As the Department of Finance prepares the third budget of the current provincial mandate, the Fredericton Chamber of Commerce urges the government to ignore the political election cycle and fully commit to making decisions that will get our province back on its fiscal track in the near term. Our recent pre-budget submission to Finance Minister Cathy Rogers focuses on two things – reducing the Province’s debt in the short-term and investing in our people in the long-term.
We recognize government cannot and should not run fully like a business, but there are some broad principles that can and should be adopted - particularly when it comes to finances. Any business< facing a fiscal situation analogous to New Brunswick’s would take one of two courses of action: (1) take immediate action to stop financial losses with a view to reinvesting those savings into future growth with a clear vision; or (2) close its doors and file for bankruptcy.
Everyday that passes and New Brunswick continues to add about a million dollars to our debt, we creep closer to the second scenario. As a province, there is still time to commit to the first scenario, but it has to be now and it has to be decisive. Last month, Minister Rogers touted a $66 million reduction in the 2015-16 deficit, but the bigger concern was the net debt increased by $541.4 million - $105.9 million more than the expected $435.5 million.
The government has to prioritize the province’s rising debt. New Brunswick’s interest payments on our nearly $14 billion net debt are expected to reach $700 million in the current fiscal year, meaning we are spending nearly $2 million per day for the interest payments on past purchases. That amount of money can be a game changer for a small province like New Brunswick - if it is reinvested with economic growth as the only priority.
We must also face the reality that a significant portion of our annual budget comes from federal transfer payments - payments generated in large portion from oil and gas industry, which is now facing its own long-term financial issues. Unable or unwilling to use our own resources to the economic benefit of the province, New Brunswick should get used to increasing pushback from “have” equalization provinces which are now struggling themselves. In short - the Province has to find solutions internally and it starts with balancing the books.
Raising taxes cannot be the answer. Businesses are struggling for survival in New Brunswick. In the past year they have seen increases in personal income tax, minimum wage, HST and corporate tax. They are facing a massive increase in worker’s compensation premiums in 2017, a carbon tax in 2018 and a hike in the Canada Pension Plan in 2019 - at a minimum.
Economic growth through business success is the only sustainable way for the Province to remain viable. It is the only route to protecting our health and education systems. It is the only way to retain our young people and begin to increase our population.
It is also our people where government should be looking to invest as a long-term strategy. Investing in human capital through immigration, education and skills development will allow New Brunswick to build the generational foundation it needs for economic prosperity.
We need to increase our population by about 1% per year in order to keep pace with the country and grow the economy, according to economist Richard Saillant - about 7,500 people per year. While increased immigration has to be part of any population-growth solution, its effectiveness (retention rates) will also ultimately be determined by economic growth, and more specifically - jobs. The symbiotic relationship between immigration, increasing the population and economic growth is not linear, but there is a thread that connects them all - education.
This means basic literacy in the K-12 system, workforce-ready skills development, and investing in our post-secondary sector. 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 the centrepiece of our 21st century economy and one of the safer investments a government can make in terms of return on taxpayer investment, as UNB’s recent economic impact study demonstrated - but first the government has to figure out where that money is coming from and we suggest they look internally.
The province will not be ‘fixed’ in one budget or in four-year increments and it is difficult to think generationally when our issues are so immediate, but we have to begin somewhere and it starts with reducing debt - that’s the problem that hangs over and weighs down everything else.
Krista Ross is CEO of the Fredericton Chamber of Commerce. With more than 950 members, the Fredericton Chamber of Commerce is one of Atlantic Canada’s largest chambers of commerce. A dynamic business organization, the Fredericton Chamber of Commerce is actively engaged in policy development that affects the competitiveness of our members and of the Canadian business environment. It’s vision is Community Prosperity Through Business.