On the Auditor General, McNeil is half right

The ironic thing about the fuss over the Premier’s snarky attack on the provincial auditor general is that he has the right target but the wrong issue.

Asked by reporters last Thursday to comment on the auditor’s deconstructing of the government’s efforts to deal with the family doctor shortage, McNeil aimed a couple of jabs in AG Michael Pickup’s direction. The gist was first, that he (McNeil) didn’t need to be told Nova Scotia has a shortage of family doctors, and second that the voters, not Pickup, would judge the quality of the government’s communication on the shortage.

Prodded for his opinion on whether the auditor had overstepped his authority, McNeil made a general observation on the respective roles of elected representatives and the auditor. He argued that public policy is the “right” of elected members, whose decisions in that regard are judged by the public at election time. Then he delivered what he may have expected to be the knockout blow.

“If he (Pickup) chooses and wants to do public policy there are 51 ridings for him to run in…He has a job to do to ensure that the finances are being spent appropriately, but public policy is actually for the people who are elected.”

To continue the boxing metaphor, the media judged that the Premier’s roundhouse punch badly missed the mark. It was McNeil, not the AG, who ended up on the canvas.

Reporters looked to the law and concluded that the auditor’s report on certain aspects of health care delivery (physician, mental health and home care services) was well within his legal mandate. That’s an interpretation with which the AG heartily agreed. “I’m 150 per cent comfortable that the work we’re doing lies within the mandate of the office of the auditor general,” said Pickup.

Far be it from me to challenge 150 per cent certainty. And the audit at issue of the work of the Department of Health and Wellness and the Nova Scotia Health Authority certainly seems to fall within the terms of Section 18 (1) of the Auditor General Act. That section says the AG may conduct “any audit or investigation that the auditor general considers appropriate” with respect to “any auditable entity.” An auditable entity would include any government department or agency such as the health authority.

Fiscal policy

Who knows what McNeil was thinking when he went after Pickup? Perhaps he was just annoyed with the headlines generated by the health audit – for example, “AG slams Nova Scotia health care” (Chronicle-Herald) and “Report calls out gaps in N.S. health care” (Globe and Mail). Those headlines help to validate what the opposition parties and vocal members of the public have been saying for months.

Maybe the Premier was thinking that the timing of the audit report and the way it was delivered and covered was close to crossing the line set out in Section 18 (7) of the legislation, to wit “Nothing in this Act is to be interpreted as entitling the Auditor General to question the merits of policy objectives of the Government.”

I’m no lawyer, but as tough as the audit report was, it did not question “the merits of the policy objectives of the government” – just its failure to achieve them. Whether the same can be said about the eagerness of both Pickup and his AG predecessor to implicitly question the fiscal policy objectives of successive governments is another matter. If there has been any crossing of the line into public policy it has taken place there.

Pickup and the AG before him, Jacques LaPointe, have used their office to purvey doom and gloom about Nova Scotia’s fiscal state, using selective statistics and dubious analysis to make their case. It started with LaPointe, when the NDP was in power, questioning the inter-generational ethics of public debt. It has continued with Pickup.

I wrote about Pickup’s tendency to leave out facts that would spoil his story in posts in February 2015 and again in November of 2015. As a backbench MLA in 2012 Howard Epstein challenged LaPointe’s initial foray into this territory at a meeting of the legislature’s public accounts committee in January 2012. Further details of that encounter can be found in Epstein’s book, “Rise Again: Nova Scotia’s NDP on the Rocks.”

One thing to note is that there is nothing in the Auditor General Act that mandates an overview of the province’s fiscal position. LaPointe and Pickup have taken it upon themselves to venture into territory normally occupied by the Canadian Taxpayers Federation. The other thing is that other than Howard Epstein, no politician has complained about AG’s continuously raising the small “p” political issue of public debt. Indeed, when Epstein brought it up in 2012 the top Liberal at public accounts apologized to the AG for his “diatribe” and the Conservatives called for Epstein to be kicked off the committee.

It was obviously to the political advantage of the Liberals and Conservatives to do so. When the dustup involving Epstein and LaPointe occurred, the debt of the province stood at $13.4 billion. Liberal and Conservative governments ran up over 97 per cent of that debt over the years, $9 billion of it accumulating since 1990. Being able to cast the NDP as defenders of public debt worked like a charm in letting the Liberals and Tories off the hook for past performance. Similarly, Pickup’s dire warnings of 2015 fitted well with the McNeil government’s restraint agenda.

Doom and gloom forever

But now that the budget has been balanced and some modest new spending is planned, the McNeil government may want to pat itself on the back and austerity weary Nova Scotians can point to a recent report from the Parliamentary Budget Office in Ottawa. It revealed that Nova Scotia is one of only two fiscally sustainable provinces in the country. (PBO defines fiscal sustainability as maintaining current debt-to-GDP levels without the need to raise taxes or cut spending. The calculations are done annually, and may be different next year).

Despite that positive news from the PBO, the AG is still peddling doom. Pickup’s latest fiscal overview report presented in October downplayed the Liberals’ modest surplus and played up the bad news over the last 10 years – expenses up 37%, taxes up 49% and net debt increased by $3 billion. His report is accompanied by videos (available on Utube) posing 30 questions Nova Scotia “may want to ask” (of whom is not clear).

The ten questions on fiscal matters are either politically loaded or unanswerable. There are no non-political answers to questions such as:

  • Nova Scotia paid $7.5 billion in interest in the last 10 years. What happens if interest rates rise by 2-3% and how will this be paid?

Or

  • Total health care costs increased 46% in the past 10 years. If the number of Nova Scotians over 65 years doubles in the next 15 years, what is going to happen to health care costs?

Or

  • What are the biggest risks to Nova Scotia’s financial conditions and how prepared is Nova Scotia to react to the next recession or unexpected events?

And then there are the ones that seem designed to stir up the political pot, such as:

  • Education costs have increased by $109 million from 10 years ago. With fewer students than a decade ago, how did education costs increase by 7%?

Or

  • Total net debt increased by $1.6 billion in the past five years…What does this extra debt get us?”

Then there is

  • Why does the amount of debt we all owe keep increasing?

Question number eight (Is there a plan to repay the debt, and how many years will it take) is in my view the most eccentric. There has been a public debt as long as there has been a political entity called Nova Scotia. Does the AG of this province seriously believe we can have a plan not just to reduce it – but to repay it?

So run, already

Perhaps he is just being provocative with this question and one he posed in his chapter on pensions. That one’s a doozy, politically. It asks why the province contributes different amounts to different pension plans – one dollar for each dollar contributed by teachers and civil servants and five bucks for every dollar contributed by MLAs. That’s a good one to be chewed over at the local coffee shop by the “all politicians are in it for the money” crowd.

No doubt about it. Michael Pickup has raised a lot of interesting questions, most of them political. Maybe it’s time he gave up his $187,000 per annum 10-year gig as AG to run for office. The Conservatives are currently looking for a Leader so he may even be able to get in close to the top.

 

-30-

Posted in Uncategorized | Leave a comment

The Mayor’s speech and the missing facts

I couldn’t help but notice the headline across the top of page 6 in last Thursday’s Chronicle-Herald : “Halifax on the rise, says Savage.” Accompanied by a photo of the mayor himself, the story reported on Savage’s speech to a luncheon put on by the chamber of commerce and the Halifax partnership.

Boosterism was the order of the day, and the mayor provided it, both with his rhetoric (“This is Halifax’s time, time for big ideas and decisive moves”), ambitious growth targets (population of 550,000 by 2031) and some statistics.

For the latter, Savage highlighted population growth (to 426,000 from 414,000 over the past two years) particularly in 25 to 39 age group – up 2,560 in 2015 and 3,800 in 2016. “These are the people that every city covets,” said the mayor – and who would not agree that growth in this key demographic is a good thing? According to the Herald report, the mayor also looked at the bright side of the current plague of traffic snarls and closed sidewalks, implying they are the result of it being “Halifax’s time.”

In the mayor’s defence, his speech was par for the course at luncheons sponsored by business groups. A big part of the contemporary political leader’s job seems to consist of cheerleading for business and promoting city or province to business leaders. Facts and stats are selected to further that objective, while nuance and balance are not part of the deal.

With regard to the ubiquitous construction, it’s hard to measure how much of that has to do with economic growth and how much is just to take advantage of federal dollars to replace infrastructure that’s simply worn out and in need of replacement.

The population stuff is easier to calibrate since it comes from Statistics Canada. The mayor referred to the increase in 25-39 year-olds as his favourite statistic and it’s no wonder. There are not many other stats at hand to support an excessively cheery outlook. Indeed, some facts and stats could lead in the opposite direction, especially for rural Nova Scotians and young Haligonians.

Demographics mixed

Take for example the mayor’s favourite, demographics. While a surge of immigration played a big part, another chunk of the city’s growth came from people moving in from other parts of the province. Thus, while Halifax was growing by almost 12,000 between 2014 and 2016, the rest of the Province’s population dropped by nearly 5,400. The same pattern existed for the 25-39 year-olds. While Halifax gained nearly 6,400, the rest of the province lost over 2,000 members of this sought-after demographic. A small percentage moved to Halifax, the rest left the province.

Other examples: while Halifax’s 25-39 age group was growing, the feeder bracket for this demographic was not. The number of 15-24 year-olds in Halifax dropped by 2,300 between 2014 and 2016. Throw in the fact that Halifax’s over-65 population increased by almost 9% and you will understand why – the mayor’s selective statistics notwithstanding – our aging population trend continues.

Then there is the confounding state of employment in Halifax. Despite appearances to the contrary, as reported in July and in August statistics show that the number of jobs in Halifax is not keeping up with the increase in population. This leads to a jump in the unemployment rate and questions whether the city will retain many of those working age individuals who are contributing to the current increased population.

Employment still dropping

The latest monthly employment numbers from StatsCanada – coming out two days after the mayor’s speech – provided more troubling news on that score. They showed a continuation of the negative trend that began in the summer of 2016 when employment was 231,500 and the unemployment rate was only 5.2%. Comparing October 2017 to a year earlier shows the following.

Date                                     October 2016           October 2017     Change

Employment                       226,200                   222,900           -3,300

Full-time employment      189,100                    185,500           -3,600

Unemployment                     13,500                      16,800             3,300

Unemployment rate                5.6%                         6.9%             23.2%

 

In a nutshell, with the size of the workforce unchanged employment dropped by 3,300 and unemployment rose by the same amount between October 2016 and 2017, leading to a big increase in the unemployment rate. The 25-44 age group – including the hankered-for 25-39 group – fared slightly better than the labour force as a whole, with an unemployment rate of 5.7% in October. That rate was in the middle of the pack among the 34 census metropolitan areas (CMAs) reported by Statistics Canada.

That middling result was in sharp contrast to the youth labour force. Unemployment among 15 to 24 year-olds was 17.1% in October, second highest in Canada and up a rather startling 45% from October 2016. That 45% increase represents the rate. The number of unemployed youth has gone from 4,500 to 6,100 – an increase of 36%. And think how much worse those numbers could have been if so many of these young people hadn’t left town (see above).

Youth unemployment, like poverty, has been talked about for so long- and has been in double digits seemingly forever – that no one pays much attention. (Except when it goes down a bit and gives the government a chance to pat itself on the back). Maybe that should change. October marked the sixth month in a row that the rate of unemployment among young Halifax workers exceeded 16%. The last time the Halifax rate hovered around such a high level for half the year was in 2002. (CANSIM 282-0128).

It may be a bit of an overstatement to throw out a headline such as “Halifax faces a youth unemployment crisis.” But there’s at least as much evidence to support such a headline as there is the “On the rise…” that trumpeted the mayor’s speech to the business crowd.

-30-

 

 

 

 

 

 

 

 

 

Posted in Uncategorized | Leave a comment

Feeling sorry for Alberta (and the rest of Canada)

Globe and Mail columnist Gary Mason has a timely piece in Wednesday’s edition. Headlined “No one should feel sorry for Alberta” his commentary serves as a preemptive sortie again the emergence of Jason Kenney as the new leader of the United (in rage) Conservative Party of Alberta.

As Mason sees it, Kenney rose to power with a narrative formed by the notion that “the province is a shell of its former self: the NDP has ruined everything: the rest of the country is against us but we won’t be on our knees much longer. Mr. Kenney will Make Alberta Great Again.”

Mason argues that many provinces – just many? – wouldn’t mind having Alberta’s “so-called problems” such as “the highest GDP per capita in the land” and growth exemplified by Calgary’s rate of 4.6%. He could have cited even more examples to strengthen his case – provincial growth which is expected to be the highest in the country this year and next.

But his key point is about taxes. Mason frets unnecessarily about Alberta’s growing deficit and debt but points out that if Alberta raised its taxes to the same level as neighbouring British Columbia – with the second lowest taxes in the country – it could bring in almost enough revenue to eliminate this year’s expected deficit.

The concern about Alberta’s deficit – or as Mason would have it “the mess the province is in” – is based more on ideology than fiscal reality. The province’s debt-to-GDP ratio is estimated at 6.8% this year. RBC’s most recent Canadian Federal and Provincial Fiscal Tables project that even after two more years of sizeable deficits Alberta will have a ratio of only 11.4%, still easily the lowest in the country and about one-third of the 34.1% projected for Nova Scotia in 2019.

NDP raised taxes

Mason paints with an overly broad brush when he suggests that rather than raise taxes or rein in spending “politicians and others here moan and whine about how horrible things are, how awful the province is being treated by Ottawa and other jurisdictions.” So far, the moaning and whining is coming mostly from Jason Kenney and his crowd, not from the NDP government.

In its first budget, the Rachel Notley government increased the corporate tax from 10% to 12% and replaced the 10% flat tax on personal income with a bracketed system that raised the rate to 15% for those making $300,000 or more. (Nova Scotia’s top rate is 21% and kicks in at $150,000). The NDP also bravely introduced a carbon tax of $20 a tonne, rising to $30 next year.

Despite these increases, the NDP government’s most recent budget was still able to boast about Alberta’s overall tax advantage compared to other provinces, with no sales tax, no health premium and no payroll tax. “Even when the carbon price rises to $30 a tonne in 2018, Albertans and Alberta businesses will still pay at least $8.7 billion less in total taxes and carbon charges than if Alberta had the same tax system and carbon charges as any other province,” according to the 2017 budget.

But does this positive, revisionist view of the province’s economic situation mean “No one should feel sorry for Alberta”? Not necessarily.

Reminding about the province’s good fortune relative to others has had no noticeable impact on the complainers and bellyachers. The carbon tax in particular has people seeing red even though the impact of the levy on most Albertans is benign. At worst the tax may cost an affluent fuel-inefficient family of four about $40 a month, but will be fully rebated to the majority of households.

The perceived negative effect on Alberta of the federal equalization program is also hard to fathom. Alberta does not receive equalization – as the richest province in the country it doesn’t need it. In general, Alberta does pay more in federal taxation than it gets back in federal programs – again, a consequence of its wealth. And of course, that has changed to Alberta’s advantage in recent years with the on-going per-capita health transfers and short-term disaster relief. And Jason Kenny’s big idea – removing resource revenues from the equalization formula – would provide negligible benefit to Alberta, while surely helping out Newfoundland and Labrador.

Fear for Future

The fact that equalization and the carbon tax remain such sources of anger suggests they are proxies for underlying anxiety about Alberta’s ability to keep the good times rolling in a world in which fossil fuel consumption must decline. Railing against the carbon tax, equalization and pipeline opponents in other provinces are interconnected responses to that fear of falling now that a major source of the province’s wealth is in jeopardy.

Never mind that several generations of political leadership – federal and provincial – should have seen this coming and planned for it. Any prospect of such forward thinking evaporated a long time ago. Put simply, the Mulroney government handed over the formulation of national energy policy to the oil industry, and Alberta decided to dip into its heritage fund to avoid a sales tax.

Now that Donald Trump has demonstrated again the potency of know nothing populism we will likely see a continuation of the sort of provocative stuff Kenney spouted during his leadership campaign. Trump has his Mexican wall and his Muslim ban; Kenney has his referendum on equalization and his campaign against national polices on carbon emissions.

The difference is that Trump’s cruel but nonsensical proposals may have sprung from ignorance. Kenney, a member of the federal cabinet for eight years, has no such excuse. He will know that a provincial referendum on a federal program is fraudulent. But he could well keep on about that, as well as challenging national polices on carbon emissions.

Stoking people’s anger at scapegoats and paper tigers is easier than talking about the real problems and their solutions. If Kenney and his United Conservative Party continue that approach and are successful we may indeed end up feeling sorry for Alberta – and for the rest of the country as well.

-30-

 

Posted in Uncategorized | 1 Comment

McNeil tries to re-write history of bad health care deal

The fall session of the Nova Scotia legislature wrapped up Thursday – not with a whimper but a crack – as the government ignored opposition and expert advice and whipped through its flawed cyber bullying and adult capacity legislation. Those bills, along with a gormless cap-and-trade bill that will leave everything to cabinet regulation, were the dubious legislative highlights of the session. Question period and a lot of the budget debate were dominated by health care and its mismanagement.

Given that health care also monopolized the recent Nova Scotia election, one might have expected more attention directed to the diminished federal health transfers that are contributing to the problems. Some insist that money (or lack of it) isn’t the issue. That may be true, but we are having trouble finding family doctors and the ones we have are, on average, the lowest paid in the country. So there is at least a correlation between the issues everyone’s talking about (finding a family doc) and the one rarely mentioned (the tight-fisted approach of the Harper-Trudeau government to health transfers).

Thanks to the Nova Scotia Health Coalition, the subject of health transfers finally arose during question period a week ago Friday. The Coalition had put out a release pointing out that the health deal accepted by the McNeil government around Christmas time last year would cost Nova Scotia something like $1 billion over the next ten years.

The $1 billion figure was a little lower than the $1.2 billion I calculated in a piece last March using a slightly lower annual escalator. However, give or take a couple of hundred million, unless the national economy booms it is very likely that there will be a costly (to Nova Scotia) gap between what the provinces settled for and what we could justly demand. When NDP Leader Gary Burrill, citing the Health Coalition’s report, asked the Premier to admit he signed a bad deal, the ensuing exchange elicited from McNeil a response typical for the session just past. Every time the NDP asked a question, McNeil responded by distorting the NDP’s record in office and throwing it back at them.

What follows is an edited version of the exchange from Hansard for Oct. 20, starting with Gary Burrill questioning the Premier.

Burrill: A new report from the Nova Scotia Health Coalition finds that the Health Accord negotiated with the federal government last December will end up costing Nova Scotia close to $1 billion over the next 10 years because the Premier agreed to an escalator clause that falls so far short of the 5.2 per cent required to ensure the federal government pays its proper share. Mr. Speaker, the Premier was adamant at the time that this was a fine and fair deal for our province. Will he now admit that there is mounting evidence that he was wrong?

McNeil: Mr. Speaker, the honourable member…would know that when he was in government last, that escalator clause was negotiated with his Premier and the federal government, the former Conservative federal government….We went to negotiate it to ensure that there were hundreds of millions of dollars added, to ensure that we dealt with the escalating costs of home care…there’s also additional funding in that Health Accord to adolescent mental health. (Interruption)

The Speaker : Order, please.

McNeil: Thank you, Mr. Speaker. Again, I think it’s sensitive to them, the fact that the deal that they are referring to is one that was negotiated by their former Leader with the former Conservative Party…We’re going to continue to stand up and work with Nova Scotians to ensure they have access to primary health care.

Burrill: We have communities holding Chase the Ace events so they can buy lifts for their hospitals; we have nursing homes making cuts in diet and programming. Just this weekend, we have six emergency rooms across the province that are closed. The Health Coalition reports that the money Nova Scotia failed to negotiate in the Health Accord would have paid for 396 physicians. I want to ask the Premier, why did he negotiate a deal that put us so far behind the eight ball for dealing with the health care crisis?

McNeil: Mr. Speaker, the deal he is referring to, the base of that deal was committed to by that government. Thank God Nova Scotians booted them out…We negotiated on behalf of the people of Nova Scotia to have hundreds of millions of dollars added to that deal for home care, which is a priority for our government, which continues to reduce the home care wait-list, to provide supports at home for seniors where they want it…

Burrill: Mr. Speaker, I do hope that the Premier will not be looking to us to provide him with a reference as a history teacher. Now few, if any, government decisions will have negative consequences as long-lasting in our communities as the Premier’s negotiation of a health deal that does not account in its fundamentals for the realities of our older and our rural population…

Let’s look at the actual history, instead of McNeil’s version.

  • The health deal in place when the Liberals took office was not “negotiated” by the previous government. The Harper Conservatives imposed the deal on the previous government (and all provincial governments), decreeing in December 2011 that a 6% annual increase would end in 2017, to be replaced by smaller increases tied to the rise in the GDP.
  • As the 2012 Chair of the Council of the Federation, McNeil’s predecessor, Darrell Dexter, responded to the edict by working with the other provincial and territorial governments to seek negotiations with Ottawa for  a better health deal. When Stephen Harper refused to negotiate, the Dexter government joined the other Atlantic provinces as well as British Columbia and Quebec to press for a funding formula that would give a top-up to provinces like Nova Scotia with older populations.
  • During the 2015 federal election campaign, the federal NDP committed to retaining the 6% escalator. The Trudeau Liberals accepted the Harper government’s escalator and promised only to spend an extra $3 billion over four years for home care – worth about $7 billion less to the provinces than keeping the 6% escalator over the same period. The Liberals  made no commitment for a needs-based top-up.
  • McNeil and other Liberal Premiers in the region said little or nothing about health funding during the federal campaign helping to keep the issue – and the stark difference in party platforms – off the campaign radar.
  • Post election, there is no evidence that the McNeil Liberals vigorously pressed the Trudeau government for a demographic top-up, an idea that had support from both the Canadian Medical Association and the Conference Board of Canada.
  • Nova Scotia was one of the first provinces to abandon the provincial common front demand for a 5.2% annual increase to settle for a GDP-determined escalator, some targeted per-capita funding for mental health and home care, with no demographic top-up.
  • According to budget documents, as of next March 31, two and a half years into the Trudeau government mandate, Nova Scotia will have received a mere $8.8 million of new money for home care and mental health, the first modest instalment of the heavily back loaded “hundreds of millions of dollars” McNeil claims to have “negotiated.”

Instead of looking in the rearview mirror for someone else to blame for the federal and provincial Liberals’ health funding duplicity McNeil should spend more time thinking about the future of health care. A good place to start would be the latest annual sustainability report from the Parliamentary Budget Office. The PBO finds that the federal-provincial fiscal imbalance that began under the Harper government is continuing. Despite current deficits, the Office’s long term growth and demographic projections show the feds completely eliminating  their debt over the next 40 years. Meanwhile, provincial debt will increase more than three-fold without some combination of spending cuts or tax increases.

The principal cause of this potential debt down loading is increased health costs from an aging population, and federal contributions that do not keep pace with those cost increases. As a result, the PBO projects the federal share of health spending will drop by from 20-30% in the Atlantic Provinces over the next 25 years. In Nova Scotia, the federal share of health spending is projected to drop from 23% in 2016 to 18.1% by 2041. In the worst case, Newfoundland and Labrador, the federal share based on current trends is 13%, down from 18.6%. To preserve any semblance of a national system where the quality of health care is not determined by postal code, those percentages need to be going up, not down. The McNeil Liberals need to drop the partisanship, admit the flaws of the current health deal and work to fix them.

-30-

 

Posted in Uncategorized | 1 Comment

Liberal mid-term troubles bring back same old political landscape

As the federal Liberal government marks its second anniversary it appears at least some of the bloom is off the Trudeau rose. Several national polls actually have the Liberals neck-and-neck with the Conservatives. The CBC’s Poll Tracker aggregation, updated Oct. 17, had the Liberals slightly ahead, but down ten points from their standing a year ago.

The drop-off in support extends to the Atlantic Region, where Poll Tracker finds a similar ten-point drop from this time last year, albeit from a much higher starting point. Despite the decline in popularity, Poll Tracker still has the Liberals more than 20 points ahead of the second place Conservatives in the Atlantic Region. Halifax-based Corporate Research Associates (CRA) found an even wider margin of support for the Liberals over the Conservatives – 39 points – in its latest quarterly survey.

But the CRA polling was completed before the uproar over Energy East and tax reform hit critical mass. Those issues were particularly hot in New Brunswick, where opposition to the proposed changes to small business taxation led to the first public crack in the region’s solid Liberal wall.

Saint John MP Wayne Long got his knuckles rapped for supporting an opposition motion calling for more consultation on the reforms. The Liberals followed up that mild punishment up with some regional troubleshooting, dispatching the Finance minister to Saint John this week to announce a retreat on the passive income part of the tax reform package. Although there are plenty of other reasons – the health deal and the stagnant regional economy chief among them[1] – that foray into damage control suggests the Liberals see a connection between the dip in the polls and the tax reform brouhaha.

Trying to attribute a drop in popularity to any particular issue is a mug’s game. However, the mid-term polls indicate an interruption in what looked a year ago like an inevitable Liberal parade to re-election in 2019. The tightening polls also provide the cue for a resumption of talk about vote splitting and strategic voting.

Singh factor

So far, the Conservatives are the default beneficiaries of Liberal ineptness. But there is also the Jagmeet Singh factor. According to several reports his election three weeks ago to lead the NDP pleased Conservative strategists who expect his appeal to ethnic and suburban voters in Toronto and British Columbia will take center-left support from the Liberals and help elect Conservatives. A poll by Angus Reid, conducted two weeks after Singh’s victory, may bear this out. It shows the NDP creeping up to 18% and the Liberals and Conservatives in a tie.

Liberals were quick to buy into the Singh-as-spoiler scenario, telling the Hill Times that “the Jagmeet Singh-led New Democrats would ‘siphon off’ a significant chunk of votes from them in the 2019 election, creating three-way races across the country that would be a ‘double whammy’ for the ruling party trying to hold off the Conservatives, and, at the minimum, could reduce them to a minority government.”

Should that potential scenario continue to show up in the polls we will cursed by the same phenomenon that has often dogged federal politics ever since the Progressive Conservatives were replaced by the current noxious brand 20 years ago: strategic voting to keep the latter from getting in – or in the case of Stephen Harper’s government, getting back in – with 30-something per cent of the vote.

Harper’s replacement, the socially-conservative Andrew Scheer, seems like a more personable sort. But the leadership campaign he won narrowly over an avowed libertarian suggests that the federal party has moved further to the right.

The unfortunate part is that the Liberals had both the campaign commitment and the opportunity to fix the problem of polarization and vote splitting through electoral reform. They chose not to. Failing to convince anyone to support the type of reform they wanted, they abandoned the whole project. It would serve them right if voters remembered that betrayal and acted accordingly the next time the Liberals come looking for their strategic vote to keep out the scary Conservatives.

-30-

[1] As I wrote in a First Anniversary piece a year ago:

“It is quite possible that Liberal support has nowhere to go but down. Trudeau’s threat to impose a carbon price and the negative reaction from Liberal governments in Nova Scotia and Newfoundland may cost support, especially in rural areas. If the Liberals fail to deliver something more on health transfers for the next fiscal year provincial Liberal governments in the region may finally be forced to take a strong stand. And if the economy continues in the doldrums, voters may stop blaming the price of oil and focus some of their concern on a federal government that has no plan for economic development in this region beyond Scott Brison photo ops and recruitment of a few hundred well-heeled immigrants some time in the future.”

It may be that those issues are having some impact on political preferences but given their scant coverage compared with the flood of reporting on tax reform (and to a lesser extent Energy East) it is a better guess to place the drop off in Liberal support there.

 

Posted in Uncategorized | Leave a comment

Energy East: Political posturing over a business decision

One newspaper report described as “terse” TransCanada’s announcement cancelling construction of the Energy East Pipeline. And indeed it was.

“After careful review of changed circumstances,” declared TransCanada’s CEO, “we will be informing the National Energy Board that we will no longer be proceeding with our Energy East and Eastern Mainline applications.”

He offered no elaboration for the decision, but didn’t need to. With that cue, others were ready to provide their own particular amplification. Pipeline opponents – including environmentalists, some First Nations, and the Mayor of Montreal, Denis Coderre – celebrated, with Coderre  calling the decision a “a great victory.”

In the polarized politics of pipelines, great victories must be matched with great defeats. Brad Wall, the outgoing Premier of Saskatchewan, foresaw a threat to the federation, predicting that some the decision “may well have some westerners wondering if this country really values western Canada.” He also played a familiar tune, questioning the right of politicians in an equalization-receiving province to oppose a pipeline carrying oil from a non-receiving one.

Wall, like the Conservative official opposition tried to blame the whole thing on Justin Trudeau. They chastised the PM both for what he did – his government’s feeble attempts to rein in greenhouse gas emissions – and for what he didn’t do – champion Energy East.

The latter criticism was probably closer to the mark. The Liberals were quick to go passive and push the notion that market conditions – principally the drop in the price of oil, U.S. approval of TransCanada’s Keystone XL line and the Liberals’ sanctioning of two other lines – were responsible for the cancellation. (University of Alberta’s Andrew Leach has a detailed discussion in the Globe and Mail of the impact of the Keystone approval on Energy East).

Markets dictated

Resources minister Jim Carr downplayed the significance of the NEB’s late summer announcement that its decision on TransCanada would take into account the effect of meeting GHG emission targets on the pipeline’s future viability. Friends of the pipeline fumed about that, but Carr claimed that getting the NEB involved was a matter of transparency.

According to the Minister, the Liberals had made clear on taking office they would assess pipelines and other major projects for their climate change impacts, and had done so before approving Trans-Mountain and the Enbridge Line 3. Said Carr: “The new wrinkle is that the NEB would conduct the review as part of its hearing process.”

That rationalization may sound too clever by half, but overall it’s hard to knock down the market conditions argument. Even Rachel Notley, faced with claims by Brian Jean, the once (and possibly future) leader of the opposition, that TransCanada’s decision amounted to a “declaration of war against Alberta by other provinces,” seemed to accept part of the market argument. Her statement of disappointment acknowledged that the decision was driven by a broad range of factors.

One factor that received scant coverage was outlined in the Globe and Mail by Benjamin Dachis of the business-friendly C.D. Howe Institute. He argued that because of a recent NEB pricing decision on natural gas shipments TransCanada no longer needs to pursue Energy East. The project was hatched largely to use pipeline capacity created by a drop in natural gas shipments to Ontario. With TransCanada’s recent approval for a new lower price, it can fill that capacity with natural gas and no longer needs to convert the pipeline to carry oil.

If Benjamin Dachis is right, it’s one more reason to lower the political heat and finger pointing. Unfortunately, that is not likely to happen anytime soon. Conservative provincial politicians in Alberta and Saskatchewan will ignore inconvenient facts and fan the flames, as will the federal Conservative Party. Despite environmentalists’ claims of victory, it doesn’t look like the demise of Energy East moves the country any closer to finding consensus on a realistic plan for sharply reducing GHG emissions.

Regional impacts

On early returns, the Energy East diehards and blame throwers will find some supporters in this region. It is a sad fact that when it comes to regional grievance, nothing fires up our media and politicos like oil and gas issues. Gouge us on equalization, fleece us on health transfers or abandon regional development and there’s barely a complaint. But don’t mess with our dreams of wealth from fossil fuels.

In the 1970s and 1980s Newfoundland and Nova Scotia were at war with Trudeau the First over offshore development and oil and gas royalties. In the 2000s the same two provinces clashed with both Liberal and Conservative federal governments over the effect of those royalties on equalization. Now it’s New Brunswick’s turn to cry.

That province has gone all in on Energy East since it was first proposed four years ago, craving both the short term economic boost that would come from its construction and ongoing increased activity at the port of Saint John. Premier Gallant, in deference to his federal Liberal patrons, was restrained in his response. But the editorial reaction of the Irving-owned newspapers was ballistic. The Telegraph Journal even raised the notion of secession, declaring: “It is time to stop playing nice and make clear to the federation that our continued membership depends on fairness, starting with support for projects that will aid in the free exchange of goods.”

Of course, Irving Oil was a partner in the Energy East project, expected to refine some of the pipeline-delivered oil, while exporting the bulk of it through a new terminal. Although the hyperbolic Telegraph-Journal envisioned Energy East “making us a wealthy, self-sustaining province again” the proposed terminal was in fact a relatively modest $300 million investment, employing no more than 50 people in hard-pressed Saint John.

Unlike New Brunswick, Nova Scotia had nothing – however modest – to gain from the pipeline and would have shared with New Brunswick the environmental risk of significantly increased tanker traffic in the Bay of Fundy and Gulf of Maine. Nevertheless, some past and present Nova Scotia politicians lamented the lost opportunity for a pipeline extension linking the Maritimes to the national grid.

And while refraining from separatist talk, the Chronicle-Herald’s editorialist exhibited the same regretful tone, complaining that in the eyes of the federal Liberals Atlantic Canada is “At the bottom. Where it’s OK to be the only region not connected to the national pipeline… left to get its oil from such bastions of political stability and climate enlightenment as Venezuela, Saudi Arabia and Nigeria.”

There is a two-word response to such concern. Offshore Newfoundland.

If it is so vital to the region’s interest to use Canadian oil, maybe we should encourage Irving and any other refiners selling into the Maritimes to purchase and refine the stuff from Newfoundland instead of those other awful places. Getting Irving to do that may not be as straightforward as it sounds. But it seems like a better plan than the expenditure of almost $16 billion so that we can hook up to the delivery system for a product we must drastically cut down on if we are going to survive.

Moving on

In the short term, some good may come from the Energy East flare up and the politics around it. The 32-strong Atlantic Liberal contingent elected in 2015 was not likely to survive intact after the next election two years from now. But the pipeline, the small business tax reforms and the lousy health deal alone point toward more  than just a return to political equilibrium going into 2019. It may become open season on the seats of Liberal MPs in the region.

That means we should see some attempts at fence mending in the months ahead. Let’s just hope those efforts consist of more than photo ops like this week’s pro-forma superclusters announcement, and do not include a full retreat on tax reform. Given their shifty record on the health file it may be wishful thinking, but a better place to go would be a fairer formula for health transfers, one that recognizes the special needs of provinces with older populations.

-30-

 

 

 

 

 

 

Posted in Uncategorized | Leave a comment

Updated NS Budget 2017: Deja Vu, only worse

Driving back to Dartmouth from last Tuesday’s provincial budget lockup at Pier 21 we were required, like the rest of the traffic, to slow down because of the construction project that has turned Water Street into an obstacle course. The bottleneck caused by the Queen’s Marque construction simply added insult to injury.

We “stakeholders,” like members of the legislature and everyday Nova Scotians of less exalted status had just been briefed on the revised provincial budget for 2017-18. It was the updated version of the one that was introduced in April but not passed because the Liberals preferred going to the polls. As the media quickly detected, this new version of Budget ‘17 wasn’t much different from the one it superseded.

After an election campaign dominated by health care and its deficiencies, the Liberals decided in the update that it was prudent to sprinkle a bit more money in that direction:

  • $2.7 million to reduce wait lists for orthopedic surgery
  • $1.8 million for youth mental health
  • $800,000 each for cancer drugs and the opioid crisis

But the biggest single item of new spending in the revised post-election budget is $4.7 million to pay the inflated cost of cleaning up contamination on the site of the Queen’s Marque thing. This happens to be twice as much as the government plans to spend this year to scratch this particular stakeholder’s itch – supported community housing for people with developmental disabilities. The $2.1 million in new spending earmarked for this year may produce a dozen new homes – for a wait list exceeding 1,300. But housing for the wealthy, with a killer harbour view, must take priority.

The opposition in the legislature focused on the health issue. Jamie Baillie declared himself “pissed off” that there was no new money for primary care. Gary Burrill, noting several recent breakdowns in care, coincidentally equated the tiny increase in the $4.2 billion health budget with bringing a garden hose to a house fire.

Restraint overall

Others may look at the second coming of Budget ‘17 and wonder whatever happened to highway twinning. Given top billing in the April budget speech of Randy Delorey, it received nary a mention in Karen Casey’s address. Advocates for the disabled may also wonder why the April budget passage entitled “An Accessible and Inclusive Nova Scotia” hit the cutting room floor for the September edition. Of course, everything can’t be mentioned in a budget speech, especially when a good chunk of it was devoted to defending the pre-emptive introduction of the pre-primary program.

But it’s not the small details that are the most perplexing, it’s the overall thrust of the budget and the way that Stephen McNeil has framed it. The core of this budget and its predecessor is, to quote a conservative politician of another time and place, “acute, protracted restraint.” The only discernible overriding vision is of balanced budgets to produce a progressive reduction of the province’s debt-to-GDP ratio. But with no significant boost in GDP or revenue anywhere on the horizon, that will only be brought about by austerity, worse than what we have already experienced.

My piece about the April budget argued that the media and the opposition parties should expose the fact that the budget the Liberals were running on –in effect their election platform – was an austerity budget. To wit:

“Save for the election year spending blip, restraint is the Liberal plan right up until 2020, according to budget documents. After the 3.7% increase this year, balancing the budget would require limiting spending to a 0.7% increase in the 2018 budget and 1.3% in the 2019 budget. If Libs are actually running on the budget brought in this week they must be counting on no one bothering to read it, preferring instead that all people hear are the good news announcements and the magic words ‘balanced budget’.”

As it turned out, no one paid much attention to the fiscal plan during the campaign. The austerity promised in the budget’s four-year blueprint was glossed over as the opposition parties fashioned their campaign platforms on the April budget’s shaky fiscal structure. That budget had as its foundation the unsustainable suppression of public sector wages. The updated budget framework is based on that same cracked foundation, and it has become even more ramshackle.

As the NDP’s Dave Wilson put it, the Liberals have created a budget to fit their narrative, and that narrative is fiscal restraint. It would be possible for the Liberals to interpret their re-election with a significantly reduced majority as a backlash against their handling of health and their bullying tactics toward teachers and other public sector workers. Instead, they see their narrow victory as vindication of their tight-fisted ways, proof as the Premier put it on budget day that “Nova Scotians want us to live within our means.”

Rough future

So as a result the government continues with a fiscal plan with one constant – a balanced budget – and two variables – expenditures and revenues.

As for expenditures, the projected increases are even less in the update than they were in the April edition – 0.3% (down from 0.7%) next year and 1.1% (down from 1.3%) the following. No other government in the country is planning to inflict this level of austerity on its citizens, according to fiscal tables published last week by RBC.

Only New Brunswick and the depressed, oil-reliant provinces of Saskatchewan and Newfoundland even come close to matching Nova Scotia’s commitment to restraint. Indeed, the Liberals are trying to outdo themselves. When accounting adjustments are excluded from the calculation, the McNeil government increased spending an average of 2.7% a year between 2013-14 and 2016-17 – more than twice the average increase they are projecting for the next three years.

Budget papers provide no specific explanation for next years’ minuscule increase in spending – an increase that is in fact a spending cut, given 2% projected inflation. But the inference is that to keep the budget balanced, one variable – expenditure – has to match the other variable – revenue. The needs of the people for government services aren’t in the equation.

And unfortunately, revenues are expected to decline in 2018-19. There are three reasons for the drop, one of which is a one-time accounting adjustment for the Convention Centre. The second factor is tax cuts – $15 million to small business and $85 million for individuals.

The wisdom of cutting taxes while starving public services is certainly questionable, but could be justified if economic growth gave promise of increasing revenues. Sadly, there is a near absence of real economic growth next year –projected at 0.5%, down from 0.8% that was expected five months ago. The stagnant economy is  the third reason for next year’s revenue decline. And the budget projects little improvement in the economy in 2019 and 2020, resulting in revenue growth averaging only about 2% a year.

So that’s the bottom line of the 2017 budget. As long as a balanced budget remains the political holy grail and the economy produces little revenue growth there will be intense pressure on public spending. Unless the Liberals can pull more accounting tricks out of a hat – or there is an unexpected windfall from the federal government – we are in for a very rough ride over the next four years. But then, we will always have Queen’s Marque.

 

-30-

 

 

 

 

 

Posted in Uncategorized | Leave a comment