"It would be a travesty if we don't use this windfall we have, this oil — which will be gone one day — if we don't use that to get rid of this massive debt that our people and our governments have accumulated."
That was finance minister Tom Marshall late last year when he released the provincial government’s financial update for Fiscal Year 2010. He made the comment to CBC’s Jeff Gilhooley during a live interview.
Auditor General John Noseworthy’s most recent report on the public accounts (for Fiscal Year 2009) pretty much demolishes Marshall’s claims that he and his fellow Conservatives have been managing the province’s finances in a sound way.
The chart shows debt expenses by fiscal year over the past decade. Incidentally, just to make sure you don’t get screwed up in this and subsequent posts, notice that the Auditor General mislabels every fiscal year. The period covered in this chart is from 1999 to 2009. That’s the way your humble e-scribbler will refer to the dates.
This chart shows just exactly how much money the provincial government spends every year to service the public debt. Very little of that is actually going to pay off a debt. The overwhelming majority of that money goes just to pay the interest that comes due every year.
Take a good look at those numbers.
In 2009, the provincial government spent the better part of a billion dollars doing nothing but paying interest on outstanding debt.
Those figures also tell you that what the province’s finance minister and even the Auditor General call “net debt” isn’t really the measure of public debt that you should be fixed on. After all, if the provincial government really had reduced public debt by almost three or four billion dollars, we wouldn’t be back paying debt servicing costs the likes of which the government hasn’t seen since 2001.
The number you need to look at is gross debt, or, as the Auditor General labels it in the chart below: “liabilities”
That shows the total amount owed now and in the future by the government and its corporations and agencies. When it comes to figuring out interest payments and so on, that’s the figure the banks and other creditors look at. Think about it for a second: if you have a mortgage on your house, the bank doesn’t check every year to see how much cash you have in the bank or anything else to figure out the interest payments you need to make on the loan. They just know how much you borrowed and what rate of interest they are going to apply.
So when you look at that line called “liabilities” you will see that the provincial government had $13.733 billion in 2004 – the first full year the Conservatives were in power – and owed $12.559 billion five years later. Not surprisingly, the debt servicing costs in 2009 were not far off what they were way back before Tom Marshall, Jerome Kennedy and the rest of the provincial Conservatives worked their supposed financial miracles.
Take a look at these two charts and you’ll know why your humble e-scribbler has been harping on this point for pretty well the whole span of Bond Papers. Paul Oram’s resignation in the fall of 2009 - note the year! -just highlighted the issue.
Take a look at those numbers and you’ll understand why Tom Marshall simply has no credibility when he talks about his administration’s management of public finances.
And if you look at those figures you’ll understand that, even if the Muskrat Falls deal was brilliant – and it isn’t – the provincial government has far more pressing issues to deal with rather than build someone’s political legacy. That deal would take the gross debt from $12.5 billion to between $17 and $18 billion.
Tom Marshall’s already given us a judgment of his own performance as finance minister: a travesty. They haven’t reduced the public debt to any appreciable degree.
So what would it be if the same guy and his cabinet colleagues then increased the public debt by another 50%?
- srbp -