As often as they say it, the facts don’t bear out the claim some politician like to make about the provincial public debt.
The Premier did it again in the House of Assembly Tuesday evening. We can all give her a bit of a break since she was on her feet and obvious her blood was up.
But still, this is an old claim that is as false now as it was when the Tories first started using it a few years ago. And frankly, Kathy Dunderdale should have a better grasp of the facts. Otherwise what some people think is visionary leadership is just another delusional politician on a rant. Heaven knows our province has been saddled with enough of those.
The Premier said that the public debt today was $4.0 billion lower today than it was in 2003, or words to that effect. It’s part of a Tory claim that they inherited a financial mess and sorted it out.
Actually, any such claim is not even vaguely on the same planet as true, if you really look at it.
The gross public debt is the sum of all the provincial government liabilities. It is what the people owe directly through the provincial government and indirectly through outfits like Eastern Health and Nalcor.
It’s also the figure that has the greatest influence on the debt expenses every year. Think of it this way: if we had a mortgage for $100,000 and had $40,000 in cash and investments, our mortgage payment each month wouldn’t go down even though our “net debt” was $60,000., We’d be paying the mortgage based on owing $100,000 plus interest. That’s not a perfect analogy, but it’s in the ballpark.
In any event, the gross public debt in 2003 was roughly $13.42 billion. That comes from page nine of the Public Accounts for the 2003 fiscal year (ended) March 31, 2004. The Tories took office in October and they didn’t change much of anything in the year’s budget.
The gross debt for Fiscal 2010 (ended March 31, 2011), the last year for which we have figures readily available, stands at roughly $13.1 billion. In between, the gross debt hit $13.66 billion in 2007. That figure came from a table in the link for FY 2010.
What the Premier and her colleagues like to talk about is net debt. That takes all those liabilities and subtracts any cash laying around. While accountants like it, the concept of net debt is a bit misleading. The idea is that the amount left after you subtract the cash is what we will have to pay for now and in the future. The cash theoretically covers the rest.
Well, that’s a nice idea in theory but the pots of cash that make up the cash assets aren’t actually put aside for paying off debt. They are just sitting there. Any government today or in the future could spend them on anything.
Right now the plan for Muskrat Falls calls for the provincial government will take at least $3.0 billion and spend it on a big dam in Labrador. As a result, net debt will go up just because there isn’t as much cash to subtract from the gross number. Makes sense?
If things go pear-shaped in the economy or that project balloons in cost, you can pretty much kiss the rest of those cash assets good-bye. They’ll spend it, like ya would. So talking about net debt is a wee bit misleading.
If they wind up borrowing 100% of the cost of Muskrat Falls, then the gross debt will just go up by the amount of the borrowing and related liabilities.
So as far as the public debt goes, we are living in the age of record public debt in Newfoundland and Labrador and have been since 2003.
And as for all the cash that’s been flowing? Well, that comes from oil and mineral deals signed before 2003.