that amount each year and still remain sustainable. But in B.C., the province would need to spend $7.6 billion (1.8 per cent of GDP) less or increase taxes by that amount to become financially sustainable.
Of the sustainable provinces, Ontario has 0.3 per cent of GDP or $3.4 billion in extra fiscal room, Saskatchewan has $700 million (0.6 per cent) and Nova Scotia has $200 million (0.3 per cent). Alberta breaks even.
Of the provinces with unsustainable long-term fiscal projections, the PBO report says Manitoba needs to spend $500 (1.6 per cent) less a year, or raise revenues by that much to reach stability over the long term.
For P.E.I. that number is $100 million (1.1 per cent), for New Brunswick it's $200 million (0.5 per cent), for Newfoundland and Labrador it's $200 million (0.5 per cent), and for the territories combined it's $900 million or 5.9 per cent of annual GDP.
Reply to Jerry Dion
Reply to Matt Steele
Reply to Dan Lee
#1 contributer -gas and oil
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#3 contributer- Forestry
This election Higgy's got some 'splaining to do on behalf of his handlers.
“ In November 2021, the Government of New Brunswick released a Provincial Health Plan entitled, “Stabilizing Health Care: An Urgent Call to Action”. The Provincial Health Plan acknowledged that health care in our province is in crisis and set forward a series of action items over the course of a two-year timeline to “build a health care system that is citizen-focused, accessible, accountable, inclusive, and service-oriented for all New Brunswickers”.
Deliverables within the Provincial Health Plan are organized according to five Action Areas:
Access to Primary Health Care
Access to Surgery
Create a Connected System
Access to Addictions and Mental Health Services
Support Seniors to Age in Place
Steve Morningstar
Budget when written by Jacques is always sensationalized. The previous budgets were underestimated by only a few percentages points it's just the numbers are huge. If you ever lead a big project and can actually come in under by less than a couple percentage points at the end of the year usually its a good thing. We have a total budget this year in NB of 13.3 Billion (increase in spending of 6%). The projected surplus at the time was 41 million. That's $4.10 on $1,330. and changing that to being off by 300 Million it's equivalent to 30$ on $1330. The numbers are large but scope is important. Now the federal liberals are off by billions and much larger % but it is scrutinized way less. Hopefully if the liberals get in we see this same scrutiny.
Henri Bianchi
Speaking of deficits, as of this yesterday we have yet to see the federal government's audited financial statements for the fiscal year that ended in March - more than five months ago.
The norm for audited financial statements in the private sector is one or two months.
Ronald Miller
Reply to Henri Bianchi
The Higgs gov't changed reporting from yearly to quarterly increasing transparency. I don't blame the feds, the more they can hide from us the better in their eyes.
MR Cain
Reply to Henri Bianchi
The private sector also chooses their own fiscal year.
Jerry Dion
I don't believe for a second that 30 clinics will only cost $115 million, whats the true cost?
Ronald Miller
Reply to Jerry Dion
The big question is where are the staff coming from to run them.
Steve Morningstar
Reply to Ronald Miller
Exactly we have added a Net (so over retirements and people leaving) of 89 docs an 686 LPNs since 2021. So it isn't like we aren't adding new docs, it could be the influx of people on any already in crisis system (it's in crisis right across the country and for quite some time) Wait times for hips and knees is way down and ER wait times are down also (although they still have a long ways to go)
Ronald Miller
Reply to Steve Morningstar
Yes, there have been many improvements under this gov't even though the left either doesn't understand that or does not want to acknowledge it. And yes, there is a long ways to go. A system that has been in decline for decades can't be fixed in a few short years.
MR Cain
Reply to Jerry Dion
The clinics are just a reorganization of processes using the same resources. My doctor has been collaborating with other doctors to offer improved service resulting in 20% increase in patient care.
Don Corey
Reply to MR Cain
You’re incorrect on that one. The 30 clinics will require resources that we don’t have, just like like every other province in this country.
Using existing resources simply means we suffer even more elsewhere in the healthcare system.
Don Corey
Reply to Ronald Miller
Holt seems to be unaware of the Canada wide healthcare crisis. Every province is short of doctors and nurses, and we’re competing with each other (and many other countries) for them.
The weekend news mentioned several ER’s in both Quebec and B.C. shutting down because of staff shortages, patients waiting on stretchers for 2 days, etc.
The Liberals here like to pretend that we’re the only province with serious healthcare issues.
Douglas James
It's "pretty small," Steeves argued — just two cents per $100. LOL. For a minute there, I thought he was talking about the sales tax cut.
Michel Pelletier
All the money that government spend or not is money that belongs to tax payers. Government are elected for the people by the people and not the other way around, If taxes are not spend they should given back to tax payers either in form of services, or rebate. What is needed now is meony for healthcare and education and that's it. Nurses have not hda raise for many years and yet they are the fondation of the healthcare system, 35% of physician to do not carry their full load of 8000 patient per physician, and yet specialist talk about the summer month slow down and that because they are on vacation during these 2 months but blame the lack of nurses ad others for this slow down, Bring in more nurses
Steve Morningstar
Reply to Michel Pelletier
So by that logic if they spend more than they collect do you expect another tax bill? We have surpluses but are in massive debt. Every dollar we pay on that debt we don't have to pay interest, making it easier to lower taxes. Which is what is happening finally.
MR Cain
Reply to Steve Morningstar
Compared to Ontario or Alberta, we do not have massive debt. We should be making debt payments the same as a mortgage; regularly, but still providing the resources to care for the citizens. In other words, don't starve the kids to make double payments then turn to the feds for more money.
Steve Morningstar
Reply to MR Cain
Alberta had no debt until the NDP got in now they are trying to pay it back. There are also more people in a single city in those provinces than our entire population combined not to mention the industry (capability to pay it back). Before Higgs got in we were about to drop our credit rating which would of made things even worse.
Dianne MacPherson
Reply to Michel Pelletier
Bringing in more Nurses is not the answer.
We've been adding to their numbers for years
and nothing ever changes.
I want to know how many Nurses are on the
Gov't. payroll.
I'll wager we'd be shocked !!
Don Corey
Reply to MR Cain
NB is entitled to the same federal funding as all other provinces. There is an established formula for equalization payments. Why shouldn’t we expect to receive all federal payments that we are entitled to?
Deborah Reddon
Reply to Don Corey
Perhaps you heard about the discussion Premiers had when they met in NS a month or so ago? I believe it was Premier Eby from BC who questioned the formula which has not been changed in some time. BC does not receive any Transfer funds but Ontario does which he said was ludicrous. However, opening that pandora's box will create lots of problems, especially for NB which will not longer enjoy receiving 40% of it's annual operating budget in the form of Transfer fund. Premier Higgs was decidedly quiet during that discussion - he knows what side of the bread gets buttered.
MR Cain
Reply to Steve Morningstar
Shoulda woulda coulda; that is past history. Fact is, what is the big deal with owing money? The banks are not going to send everyone to debtors prison. We also have a growing population, and with that, a growing source of revenue. Invest in people, and the returns will follow. The corporate world is making huge profits, yet wages and benefits are hardly enough to live on.
Donald Fillmore
How is this even a story? Higgs and crew have constantly underestimated revenues year-after-year. Why does anyone still believe their projections are anything more than excuses to cry poor when they cut programs and underfund health, education and social spending? Liberals and the media need to stop taking the Finance Dept's estimates/projections as anything more than a political bs machine. David Coon has the only sane comment on this that I've found.
Deborah Reddon
Reply to Donald Fillmore
How does not talking about the deceitful actions of the current government make it a non-issue? There are many who believe Higgs & Co erroneous reports, staying quiet is like condoning bad behaviour
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