06 November 2014

Spending Comparisons #nlpoli

The Canadian Institute for Health Information (CIHI) released its annual summary of health care spending health care last week. This is a pretty basic collection of numbers that show how much money we spend on health care, whether it is from provincial, federal, or private sources.

The report made the news, as it always does.  The Globe and Mail reported that spending on health care was growing at its lowest rate in 17 years.  fair enough.  They also did a story on how much seniors are costing the health care system.

In that second one, the Globe asked why it is that some provinces pay more per person for health care than others.  Some provinces – like Newfoundland and Alberta – have more money because of oil, said the Globe’s expert.

And if you really didn’t know what was going on, you’d think that made perfect sense.


You see,  Newfoundland and Labrador has been consistently among the top five provinces in per person spending for all sorts of government services. An SRBP post from 2010 used some figures from RBC economics to demonstrate the recent pattern.  What you have to remember is that 2005 was after oil money started flowing but well before the big money started coming through the door in 2007 or so.  [program expenses[5].jpg]

Go back before that even, and you can see overall government spending is as high in Newfoundland and Labrador as anywhere else in Canada.  Here’s a chart from the Canadian Taxpayers’ Federation that starts in 1991. No oil money and the start of the worst economic downturn since the Great Depression.

per cap spending

And there’s Newfoundland and Labrador right up there at the head of the pack.

Lesson One:  Be sceptical of any pronouncement by any mainland expert about what is happening in this province.  Odds are they don’t have a sweet loving clue.  You will get the same thing sometimes from crowds of experts like the ones at the Atlantic Provinces Economic Council or the Fraser Institute.  They are not always right any more than they are always wrong.

Why is program spending in Newfoundland and Labrador higher than other places?  Well, the simplest answer is that public spending here isn’t about delivering services in and of themselves.   Government spending is about all sorts of other things, including substituting for private sector economic development. 

Newfoundland and Labrador isn’t alone in this.  In fact, there’s a global pattern that connects this sort of high spending with governments that depend heavily on external sources for their money.  Transfers from another government and oil money work basically the same.  There’s no connection to the local society so governments tend to treat the cash like it is always there.

Government spending is extremely politicised in places like Newfoundland and Labrador.  The result is that governments don’t moderate spending.  The idea of living within their means or saving a bit for a rainy day are completely foreign concepts. Governments in these sorts of places never thinking they spend too much. They always think they just don’t have enough income.