That’s why it’s important to notice the words Premier Dwight Ball used this weekend in an interview with Tom Clark for Global’s current affairs show The West Block.
Ball said there was “no real sure fix” for the provincial government’s financial problems. But he did say that the government’s plan would involve revenue-generation, controlling expenses, efficient spending, and “what Ottawa can do to help initiatives around infrastructure.” Ball also said that the provincial government would be applying for the same “sustainability” funding that Alberta was getting.
So what does that mean in concrete terms?
Well, it means that the new Liberal administration is likely going to follow precisely the same plan as their Conservative They apparently accept all the faulty assumptions that guided the Conservatives from 2003 and that led us – inevitably – to the current financial mess.
There’s apparently no better way to get off the wrong path than to stay on it.
Note particularly that Ball said he would “control” spending.
Not reduce, cut, curtail or anything of the sort.
He said “control.”
“Control” spending is exactly what the Tories did when problems started showing in their financial house of cards. The prosperity plan” laid out with the help of folks like Wade Locke was to hold the line on spending and allow revenue to go up and down. Some years you’d have a surplus and some years you’d have a deficit but in the end, everything would even out.
Well, not really, but that’s what the politicians believed. Locke adamantly insisted that oil would come back up and save us all. You can hear the current Liberals talking the same way as the former Conservatives when they note the abundance of oil offshore. We just have to “bridge” from the current situation until oil comes back
That “bridge” talk, in case you'd forgotten, is what Dwight Ball said when he took office. Oil has fallen even further, guys like Locke have been spectacularly wrong in their forecasts, the policy to date has been the cause of the problem, and yet the politicians and their advisors are following exactly the same policy. It is completely insane.
Don’t expect any layoffs, either. In another part of the interview Ball specifically talked about a government goal to keep as many Newfoundlanders and Labradorians working as possible. Ball and Clark also talked about the impact of all those migrant labourers from Alberta – and Saskatchewan – who have lost their jobs. Those folks will need jobs so the logical place for any local politician to look for those jobs is government spending.
As for revenue, we can also likely forget any tax increases in the near time, at least not ones that might significantly improve the government’s financial prospects. Ottawa will toss some cash consisting of a bit of infrastructure money and a one-time injection of money through the Fiscal Stabilization Fund.
Natural resources minister Siobhan Coady confirmed last week that the new Liberals will also be chasing after Statoil to sign a development agreement on a field that even the company does not know is commercially viable in the current and likely oil price environment. They have a royalty regime that ash not be gazetted yet or fully disclosed to the public. The government still doesn't know how they will handle the payments under the Law of the Sea.
And yet Dwight Ball is taking a leaf from Paul Davis’ brilliant strategy of desperation. With the province in an even bigger financial mess than ever before – by Dwight’s own calculation – he plans to try and sign a development deal for the Flemish Pass. Danny Williams, desperate for an election victory in 2007, signed a shit deal with the help of Ed Martin. Dwight wants to follow in Danny's footsteps. Odds are Dwight will get his wish. This is good news for Statoil and any other oil company wanting a sweet-heart development deal but it is the worst possible news for Newfoundlanders and Labradorians.
And so with a bit of federal money and a crap-load of money from the banks, Dwight Ball and his Liberals l will stumble through the next fiscal year. It likely won’t spare us from a credit downgrade but it seems Ball has already accepted that as inevitable. By next year oil might well come back. All the Liberals frantically retweeting and sharing stories about oil’s imminent rebound will surely work magic in the universe. After all it worked so well for the Conservatives.
Meanwhile, for people fascinated with prognostication, consider these words from an SRBP post about last year’s budget. It was from May and discussed a fierce attack on Don Mills by Wade Locke over the provincial economy and the budget.
Drop the assumed price of oil, for example. On top of that, assume that the future administration – regardless of stripe - won’t have the political will to cut spending such that it has to borrow more money than the current planned amount. On top of that, throw an expensive electricity subsidy program to help offset electricity prices thanks to the high rates needed for Muskrat Falls.
Current government revenue is $5.7 billion. Let’s give the government revenue of an even $6.0 billion in 2021. The debt servicing cost in that scenario above could wind up being about $1.5 billion, instead of the $1.0 billion currently forecast. There’s Wade’s magic “1-in-4.”
The current [government] estimate would put [debt] at one-in-six, incidentally, if you assumed the situation five years out will look more like the one this year than the one forecast. Before you dismiss the notion, just bear in mind that when it comes to forecasting, you are a prisoner of your assumptions."