Painful austerity budget for Newfoundland and Labrador

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The provincial government of Newfoundland and Labrador brought down an austerity budget on Thursday, which included an extensive combination of tax and fee increases, as well as a variety of spending cuts and delays meant to control the deficit.

Low oil prices and high short-term expenses for the controversial Muskrat Falls hydroelectric project have strained the province's finances, only a few years after an oil boom brought a brief and unprecedented period of wealth.

On November 25, days before the election that brought them into power, the Liberals reassured voters that public sector jobs were safe. Instead, however, the budget will set the stage for hundreds of layoffs.

Personal income, corporate income, gas, tobacco and sales tax will go up, as will the cost of many government-issued exams, permits, inspections, tickets and licenses. Operational grants to health authorities, Memorial University, arts organizations, school and library boards and other entities will be reduced, school class sizes will increase and some courts and government offices will close, alongside many other cuts.

A new income supplement is meant to reduce the impact of austerity on low income individuals, though net benefit for many may be marginal because other programs, such as a home heating rebate, are being cut entirely. A new deficit reduction levy, which will see individuals earning $25,000 pay $300 and those earning over $202,500 pay only $900, has been criticized for being unfairly regressive.

Reactions: Labour

Jerry Earle, head of the Newfoundland and Labrador Association of Public and Private Employees, called the budget a betrayal. Mary Shortall, head of the Newfoundland and Labrador Federation of Labour, also voiced her disappointment.

"Suffice it to say we are not very happy with this [budget]," Shortall, told rabble in an email late Thursday afternoon.

"Obviously, this government sees deficit reduction as more important than employment or services, and they didn't have the courage to enact a long-term progressive, permanent taxation regime where those who can afford to pay more do," she said.

"We're still way behind our neighbouring provinces. This [budget] will be particularly hard on seniors, youth, students, low-income earners and rural Newfoundland and Labrador. And this is the tip of the iceberg. All indications point towards worse cuts in the fall," Shortall explained.

Reactions: Economics

Alison Coffin, an independent economist in St. John's, said that the problems in the budget have been brewing for some time and that the budget could have been far worse. Coffin was also a candidate for the provincial NDP in the November election.

"Honestly, it's not at all unexpected. We've known that we've been overbudget for the last couple of years. A lot of the things that have put us over the tipping point have been in the making for a prolonged period of time," Coffin said in a phone interview with rabble.

Coffin expressed that, while there is a genuine need for cutting spending and increasing revenue, and that carrying a deficit under current circumstances is benign, the government still does not appear to have a long-term plan to diversity the economy, retain young adults or manage wider effects in the labour market.

"I'm a little bit more concerned with the fact that they don't have a real plan for why they're carrying a deficit and what the end result will be. Once we get through this slow down in the economy, where do they want to be? They talk about diversification and there's $2 million that goes into the fishery and $13 million goes into the tourism -- these are the things that we've already done. ...It's not really a diversification."

"We're still facing an aging population, we're [still] facing a declining population. But we don't see any plans to say, 'Well, how are we going to keep young people in the this province and keep them having babies?' ...We don't see any labour market adjustment pieces being [included]. People are going to be laid off, but there's no talk of [that] being strategic," Coffin said, going on to highlight that hypothetical cuts to police services, for example, could be especially imprudent given that recessions increase crime.

Newfoundland and Labrador's median age is the oldest in Canada. In 2013, then-Premier Kathy Dunderdale called the province's demographic situation scary.

Higher education

Students were not expecting the re-introduction of provincial student loans, which had previously been replaced with non-repayable grants. The province's student aid package had been lauded by student organizations across the country. Student grants are now being entirely eliminated for those who study in another province, unless their chosen program is not offered in Newfoundland.

Travis Perry, the chair of the Canadian Federation of Students (CFS)-NL, shared his disapproval at the new changes with rabble.

"I definitely think students are a little caught off guard by that change," referring to the re-introduction of loans.

"We were given no indication from government that that was something that they were considering. It was something that [the Liberals] celebrated alongside the PC party when they were governing as a step in the right direction. ...It's definitely concerning to see that there was no mention of maintaining a tuition freeze in the budget."

Perry added that he and other students will be attending an anti-austerity rally planned by the St. John's Social Justice Cooperative.

"Students are definitely angry and frustrated and upset over this budget and I'm sure they're going to be taking actions in the coming weeks," Perry said.

Bilan Arte, the national chair of CFS, told rabble that students were "incredibly disappointed and shocked" to see the re-introduction of student loans.

"Cutting funding to Memorial University -- it was shocking. From our perspective, [the budget] really took away a very strong example for what government funding in post-secondary education could look like," she said, going on to say that CFS has often cited Newfoundland and Labrador as a success story. 

The government also appeared to shift responsibility for the tuition freeze at Memorial University to its administration, with Bennett refusing to categorically commit to preserving it. Premier Dwight Ball had previously committed to retaining the freeze for Newfoundland and Labrador students.

Activism

The Social Justice Cooperative of Newfoundland and Labrador has already planned an anti-austerity demonstration. Jon Parsons, a board member with the Cooperative told rabble that a demonstration is necessary to turn popular anger into action, help create solidarity, and overcome divisions.

"People are understandably angry right now. ...Sectors of society have been pitted against each other [but] one of the things we want to accomplish is to create a sense of broad-based solidarity and to instill a fighting spirit so that people can resist."

The planned rally will take place Harbourside Park in St. John's for Saturday, April 16 at 1pm.

 

Cory Collins is a writer and visual artist living in St. John's. He can be contacted via Twitter @coryGcollins or corycollins.ca.

Photo: flickr/PROKenny Louie

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