On November 27, 2015, Minister Victor Boudreau released the specific initiatives the Government of New Brunswick is considering as part of their year-long strategic program review. The list, a combination of efficiencies that should be the ongoing business of government and a series of tax increases that will hurt our fragile economy is sure to please no one in the short term - but may be our last shot at getting our fiscal house in order in the long run. There is no doubt - New Brunswick needs action and now. Hopefully this process will give the government the political will to make decisions
and the commitment to stand by them.
The Fredericton Chamber of Commerce has been engaged throughout the program review process and our primary advice for the minister continues to be focusing on choices that will not hurt economic growth in the province as this is the only sustainable way to truly get the province’s finances in order for the long term. No amount of cost cutting or tax increases will lead to prosperity - only growth and the province being ‘open for business’ will get us there, both in reality and by perception.
We recommend a comprehensive review of the province’s entire tax structure, including personal, corporate, property and consumption taxes to ensure that New Brunswick is following best practices in a competitive global marketplace. Cost competitiveness is one advantage that we have in New Brunswick, but this has been consistently eroded over the past few years and the revenue side of this program review threatens to eliminate it altogether. The combined provincial/federal personal income tax rates are already hurting the province’s ability to attract the best and brightest employees, entrepreneurs and physicians.
There are already highly-skilled (and irreplaceable) professionals that are reducing working hours to get below the highest threshold (reducing their tax contribution to the Province) and others that mostly work outside of the province considering moving to a more favourable jurisdiction (completely eliminating their tax contribution to the Province). Not only does this further signal that we are closed for business in the province, but will also hurt businesses currently operating in the province, which ultimately harms our communities and citizens. It is clear that any short-term fiscal benefits to the government by further increasing taxes and costs are simply slowing our demise (and will eventually accelerate it).
Before any taxes or other costs are raised, we believe that all steps should be taken to prioritize efficiencies within government, while rationalizing public assets and services to reflect current realities. Part of this means having a modern urban economic development model, particularly in line with the Province’s Chief Economist David Campbell’s October 2014 paper, Towards a stronger urban economic development model in New Brunswick. Financially successful jurisdictions have a strong urban core (or cores). Given New Brunswick’s geographical and demographic history we need our small urban centres in the south and north to work more closely together and for everyone to recognize, celebrate and capitalize on the differences between rural and urban areas. This does not mean leaving rural areas behind - it means focusing on what different areas of the province are most capable of doing best - whether it be natural resource development, fostering innovative startup companies or becoming a centre of retail commerce.
One of the more concerning items in the “savings” list are the proposals for post-secondary institutions. Post-secondary educational institutions are not only credential-granting bodies - they are also the hub of entrepreneurship, innovation and skills-acquisition in our communities. They are much more than an extension of the province’s K-12 system - they are the centrepiece of our 21st century economy and one of the safer investments a government can make in terms of return on taxpayer investment. In fact, UNB’s economic impact was recently studied: “It shows that for every $1 spent on UNB, students, society and taxpayers more than double their investment: $2.80 is returned in lifetime earnings for students; $2.80 is returned in added provincial income and social savings for society; $2.10 is returned in added taxes and public-sector savings for taxpayers. In any event, the statement that “any savings found through these measures will be re-invested into the system” makes its inclusion in the list curious since this would indicate the measures proposed will not help get to the government’s $500-600 million target.
We are also a member of the Coalition of New Brunswick Employers which has previously presented its position and we reiterate the points therein, particularly concerning costs to business, an efficient and optimized government, providing approval for private sector development projects, and an increased role for the private sector in delivering appropriate government services.
As the government has repeatedly stated - they do not create jobs, they create an environment for job growth. This means putting New Brunswick businesses in a strong competitive position. Increasing costs and reducing our capacity to innovate and educate is the worst of all possible outcomes. The business community may be an easy target politically, but in reality it represents the one true opportunity to grow and restore hope.
The province certainly requires urgent action now, but more than that - it needs action that addresses the dire debt / deficit situation while also setting up New Brunswick for sustainable growth moving forward. Doing nothing is not an option, but increasing costs or cutting areas that directly contribute to growth would be equally detrimental. If we push the economy down much further, there may not be any programs left to review.