New Brunswick doubles down on failed recipe

New Brunswick is once again playing the role of guinea pig for neocon-inspired experimentation on the Maritime body politic. With last week’s budget, highlighted by further cuts to the public sector and talk of out-sourcing government services, our northern neighbor continued a tradition started a quarter century ago by Premier Frank McKenna of applying the bromides of the conservative think tanks to address New Brunswick’s economic ills.

McKenna’s approach was to lecture New Brunswickers about shedding government dependency and pulling themselves up by the bootstraps, while he begged big business to set up call centres and the like. When McKenna left, Bernard Lord showed a more traditional Red Tory approach. The province did reasonably well under Lord, surpassing Nova Scotia in personal disposable income growth and balancing the budget five years out of seven.

But then along came another Liberal government under Shawn Graham. Graham surpassed McKenna in the bromide department – cut taxes and grow rich was his thing. The “self-sufficiency ” agenda called for the province to be equalization-free by 2026. To cheers from rightist think tanks like AIMS and the Canadian Federation of Independent Business, the chosen instrument for New Brunswick’s ascent to “have” status was, as described in 2009 by the minister of finance “the largest one-time tax reduction package in New Brunswick’s history.”

Slashing corporate and personal income taxes and keeping the HST at 13% turned out to be a disaster. The Liberals began to get their wish in the self-sufficiency department – equalization and other federal transfers grew hardly at all, accounting for 36.4% of New Brunswick’s revenue in 2015, down from 38.2% in 2009. But contrary to the neocon textbook, the economy did not grow in response to the tax cuts and provincial revenues were flat as well. Annual deficits were the result and the province’s net debt ballooned from under $8 billion in 2009 to a projected $13 billion this year.

More of the same – only different

Last week’s budget marks the end of the failed tax cut experiment. The HST is going up to 15% and the corporate tax rate from 12% to 14%. A tax on high income earners is being reduced, but only in response to the federal Liberals’ “tax on the rich”. Otherwise the 16-month-old Liberal government of Brian Gallant has abandoned tax cuts as the road to self-sufficiency and is doubling down with that other neocon trope, reducing the size of government by cutting public sector jobs. Next to the tax increases, the plan to shave 1,300 senior and middle management jobs over the next five years was the budget’s headline grabber.

Public sector jobs cuts are not new. At the federal level they were a staple of the Harper government’s final term. (see below) What takes them into the realm of the experimental in New Brunswick is that these latest cuts come on top of major public sector job cuts, both provincial and federal, in the province over the last few years. As pointed out in an Observer post last March (“They’re setting the stage for more attacks on the public sector”) New Brunswick already had the lowest ratio of public sector workers per population in the Atlantic Region in 2013- 85.0 to 1000, just slightly above the national average. In 2014, the ratio dropped again, to 83.5 as another 965 provincial and local government jobs disappeared.

Despite the cuts, New Brunswick’s 2014 ratio was still a bit above the national average. But it was way below other provinces in the region and indeed, any of the smaller provinces. Urbanization and economies of scale seem to enable the larger provinces to provide services with fewer workers. But among the smaller, more rural provinces (the Atlantic provinces, Manitoba and Saskatchewan) the ratio is much higher – about 110 per 1000 population in Newfoundland, Manitoba and Saskatchewan, just under 100 in Nova Scotia and 94 per 1000 in Prince Edward Island. And remember, these numbers don’t just include the dreaded bureaucrats and red tape purveyors – they are a small minority. The bulk of the public sector work force is made up of the likes of teachers, nurses and hospital workers, cops, firefighters, and the personal care attendants who look after the aged and the disabled. According to StatsCanada, (CANSIM Table 383-0030) the 965 jobs lost in the provincial and municipal government sector in New Brunswick in 2014 came almost entirely from health (725) and education (205).

So New Brunswick, which has the additional challenge of providing dual French and English public sector services, proposes to meet the needs of the public with what amounts to 25% less human resource capacity than similar-sized provinces. It could be a harrowing experience for many New Brunswickers. And it will be interesting to see how voters respond to this latest neocon experiment. If the recent past is any guide, they’ll boot out the neocon Liberals a couple of years from now and turn things over to the neocon Conservatives on the other side of the house. The Conservatives will make a few tweaks before continuing with basically the same old thing. Nova Scotians should hope that the McNeil Liberals will see the New Brunswick experience as a cautionary tale, not as an example to be followed.♦

TONY CLEMENT REVISITED

While on the subject of public sector employment, StatsCanada’s latest update for 2014 also shows the impact on Atlantic Canada of federal job cuts. Those cuts began in 2010 and accelerated in 2012 before supposedly coming to an end in 2014. In November 2012, the Nova Scotia office of the Canadian Centre for Policy Alternatives (CCPA) issued a report predicting that the cuts as announced at the time would cost from 3,690 to 4,400 jobs in the Atlantic Provinces. The report also calculated that this region, with a bit over 6% of the Canadian population, could end up absorbing 22% of the cuts.

Untypically, the Harper government took the trouble of responding to the CCPA report. Treasury board minister Tony (Gazebo Man) Clement attacked the report as biased (it was partly funded by a public sector union) and assured us that the cuts here would be proportional to the national cuts. Unfortunately, as it turns out he was wrong, and the CCPA was mostly right.

Federal Government Jobs

                                                            2012           2014         Change   % change

Atlantic Canada                            50,410        47,325            -3,085       -6.12

All provinces                               400,075     382,065           -18,010      -4.50

The job loss in Atlantic Canada, at 3,085, was not as bad as the CCPA predicted. But we lost a higher percentage of jobs – 6.12% versus 4.50% nationally – and as a percentage of our population we really took a hit. If the job losses were proportional to our population, we would have lost 6.1% of 18,010, or 1,081 jobs. Instead, we lost 3,085, or 17.1% of all jobs cut by the Conservatives between 2012 and 2014.

The Conservatives did a number on Atlantic Canada and paid the political price. That’s  water under the bridge. The current question is what will the 32-strong Atlantic Liberal contingent do to restore some level of fairness?

-30-

About Richard Starr

RICHARD STARR has had careers as a journalist, public servant, broadcaster, political staffer and freelance policy adviser. He is author of numerous newspaper and magazine articles, appearing in everything from Atlantic Insight to Atlantic Progress. A lifelong student of Maritime history, Starr is married to playwright and former MP Wendy Lill. They live in Dartmouth.
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