27 July 2020

Dwight and Tom's legacy: more of the same #nlpoli

Herb Kitchen died last week.

He was the minister of finance in the early 1990s who brought down the difficult budgets, starting in 1991 that were part of a plan that turned the provincial government around.

The deficit at the time was about $300 million and the total budget called for spending of around $3.2 billion. 

Finance minister Tom Osborne announced on Friday that he will need to borrow $3.2 billion to close the gap between what the government will spend (about $8.9 billion, plus more money for Muskrat Falls) and its income.

Officially, Tom Osborne’s deficit of $2.1 billion for 2020 will be 25% of spending compared to less than 10 percent back in Herb’s day.  But if you wanted to compare apples to apples, then we should use that $3.2 billion cash figure, which works out to a deficit three and a half times the size of the one Herb Kitchen brought to the House of Assembly 29 years ago.

Thank God Herb didn't live to see what a mess the provincial deficit will actually be.

20 July 2020

Change versus more of the same: Summer 2020 edition #nlpoli

Spring 1994.

At the point Clyde Wells spoke to the graduating class of Memorial University’s business school that year, the administration he led had already started getting government spending under control and transforming the economy.  Wells goes through all of that with the class, why government was undertaking the changes, and what he hoped would be the outcome. 

Give the speech a listen.  It’s only 38 minutes and it is striking on a few levels.  First of all, think of the last time you heard a Premier speak to an audience in Newfoundland and Labrador this calmly, rationally, and with as much detail.  This is not a speech of clever quips or turns of phrase.  This is basic information.

13 July 2020

The challenge of change #nlpoli

Change is hard.

 It's even harder when no one wants to change.

Our Former
Dear Premier
Some people outside the Liberal Party have been obsessed lately with the leadership contest currently going on.  They seem to think that one person can make all the difference in how the provincial government will tackle its considerable financial problems.

Well, the belief that the Premier is the strong man or woman responsible for everything is part of our post-Confederation political culture. The strongman myth – a local version of the Latin American caudillo or the Soviet/Russian personality cults - has only grown in strength since 2003 despite the ample evidence it simply isn’t true.  There are many factors that determine what the government does and those will affect the choices the next premier and the administration he leads will make.

Rather than look at the individuals who might wind up as Premier next month, let’s take a look at those other factors.

07 July 2020

Muskrat committee flags cost risk for potential alternate transmission software #nlpoli

At the end of December 2019,  the Muskrat Falls Oversight Committee added development of alternate protection and control software for the high voltage direct current transmission system – that is, the Labrador-Island Link  - to its list of risks the committee is monitoring for potential added project costs.

Alternate software and syncronous condensers
are major project cost risks.

The reasons for the concern are contained in the section of the report on a visit by the Independent Engineer to the software development team:

“While the plan still shows expected completion of the factory acceptance tests (FAT) by June 9th, 2020, there is little confidence that the target will be met. Progress velocity remains in risk category ‘red’.”

The report received by the oversight committee in late February 2020 also noted that the number of “outstanding bugs that will be identified/ remedied at later stages presents an unknown risk to Project schedule and S/W [software?] performance.”

The Independent Engineer’s site visit to the GE development team also observed that “GE’s project plan does not include full regression testing of the completed software release or provides time allowance for bug fixes between the project phases. That raises a question if that approach will ensure full functionality of this critical component.”

The Independent Engineer was supposed to do a site visit in the first quarter of 2020, but COVID-19 forced postponement.  In the report on this period received by the oversight committee on 15 June 2020, the committee noted that the software development and schedule remained a “key project risk.”

The Q1 2020 report also noted problems with another, unrelated issue: “Soldiers Pond synchronous condensers vibration and binding issues root cause and remediation remain ongoing. When Unit 3 bearings and housing were removed corrosion and damage was [sic] observed.”

At the recent annual general meeting, Nalcor chief executive Stan Marshall apparently made no mention of the ongoing difficulties with the P and C software and the synchronous condensers.  Media reports just talked about the impact of COVID-19 that forced closure of the work site for a couple of months.


06 July 2020

Building on our successes #nlpoli

"First and foremost, be totally honest with the electorate,”  former Premier Clyde Wells told Anthony Germain on CBC’s Sunday Edition last weekend.  He was giving some general advice to the next Premier on how to handle the provincial government’s enormous financial problems.

“Don't go sugar-coating anything. Fully disclose what you're doing [and] why you're doing it. Have a logical plan that will treat everybody fairly.”

Right after honesty,  came communication in Wells' approach.  Hes told Germain that he took every opportunity to explain what was going on and why it was happening to the public.  He made a couple of televised province-wide addresses to do just that.   

People didn’t like it at first.  The opposition parties and the unions criticised everything.  That’s what they are supposed to do.  But, as Wells, pointed out, “the people of the province come around. In my case, it was proven that they come around, because in the 1993 election, after four years of the most severe cutting, we had an increased majority.”

Few Premiers have done that in Newfoundland and Labrador since 1855 and none have done it since Wells.  In 2007, with bags of cash, great times, and no opposition to speak of, the governing Conservatives won more seats than they did in 2003 but they did it with fewer votes.  In 1993, the Liberals got *more* votes than they received in 1989.

But that doesn’t really tell the whole story.

What started in 1989 was a change in strategic direction for the provincial government and the province. 

The provincial government didn’t just cut spending and eliminate jobs in the public service.  Reforms to health care and education organization and governance were supposed to shift power out of the bureaucracy in St. John’s and hand it to people in the regions where they lived. 

Education reform was tied to improving economic performance and opportunities laid out in the Strategic Economic Plan.  The plan was the product of a two-year-long process spearheaded by the economic planning group, appointed by cabinet in the summer of 1990 under the chairmanship of the Premier's chief of staff, Edsel Bonnell.  The group brought together a diverse set of individuals with an equally diverse set of ideas. There were within the group contending ideas, as former chairman of the Economic Recovery Commission Doug House describes in his book Against the tide. 

The process the SEP team used overcame those differences and built a consensus on a future direction found on three fundamental changes, as laid out in the introduction to the plan:

  • A change within people. There is a need for a renewed sense of pride, self-reliance, and entrepreneurship. We must be outward-looking, enterprising, and innovative, and to help bring about this change in attitude we will have to be better educated. During the consultation process, most people agreed that education is essential to our economic development.
  • A change within governments. Governments (both politicians and the bureaucracy) must focus on long-term economic development and planning, while still responding to short-term problems and needs. Government programs and services must place a greater emphasis on the quality of the services provided and on the client. Changes in education, taxation and income security systems are also considered critical to our economic development.
  • A change in relationships. To facilitate the necessary changes in the economy, new partnerships must be formed among governments, business, labour, academia, and community groups. In particular, better co-ordination between the federal and provincial governments in the delivery of business and economic development programs is needed to eliminate duplication and to prevent confusion for those who use them.

What happened in 2003 abandoned that strategic approach in favour of (once again) using provincial spending as a substitute for economically and environmentally sustainable private sector development. Megaprojects were all the rage and economic development became basically an exercise in handing out cheques.  Changes to education and health care governance put power back in the hands of the central bureaucracy and minimised the connection between schools or hospitals and the communities they served.

In every respect, the current financial and organizational mess of the provincial government is the result of the strategic change of direction after 2003.   Dwight Ball’s “Way Forward” stays within all the same strategic premises. Not surprisingly, it hasn’t fixed the problems.

Any proposal from any political party that doesn’t change the strategic direction of the province won’t succeed in fixing the current financial problems the provincial government faces.  That doesn’t mean going back to the 1992 strategic plan, which was designed for a different situation. 

It means using the same integrated approach, though, starting with the understanding that only a strategic shift will work.  The process is important as:  strategic change is only possible with a consensus across the province. A strategic consensus is essential because making strategic changes will require a commitment that will last beyond one four-year administration.

That consensus will only come with a lot of public discussion and debate. There will be differences of opinion.  There needs to be a lot of disagreement to make sure we explore all the options before setting on a new strategic plan made up of elements that can work.  

The new strategic plan must shift the focus of economic development from government to the private sector.  Government needs to create the environment in which the private sector can succeed while protecting the public interest through proper regulation.

The plan needs to focus not on specific topics – like substituting “tech” for the current obsession with oil – but on creating an environment in which the private sector can respond to market forces.  We cannot know what will be important in the future.  Instead, we need to create the economy that can best respond to shifts.

The lesson from the 1990s is that Newfoundlanders and Labradorians can solve their own economic and financial problems. Wells’ interview this past weekend is the first he’s given in almost 30 years and it is a reminder of what happened here, not in Saskatchewan or Iceland. 

We’ve been ignoring what happened in the 1990s in Newfoundland and Labrador.  People are casting about for some easy answers to their current problems that don’t involve actually changing anything. Unfortunately for them, more of the same simply isn’t an option.  

Well, the answers are right in front of use.  We just have to decide to build on our past successes rather than continue with tales of doom and gloom that get us nowhere. After all, it’s not like we haven’t faced bigger problems than the ones we have today and solved them ourselves.


Guiding Principles for Economic Development

from the

1992 Strategic Economic Plan

  1. The Province must focus on strategic industries. With increasing competition in world markets and limits to growth in primary- resource industries, the Province must target high-value-added activities in which we have, or can develop, a competitive advantage.
  2. Our education and training system must adapt to the changing labour market demands for a highly skilled, innovative, and adaptable workforce. In an increasingly knowledge-based economy, it is critical that governments, business, and labour work together to improve the level and quality of education, training, and re-training.
  3. Newfoundland and Labrador must be competitive both at home and in world markets. To improve our prospects for economic growth and  development, and to maintain and expand local and export markets, the province must diversify its economic base by producing goods and services that are internationally competitive in price, quality, and service.
  4. The private sector must be the engine of growth. While it is the role of government to create an economic and social environment that promotes competitiveness, it is the enterprising spirit of the private sector that will stimulate lasting economic growth.
  5. Industry must be innovative and technologically progressive to enhance productivity and competitiveness. A competitive advantage can be created by integrating advanced technologies in the workplace with the innovation, skills, and creativity of our people.
  6. To achieve economic prosperity, there must be a consensus about the need for change and a commitment from governments, business, labour, academia, and others to work together in building a competitive economy.
  7. Government policies and actions must have a developmental focus where the client comes first. The structure of government must be streamlined, efficient and responsive to public needs and to changes in the economy.
  8. The principle of environment must be managed to ensure that development can be sustained [economically and environmentally] over the long term.