21 May 2019

The Lowest-Common Denominator Minority Legislature #nlpoli

An inherently unstable minority legislature where the parties have a history of finding political agreement through public spending is not exactly a recipe for tough decisions.
There is something seductively sweet about the idea that the minority government that resulted from last week’s general election has now solved all our problems Just get back to work, some people are saying.  And play nice, together.  No more of this bickering and name-calling.

Something seductively sweet but the sweetness reveals itself as bitter naïveté when one considers that we now have a fundamentally unstable legislature at the very time when both the government’s finances and the Muskrat Falls mess are coming together.

Make no mistake about it.  Minority legislatures are inherently unstable.  They tend not to last more than a couple of years. The one elected last week will get through six months or so without much chance of upheaval.  But once the opposition parties have sorted out their finances and, in all likelihood, the Tories have found a new leader, they will be ready to bring down the House.

Anyone who tells you that the public doesn’t want an election, either now or in the near future, simply has not been paying attention.  For the past three years, poll after poll gave the current administration very low marks.  Respondents consistently rated the Premier poorly.  The last poll before the lection and two during it all showed the same thing.

What’s more a major poll taken during the election showed voters were overwhelmingly interested in a change of direction for the province. They are worried about the economy and jobs and they are worried about provincial government finances. Their concern for health care - the third of their top three issues according to polls - is as much a worry for the future as it is for any current problems.

 Voters know that if the government cannot get its finances under control, one of the areas that will take the hardest hit is health care.  Health care consumes 42% of the government’s budget annually.

In an unstable situation, the government needs stability.  That will cost money.  All principles in Newfoundland and Labrador politics convert to cash these days and spending money is the one way to make everyone happy. The Liberals abandoned their 2016 budget plan as soon as it became clear that spending money was the way to get re-elected. 

They will keep on the same path. Dwight Ball has no interest in being unpopular, even before the election.  He has less interest in it now. To keep his caucus in line, Ball will put all of them on extra pay.  The ones not in cabinet will be drawing bonuses for their jobs in the House of Assembly like Deputy Speaker or chair of committees, government whip or chair of caucus.  Don’t be surprised if parliamentary secretaries get a small salary back.

Ball’s caucus has no interest in being unpopular either.  They will not support anything that makes the government unpopular. Nor do the ones first elected in 2015 want to go to the polls any time before their pensions are salted away.  That’s November 2020. They will back anything that avoids going to the polls.  In the meantime, any of them looking for an appointment to cabinet or one of the jammy House jobs will tell you that everything is fine, and that this situation is tailor-made for The Great Conciliator®, as Dwight Ball will quickly become known.

Meanwhile, across the floor, the opposition parties can use their power to extract whatever concessions from the government they want.  Hypothetically, the Conservatives might want to cut some spending while the New Democrats want to spend more. That would make the Liberal task easy.  But hypothetically, pigs can fly.

In practice, all three parties want government to spend differently and the opposition parties would both be happy with spending more.  Their election platforms called for more spending on top of a budget that is already heavily in the red. 

If you think the Liberals wouldn’t go for that, guess again. As SRBP noted a couple of weeks ago, the 2019 budget understated the deficit for the next couple of years. The government is not on track to balance the books by 2022. In fact, the deficit next year will almost certainly be close to double what is forecast for this year.  The year after will likely be larger again. The big deficits will continue.  All of that is*before* the opposition parties extract their price for approving the government’s budget.

Then there is Muskrat Falls.  Both the Conservatives and the Liberals share the same plan.  Neither plan will work.  As SRBP pointed out just before the election campaign started, both plans include significant amounts of money that is entirely fictitious.  This money will have to come from government’s general revenues.  That extra cost is included in SRBP’s revised budget figures.  They are *not* in the government thinking yet.

But that is not all.  The Conservative and Liberal “mitigation” plans effectively freeze electricity prices slightly higher than they are right now.  As with the university tuition freeze, that means any future increases in electricity rates – even the stuff not connected to Muskrat Falls – will eventually start coming from general revenues as well. That’s not an immediate worry but you should get ready for it.

In the meantime, though, that prospect is something the bond-rating agencies will add to the uncertainty caused by the minority government now running the place. One has already given the government a negative trending on its rating.  That means they expect the government’s financial situation will get worse. The others may well revisit their outlooks once the new budget is passed.  And they certainly will revisit their ratings after the minority legislature.

The provincial election is over, but the province’s problems are far from solved. The government planned to boost spending before the election.  Now, they have to try and get a budget through an inherently unstable minority legislature where the parties have a history of finding political agreement through public spending.  Not exactly a recipe for tough decisions, is it?