Accessible Post-Secondary Education #nlpoli

Lots of people  like the idea of free tuition at post-secondary institutions like Memorial University or the College of the North Atlantic.

In the recent provincial general election, the provincial New Democrats included it as one of their major policy ideas.

A Memorial University engineering professor took up the argument last week in a letter to the editor at the Telegram:

By not having free tuition at MUN, we are basically discriminating against poor people and the middle class.

That’s one of the popular misconceptions about access to higher education.  People think it’s about cost and that people who have less money can’t afford to attend.

Research like the studies mentioned in earlier posts don’t back up the popular belief.  A recent study of experience in Ireland, for example, found that the “only obvious effect of the policy was to provide a windfall gain to middle-class parents who no longer had to pay fees. [p. 14]”.

What worked against people from low income and middle income families – according to other studies – was academic achievement in grade schools. 

Tough luck for them.  The same engineering prof who wants free tuition also wants to toughen the entrance stands:

Because not everyone can handle the workload at a university, to be eligible for free tuition a student would need a high school average greater than, say, 80 per cent.

To keep it, a student would have to maintain that average at MUN.

The inevitable result of that policy  - free tuition coupled with tough academic entry standards  - would be to further skew the benefit of free tuition to those who don’t actually need the leg up in the first place.

The usual alternative to free tuition is an approach that targets financial assistance at specific groups.  In his 2005 review of the Ontario post-secondary system, Bob Rae recommended – among other things – that the provincial government provide improved grants, adjust the student loans program and promote scholarships and similar financial support for students who qualify on economic grounds.

Inevitably, though, these approaches rely on government funding of university and college education. The only difference is how much the government will pay out of general revenues at the front end. 

Government subsidised education has one feature that people often don’t consider. Subsidy.  That’s what it is, by the way, whether you talk about free tuition or the sort of approach in Newfoundland and Labrador today. The only difference is whether the subsidy is 100%, as in the free scenario, or some other percentage.

Subsidised education puts the focus of discussion about education costs to the students rather than the education itself.  The alternative – like in the American approach – values the education.  Universities set tuition as a source of income.  The level of tuition can reflect the cost of delivering the education plus any premium for the type of degree or the institution itself.

One alternative that blends the two approaches together is the graduate tax.  In its simplest form,  tuition costs can be set based on the cost of delivering the education or a market calculation of of what the degree or diploma is worth.

The student does not pay while attending college or university.  After graduation, the student pays a percentage as an additional tax on income for a fixed period of time. 

Such an approach has one significant advantage over the current Canadian model or any of the variations some have proposed:  it eliminates the regressive nature of the policy that sees the entire society providing a benefit to specific individuals at a partial or near complete discount. 

With a graduate tax, the beneficiary of the education winds up paying for it.  What’s more the beneficiary pays based on the value of the education itself as reflected in post-graduate employment.

None of that addresses the accessibility issue for university, but at least it holds out the prospect of creating a post-secondary education system that is fairer than the one that currently exists in Newfoundland and Labrador.

- srbp -

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Opening the doors on government information

There are lots of good ideas floating around that could make Newfoundland and Labrador a stronger and better place to live.

One simple one would be to emulate British Columbia:  throw open piles of government information so that people can use it.  The Government of Newfoundland and Labrador is one of the most secretive, backwards administrations in Canada.

Open the vaults on data that no one – even the government officials themselves – is using.  It’s not that people wouldn't;t use the information or that they shouldn’t have access to it.

The problem is they just can’t get access to it, at all. As the Globe put it:

The idea is a simple one. In the past, governments collected tax dollars from citizens. Government employees inside the boundaries of government created services that were delivered back to the citizens. This exchange of tax dollars for services will continue, but, courtesy of the Internet, there’s an expanded model of government whereby government acts as a platform.

There’s an enormous amount of data inside government, such as data about climate change, the success of entrepreneurs, radon gas, bicycle accidents and so on. With governments starting to make this raw data available to citizens, people will self-organize to use the data to create value. This is not about outsourcing or privatization. This is about a new division of labour in society about how we create public value. The result is better government services and a government that costs less.

Political parties in Newfoundland and Labrador won;t adopt such a policy in the current election platform.  At least two of the parties have vested interests in keeping control of information. The other might just not give a toss.

Here’s another area where it would be nice to be proven wrong but your humble e-scribbler is not holding his breath waiting. Experience is a cruel teacher.

- srbp -

Nurturing a democratic revolution

Public life in Newfoundland and Labrador remains as fundamentally undemocratic as it ever was.

Paternalism remains the order of the day.  As three sitting members of the House revealed, they they are the face of government in their districts. 

Never mind that neither of them is actually in government.  As members of the legislature, each member has but one job:  to hold the government to account for its actions.  They do so on behalf of their constituents. Doesn’t matter if they sit on the government back benches or the opposition benches.  Their job is to serve the people of the province and the House.

By that measure, none of the current members do their jobs very well. 

The House of Assembly sits  - on average - the least number of days of any legislature in the country.  Members have little time to study any legislation the government proposes.  From the government side, members usually read prepared speeches full of officially sanctioned drivel.

The opposition members of the legislature are no better.  Liberal and New Democrat alike, they tend to rely heavily on official government statements for what they know and say about a bill.  Their comments in an afternoon sitting of the House are often laughable paraphrases of what officials told them in a morning “briefing”.   One need only look at the Hansard record of speeches by Lorraine Michael and Yvonne Jones on the day their rolled over and helped the government in the Abitibi expropriation fiasco to see this situation plainly.

The House has no functioning committees to review legislation. The Committee of the Whole remains nothing more than a hollow exercise in form over substance. The public accounts committee – once the means by which the legislature reviewed all public spending – remains as dead as it was during the darkest days of the recent patronage and corruption scandal. 

As amazing as it is to say, the House of Assembly in the early 21st century has reverted back almost to what it was before the collapse of Responsible Government in 1934.

The House of Assembly is reduced to a form of Punch and Judy show. And to compliment it, recent changes to the provincial access to information laws have systematically reduced public knowledge of government actions when the legislature is not sitting.

The people of Newfoundland and Labrador have turned their backs on politics in increasing numbers.  Voter turn-out in recent general elections and by-elections is at historic low levels.  They know that they have little control so there is no incentive to take part. 

Even the appointed House officers – the Speaker, and the watchdogs of privacy, children’s interests, elections and public accounts – are bumbling and useless. Some offices have been or are filled by political hacks who do not even pretend to be impartial.

A modern, prosperous province deserves a healthy thriving democracy.  Nothing short of a spiritual revolution can reform public life in Newfoundland and Labrador and raise it to the standards that the ordinary men and women of the province deserve.

Here are some ways to do that.

For starters, we need election finance reform:

• Ban corporate and union donations.
• Only individuals should be able to contribute to political parties to a maximum of $5,000 a year.
• Ban “in kind” contributions to parties and candidates.
• Limit election, by-election and leadership campaign fundraising and spending.
• Limit spending by political parties and third parties during elections and during the years between general elections.
• Require full disclosure of donations when they occur, with additional monthly updates on the Chief Electoral Officer’s website.

Piece-meal and largely unnecessary changes to elections in the province from 2004 onward have produced an electoral system that is an embarrassment in a democracy worthy of the name. Electoral reform should include the following measures to break the influence of money and to restore some power to the backbenchers and opposition members:

• Remove the provision that the resignation of a premier triggers a general election.  Overbearing ego created it and it serves no useful purpose.
• Eliminate mail-in ballots and the current system that allows voting before an election writ is actually issued.
• Restore the mandatory 90 day period in which a by-election must be called to fill a vacancy.  The 2004 change to 60 days proved unnecessary and, as in 2007, produced the laughable case of a by-election that was called but never actually held.
• Cut off incumbent expense charges, cell phones and other perks of office 45 days in advance of a fixed election date. This will discourage campaigning at public expense by incumbents.
• Compel members not seeking re-election to vacate their offices and cut off their expense accounts 45 days before a fixed election date or 30 days after they announce their intentions publicly, whichever saves the public more money.
• Introduce amendments to the House of Assembly Act that set mandatory sitting days (for example 50 days in the spring and 40 in the fall) for the House of Assembly with cash penalties for each member if the House does not sit the prescribed number of days.
• Introduce amendments to the House of Assembly Act to establish legislative committees, set the number of hearing days they must sit.
• Make the membership on the committee a function of House seniority regardless of whether a member is on the opposition benches or government back benches.
• Give the committees research and administrative staff to be hired by the Speaker.
• Update:  To go along with this, some other changes to funding would follow:  the office of the leader of the opposition would get funding for administrative positions such as chief of staff, executive assistant and communications director.  Caucuses would no longer get funding for staff and research positions.  Instead, every member would get a standard allotment for a constituency assistant, a travel budget etc. to support individual work as members.
• Update:  The Public Accounts Committee should be the only one with an opposition majority and an opposition chair. 
• Cabinet minister would only be allowed to serve on the House of Assembly management committee.
• Introduce legislation to limit the size of cabinet and the number of government party members who may draw extra payments for government duties.  Exclude those members drawing extra pay from committee work.
• Strengthen the conflict of interest rules for politicians to limit their business and other interests while serving in the House. 
• Add charities to the list of prohibited interests that members may have, especially once they sit in cabinet.
• Extend the prohibited period for doing business with government after leaving office to five years for all politicians and political staff.
• Former cabinet ministers should be barred from any dealings with all government departments, not just the one for which they last served as minister.

To restore the integrity of the House of Assembly officer appointments, nominees should be vetted during public hearings by a House of Assembly committee on appointments.  Nominees should come from a publicly advertised competition, although the list of potential candidates may include recommended nominees from cabinet.

Existing legislation should be amended to allow that officers can only be removed by the Speaker with the concurrence of the committee.  Any suspension or removal from office while the House is not in session must be the subject of a public hearing at the next sitting of the House.

And that’s just the start of it.

In future posts in the series, we’ll look at changes to the province’s access to information laws and reforms to senior appointments.

There are more than 15 good ideas for a stronger Newfoundland and Labrador.

- srbp -

People unfamiliar with the legislature might not understand how some of these changes could produce a dramatic difference in the House.  Let’s see if this helps:

• Banning corporate and union donations breaks the influence of big money on party policy and shifts power back toward individuals.
• Adding charities to the conflict of interest guidelines closes a gigantic loophole in the current conflict guidelines that has proven to be a major problem in the United States. 
• The new committee structure is intended to restore some power to the legislature and to individual members of the House and help break the centralization of power in the first minister. Among other things, it breaks the patronage hold that Premiers have on perks and bonuses that are often held out as a way of influencing members unduly. 
• Individual members should be able to develop a profile, reputation and a power base that would make them contenders for cabinet based on merit rather than obsequiousness and pliability.
• Funding committees instead of caucuses prevents majority parties coupled with a biased Speaker from doing as the Conservatives did in the current legislature with funding for the official opposition.
• Cutting off expenses before a fixed election levels the playing field between incumbents and challengers at the district level.

Making the Most of Our Energy Resources, Part II – Oil and Gas in the Future

Without new oil and gas discoveries, the Newfoundland and Labrador petroleum industry will dry up within a couple of decades.  There hasn’t been a significant discovery in the offshore since the 1980s, with the exception of one find in the Orphan Basin.

The problem isn’t a lack of oil or gas.  The geological estimates back up the notion there is plenty more to find. The problem is no one is looking for it hard enough to find it. 

To give you a sense of how low exploration levels are now compared to a couple of decades ago, take a look at this slide.  It’s taken from Wade Locke’s recent presentation for the Harris Centre. 

Low exploration levels is one of the most important problems facing the oil and gas industry.  It’s not a new problem.  It’s not the only problem.  There are others, all of which centre on the basic challenge of how we can make the most of our oil and gas resources now and in the future.

Here are some basic ideas that can help us to get there.

For starters, Newfoundland and Labrador has to be an attractive place for investment, exploration and development. Oil and gas is a highly competitive industry, especially in the exploration sector.  There are only so many exploration dollars to go around.  There are only so many rigs to go around and there are plenty of places in the world where companies can find oil and gas, develop it, get it to market and make a lot of money.

Sending delegation after delegation to oil shows in places like Houston doesn’t produce a single new exploration well. What the local oil and gas industry needs is a stable, predictable environment.  That is something they haven’t had for a while.

One of the easiest things for the provincial government to do is set an offshore oil royalty regime and a gas royalty regime.  The provincial government had an oil royalty regime but the 2007 energy “plan”  to replace it with something else.  Not surprisingly for the current administration, there is no sign of a new oil royalty regime four years after they promised it.

Ditto a natural gas royalty regime. The current administration promised one in 2007 but they still haven’t delivered.  In fact, the provincial government has been working on development of a gas royalty regime for the past 14 years and still they haven’t managed to produce anything but a discussion that went nowhere.

With the royalty regime set, there’s no need for the provincial government to hold up any developments while it “negotiates” with a developer.  That’s the sort of thing one might expect in a banana republic.  It isn’t what happens in mature economies.

In the same way, the provincial government should set – or allow the offshore regulatory board to set – basic rules for local benefits.

The current administration held up the Hebron development and in the end settled for a royalty regime only marginally better than the generic regime. But any gains on so-called super royalties were offset by give-aways on the front end of the royalty structure and on local benefits in the form of research and development spending commitments.

Standard royalty and benefits regimes that work across a variety of price ranges and that work fairly for the resource owner  - i.e. taxpayers - and the developer will promote stable economic development.

The provincial and federal government should also implement a policy of merit-based appointments to the offshore regulatory board.  The Canada-Newfoundland and Labrador Offshore Regulatory Board is one of the most important agencies in the province. The most recent fiasco with efforts to stuff a former political staffer into a job she was unqualified for highlight the potential damage that politicians can do to an important official body.  At the very least, the provincial government should advertise for applicants for board appointments based on well publicized criteria. Board appointees should serve for fixed terms and each appointment should come with a publicly available expiry date. The offshore board is no place for political hacks and cronies.

While the offshore oil and gas industry is well developed, the oil and gas industry that lies exclusively within provincial jurisdiction is not.  As a way of encouraging development of a well-managed industry within the borders of the province, the Government of Newfoundland and Labrador should develop a regulatory board to administer lands, manage reservoirs, serve as a repository for information on oil and gas and generally serve as the focus of industry regulation from the three mile limit inward. 

The new oil and gas regulator should complement the work of the offshore board.  Naturally, the new board will assume some of the roles assigned to the old provincial petroleum directorate as well as ones that have grown up within the oil and gas division of the natural resources department. The new onshore regulatory board should also administer new, standard royalty and benefit regimes for any future developments.

Other elements of the 15 ideas (and more) also will apply to the oil industry.  For example, breaking up the energy company and either privatizing it or forcing it to function like other companies would break its strangle-hold on the local business environment.  This would inevitably allow for new life and energy in a sector that is rapidly becoming stagnant.

Without new life in the province’s energy industry,  the future looks bleak.  Staying on the current path is not a practical option. 

These are a few ideas to stimulate life and growth and to create a future for the province and its people that works.

- srbp - 

A tisket, a tasket

You gotta love subtle minds, especially subtle political ones able to see nuances of meaning or the possibility you could rub your tummy and pat your head simultaneously.

That would be most definitely not like the political geniuses of the last decade -  Danny Williams and Kathy Dunderdale  - who always saw the world as consisting of two polar opposites:  what they wanted to do, and the pathway to complete destruction.  With Danny, his tendency to gainsay got to be especially funny since he was known to wind up arguing with himself on some major issues like Equalization.

The latest example is Kathy Dunderdale’s comments to the Telegram editorial board.  In the latest offering from that rich gold mine, Steve Bartlett tells us that Kathy Dunderdale has no time for any talk of a sovereign wealth fund.

For those who don’t know what that is, a sovereign wealth fund* would be what they do in smart countries, like Norway, to make sure their oil money continues to benefit the country long after the last drop of oil is gone. 

Basically, the Norwegians put a bit of their oil wealth into an investment fund and let it make more money for them.  They do lots of other things with their oil money, like build roads, bridges, tunnels and schools and such.  But they put some of it aside for a rainy day.

Now bear in mind the Norwegians have a shitload of oil and natural gas.  They are not really in danger of running out in the near future and there is always a good chance that all the exploration going on offshore Norway will turn up a few more gushers.

Still, they still thought it might be wise to start a rainy day fund. 

You know. 

Just in case.

And now several billion or trillion dollars later, they are doing just fine.

Some people have suggested the same idea here.  The most recent one is Wade Locke. Kathy thinks it is foolishness:

"People talk about a legacy fund all the time and we respond to that by saying, 'That's our legacy fund, the investment in infrastructure.' Because unless you have roads and wharves and hospitals and schools, your economy can't grow," she says.

There’s that binary thinking again.  No chance of doing more than one thing.  Sovereign wealth fund or infrastructure.  The word “and” is not in Kathy’s vocabulary.

One of the many things Kathy missed is that all those roads and wharves and hospitals and schools don’t really produce any money to pay for their own upkeep.  That’s especially true in a province like this one where the economy has grown increasingly less diverse over the Tory term of office. So it is great to spend a bunch of money on all that lovely infrastructure but if that is all you have done with the cash, you really haven’t done much in the long run.

The sensible answer would be to do several things with the oil money.  Invest some.  Spend some.  Pay down debt with some.  Build some infrastructure with some.

What Kathy and her mates have done is put all the province’s financial eggs into one basket.  It’s basically the same thing the Tories did with their own political leader:  one egg to rule the basket.  Sadly, when the time comes and the egg goes, as it inevitably will, all you wind up with is the sad case of …well…an empty basket.

And who really wants to be left with a basket case?

- srbp -

*  Paragraphing change and rewritten sentence to make it clear that the sentence after this mark wasn’t a comment made or or attributable to  KD.

Making the Most of Our Energy Resources (Part I – Electricity Reform)

In slightly more than a decade, fundamentally bad policy decisions by Liberal and Conservative administrations have turned the provincial government’s electricity corporation into an unregulated, unaccountable monster.

Such is the power of this hydra corporation as we enter the second decade of the new millennium that it can corrupt the public body  - the board of commissioners of public utilities - that is supposed to control the corporation in the public interest and turn it, instead, into nothing more than a tool of the corporation’s Muskrat Falls venture, all with the enthusiastic support of the provincial government.

The result of all this is that the people of the province will not be getting the most of their own resources.  Rather, they will pay dearly to supply discounted energy to other people.

No single act created the beast.

No single act will bring it under control.

But there is no question that the province’s electricity industry must be radically over-hauled.  If we allow the industry to continue on its current disastrous course, what should be a very rosy future for the people of Newfoundland and Labrador  may well turn out to be as bleak as the bleakest time in the province’s history during the 20th century.

In reforming the electricity industry in the province, we must keep an eye on our basic principles.

1. The entrepreneurial private sector must be the main engine of growth in a globally competitive economy.
2. The provincial government must regulate the industry to support economically and environmentally sustainable development.
3. At the same time, the provincial government must ensure that the people of the province – the resource owners – get their fair return at the lowest possible level of risk.

With those three elements in mind, let us now turn to some specific actions.

Privatize


While there may have been an argument in favour of nationalising the provincial electricity companies 40 years ago, those rationales have long since vanished.  Even some of the politicians who created the hydro corporation in the mid-1970s now think it was a bad idea. And if privatizing a Crown hydro corporation is a good policy for a former Parti Quebecois activist, the idea is well worth considering in this province.

Privatizing the provincial government’s energy corporation remains the best way to reform the provincial electricity industry almost two decades after a provincial government first pursued the idea.  Turning the corporation over to the private sector would net the provincial government significant cash while at the same time removing a huge debt from public shoulders. 

In the past 20 years public attitudes have changed.  A renewed sense of confidence in the public would support the creation – in effect – of several new corporations doing business within the province and expanding outside its borders.

The provincial government will need a plan on how to privatise the electricity corporations. They could entirely in the private sector from the start.  The provincial government could sell shares or accept offers – as Danny Williams was ready to do – for any or all of the company and its assets. 

Alternately, the provincial government could create Norwegian-style hybrid companies that are jointly own by the state and private share-holders. The public interest in hybrids would be managed through a parliamentary oversight committee similar to the type used in Norway and elsewhere to remove Crown corporations from decisions that may be based on too many partisan considerations.

In either approach, the new companies must be incorporated under the Corporations Act* and subject to exactly the same laws and taxes as all other companies in the province.

Embrace Competition


No matter what route the provincial government choses to take on privatization, it must sell off the generation assets seized from private sector companies in the 2008 expropriation legislation. This will be an important first step in smashing the dangerous monopoly created under the 2007 energy plan.  It will also send a powerful message to investors that the provincial government will not tolerate such grotesque abuses of power.

Reform would also mean replacing the provincial energy corporation’s  tangled mass of interlocking directorates and companies with clearly defined companies that look after electricity transmission (TransCo) and generation (GenCo).  GenCo could be also subdivided into the island generation assets and those in Labrador.

Churchill Falls (Labrador) Corporation should remain a separate company and possibly would be retained as a Crown corporation as proposed in 1994. The provincial government should move quickly to repeal legislation that supports the Lower Churchill Corporation, including the 1978 development corporation act.

In the future any Lower Churchill development should be undertaken by the private sector, based on sound financial plans.

For TransCo, the provincial government will also have to set an open access transmission tariff or give the public utilities direction to do so. OATT allows open access to transmission facilities. It is part of the competitive system fostered by American regulatory changes in the early 1990s. This is an important part of connecting the province into the North American electricity market system fairly and equitably.

Protect the Public


The 1994 version of the Electrical Power Control Act created a role for the public utilities board in managing the electricity industry in the province.  The provincial government should repeal a series of exemptions granted in late 2000 that effectively stripped the PUB of its power to ensure that the people of the province benefit from the electricity they need at the lowest possible cost, as mandated by the EPCA, 1994.

As part of the reform, the PUB leadership must be removed from the realm of political pork and patronage.  New commissioners should be appointed from the winners of an international competition.  Funding for an expanded commission that we will need to carry out the PUB’s new role should come from a combination of public funds and levies on the regulated industries.

The PUB’s first task will be assessing the province’s energy needs for the future.  This will determine what, if any new power sources might be needed.  The PUB can then re-allocate existing generation to meet the forecast need or call for new projects.

Set the Taxes and the Policies


In the new world, the provincial government will have a new role.  At first, politicians and bureaucrats will have to get used to a new role instead of involved in all sorts of high-powered negotiations for which they have usually turned out to be uncomfortably unsuited.

The provincial government will have to set broad electricity policy to deal with environmental issues:  how much of the province’s domestic supply should be from renewable sources?  Should the province allow natural gas generation?  What about nuclear power?

The provincial government will also have to set taxes and other charges that generators, transmitters and domestic retailers will have to pay to the people of the province in exchange for developing electricity resources. This could turn out to be an interesting new source of provincial government cash. There’s another post coming on that aspect.

The government would also have to set the broad rules that the public utilities board would follow when setting retail prices within the province.

Taken altogether, these reforms to the provincial electricity industry would:

• Reduce the public debt load.
• Produce an initial pot of cash for the provincial government from sales.  This would be followed by new annual revenue from taxes and other charges that the provincial government currently doesn’t collect.
• Promote sustainable development of new energy sources at the lowest cost for domestic consumers.
• Create a stable environment in which entrepreneurs can attract investment in order to develop the province’s full energy potential.

- srbp -

* Corrected from Companies Act

Strengthening the Treasury

Consider the simple reality.

The current provincial administration has more money – without considering federal transfers – than any other government in the province’s history.

Most of the government’s money comes from oil.

Oil prices are at persistent record high levels.

There are fewer people in the province than in 30 years.

Yet the provincial government is going to be running record deficits for the next five years.

And if Wade Locke’s analysis is only partially true, the provincial government will run record deficits virtually every year for the next decade and more and build debt to unprecedented, unthinkable levels.

That’s all without factoring in the Muskrat Falls mega-debt project.

We got into this state because successive provincial administrations believed in overspending today and ignoring tomorrow.  Over the past seven years in particular, the scale of fundamental mismanagement has been breathtaking. Danny Williams and his associates haven’t done anything others haven’t done before. It’s just been astonishing that they have followed a reckless course despite all the experience in this province and elsewhere that warned against it.

To appreciate just how well people in this province understood what needed to be done compare the recently Alberta expert panel’s economic strategy with the the 1992 Strategic Economic Plan developed over the course of two and a half years of widespread consultation.  Allow for the difference in the two provinces and it is remarkable how similar the language is.  Both talk about the need to develop infrastructure, broaden the economic base, promote entrepreneurship and soundly manage provincial spending.

We’ll get to the economic policies in another post in this series.  For now let’s toss out some ideas that the provincial should implement in order to make sure the public treasury is definitely managed prudently to provide a prosperous and secure future.

There are at least three basic principles that underpin these ideas:

First, recognise that the role of the provincial government is to create a climate in which personal and collective innovation in the private sector can create economically and environmentally sustainable jobs.  Government just isn’t good at it and decades of experience in Newfoundland and Labrador shows it is a bad idea for government to become as heavily involved in the economy as it has become in the past seven years.

Second, recognise that while government spending can play an important role in balancing the ups and downs of the economic cycle, it is a very bad idea to make people dependent on public spending for their primary economic activity.  It didn’t work in the Soviet Union and it won’t work here.

Third, non-renewable resources won’t last forever.  As such, the government must – as a moral obligation to the people it serves – adopt strict policies that maximise the long term benefit from resource revenues.

Now the ideas:

1. Balance the province’s books every year. Mandate that all publicly owned entities follow the same policies.
2. Spend percentages of non-renewable resource revenues in one of four ways.  Put a percentage toward an annual spending increase but limit annual spending increases to the average rate of inflation for the previous three years.  If the Conservatives had merely increased annual spending increases to five percent – instead of 10% and more – they could still have stimulated the economy when they needed to,  built needed infrastructure and had provided for a steady and reliable growth despite the recession plus they would have avoided the looming debt and very real deficit problem. We’ll get to public sector issues – including wages - in another post.
3. Put another percentage into annual capital works spending that is based on a five year plan of maintenance and new construction.
4. Put another percentage into real debt reduction.   All the current administration has done so far is pay off any debt that came due anyway.  Some of that was already covered by money put aside in other years in something called sinking funds.  The current crowd haven’t made a meaningful cut to what the provincial government owes in total. That must change.
5. Put a fourth percentage of non-renewable revenues into a sovereign wealth fund as they have done in Norway.   Invested properly, this fund can provide new income for the provincial government every year long after the last barrel of oil is gone from the ground.
6. If non-renewable revenues skyrocket in any year, commit to apply the bonus to debt reduction and to the investment fund.
7. Review program spending every five years to make sure that programs meet a real need and are run as efficiently and as effectively as possible.  Scrap programs that are no longer relevant or that have outlived their usefulness.  At the same time…
8. Introduce new programs only if they can be funded within existing spending levels or if they can be financed with new money outside government.
9. Adopt the most demanding and transparent public audit and reporting policies in the world.  End the current misleading practice of reporting the public accounts on both a cash and accrual basis without explaining the difference to people.  The people deserve to know exactly how the government is handling their money.
10. Work with the federal government to eliminate duplication of services and increase co-operation as with economic development (e.g ACOA and ENL) and taxation (e.g. HST).

- srbp -

Building the fishery of the future

To look at the fishery in Newfoundland and Labrador is to see as clear an example as one may find of the fundamental bankruptcy of the sort of old-fashioned politics that has existed from the earliest of times and that persists right down to modern day Ottawa.

It is not business, as your humble e-scribbler has said before, as much as it is a Frankenstein experiment in social engineering.  Politician after politician after politician has used the fishery for his own political gain. The fishery is the heart and soul of the province, we are told.  Mention fishing and you will find politicians eager to display their passion to rise to its defence against all manner of assailants, most of them entirely fictional.

Is there fundamentally any difference between John Efford, say, and Ryan Cleary? 

Absolutely not.

Cleary with his crusade to find out what happened to the fish is merely the latest version of the old blow-hard Newfoundland politician.  Cleary’s already mounted his ass and headed off to find the missing fish.  If by some miracle, Cleary gets the crowd in Ottawa to fund the junket-commission he wants, he will look, inevitably, in all the places where the information isn’t.  If he doesn’t get the cash – as he won’t – Cleary will claim this is yet another example of Canadian exploitation of the poor benighted fisher folk who form the moral core of a long-suffering society blah blah blah blah.

Either way, Cleary will garner  column inch after sound bite from reporters at home who are always ready to spew the bullshit to the punters or from mainland scribes hard up for copy and who know as much about the eastern-most part of Canada as the average Hmong tribesman does and seem to care even less.

Passion is their thing.  After an early embarrassment and dismissal from cabinet, John Efford rebuilt his political profile as a fisheries crusader who was as full of it as Cleary is, or Tom Rideout or any of a dozen others.

For politicians, all this will be good to the last fish. Kathy Dunderdale is vowing to step into the latest problem at the Marystown plant so that fish are processed in the province and not sent outside where they can be turned into food or some such far more cost-effectively than they can be handled in places like Marystown. 

This is the same problem, incidentally, that Fishery Products International had with the same species and the same plant on a few years ago.  Kath should recall.  She and her colleagues decided the way to handle that was to smash FPI to bits.  The lucrative bits went to foreigners.  The headquarters building changed hands a couple of times within a year and now houses some lovely provincial government tenants. The other bits wound up going to Ocean Choice, the Torily-connected fish processing company that is now experiencing some sort of karmic retribution. 

What goes around, comes around, apparently and in a small province, it seems to pick up speed on the return trip.

So firmly entrenched is the political desire to interfere in the fishery that the current fisheries minister is refusing to accept a dramatic proposal from the fishermen and the processors to do the sorts of things people have been saying they needed to do for years. 

The current provincial government’s decision only further emphasises the extent to which the fishery is controlled by people who have no business in the business.

The solution is to turn control of the industry over to the only people who can decide for themselves how best to run it:  processors and harvesters.

Not surprisingly, therefore, the first bold proposal to reform the fishery is for the provincial government to accept the recent fisheries reform proposal without further delay.

The second idea is to eliminate all subsidies to the industry within two years. They drain the provincial treasury and serve only to prop up businesses that otherwise wouldn’t make it.

The third idea is for the provincial government to abolish processing licenses with the elaborate red tape restrictions that go with it.  The current system helps to keep too many people and too many plants working in an industry featuring low wages, limited capital for investment and with no prospect that new workers will enter the industry to keep it going.

Instead, license processors as businesses under occupational health and safety rules or anything similar legislation. Beyond that?  Nothing. Let processors open plants, close plants or reorganize plants as they see fit based on the business’ finances.  If a plant goes bust, then it goes bust. 

The end result will be fewer plants but fewer plants is exactly what the industry needs.  Where those plants will be and how many that will exist are not things anybody can or should predict.  What will emerge at the end of the change will be stronger companies that are more likely to survive in a highly competitive global market.  In the end there might only be one big company – looking, not surprisingly like FPI – and a bunch of small niche companies.  There could be a couple of bigger, integrated operations but the people in the industry will be able to make a decent living from their work and their industry will be more attractive than the current mess is.

Fish harvesting also needs an overhaul.

The fourth idea is to establish a system of fish auctions using internationally recognised grading systems would improve quality and the cash that fishermen get for their landings.

Processors from any province would be required to bid for landings at the auction sites in a daily competition. Alternately, processors could operate their own fleets or make supply contracts with harvesters.  The two systems could operate side-by-side but harvesters would have a choice. 

Increased competition would also ensure they wouldn’t be victimised in a system like the old one where they had no choice but sell to the handful of locals in a closed system. It would also give fishermen greater control over their own individual operations.

Changes to the harvesting side of the industry will need federal involvement, but federal politicians and bureaucrats would have good reason to support a system that reduces the political and financial headaches of the current system.

Fish harvesting businesses would also profit by the fifth idea, the elimination of the byzantine system of gear restrictions and vessel size restrictions that serve no useful purpose in a modern industry that is run as an industry. “Buddying-up”  - having several licenses on one boat – is an example of how people in the industry are already trying to make sensible changes to meet the economic pressures of the industry.  They are limited in how far they can go, however, by the inertia that keeps in place a system of rules that may have worked decades ago but that simply make no sense any more.

Something that may have worked once but that no longer makes any sense:  that is really the tale of the entire fishing industry in Newfoundland and Labrador, if not all of Atlantic Canada.

To build the fishery of the future, we have to let go of ideas that simply make no sense any more.

We must turn the industry over to the people who are trying to make a living in it.

They know best what to do.

We just need to give them a chance.

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Updated Bonus Idea: Dismantling the Stalinist provincial bureaucracy that is stifling the fishery at the provincial level will allow the fisheries department to focus on new priorities. 

The biggest of these would be encouraging aquaculture .

The next biggest would helping to promote a new identity for local seafood based on quality.  This would be a key part of ensuring the future fishery is internationally competitive.

15 ideas (and more) – Setting the Table

Our economic vision for Newfoundland and Labrador is that of an enterprising, educated, distinctive and prosperous people working together to create a competitive economy based on innovation, creativity, productivity and quality.

Strategic Economic Plan, 1992

Our social vision for Newfoundland and Labrador is of a sharing society which balances its economic and social interests, cares for its disadvantaged, nurtures its human and physical environment, celebrates its quality of life and traditional values of individual respect and community responsibility and provides opportunities for personal and collective achievement.

Strategic Social Plan Consultation Paper, 1995

 

Within a mere two decades, Newfoundland and Labrador transformed almost two centuries of economic backwardness into unprecedented growth.

And yet, as we enter the second decade of the 21st century, a number of factors, some identified in the early 1990s, threaten to rob Newfoundlanders and Labradorians of the bright future they worked to achieve through careful planning, steady work, and a steely determination to endure.

Public sector debt remains at record levels.  Rather than reduce debt, the current Conservative administration plans to increase the debt burden still further by building an economically unsound megaproject.  What’s more, the most recent economic forecast predicts that the current administration’s policies could triple the debt within a decade.  That is on top of the burden from the  Muskrat Falls megaproject.

Changes in the province’s population, forecast in the early 1990s, have started to create pressure for new government spending and more government spending.  Just paying the interest on the growing debt will rob money that could be helping to pay for those new services.

The highly competitive global economy that has emerged in the past 20 years, coupled with fall-out from the recent recession, will demand even greater inventiveness if businesses in Newfoundland and Labrador will meet the challenges these changes present. 

Yet, over the past decade government policy has fostered greater social and business dependence on government hand-outs.  The result is a fragile economy that will grow less robust and more susceptible to set-backs.

The answer to these challenges can be found in the principles that lay at the heart of the 1992 Strategic Economic Plan: 

• We must foster a change in people.  We must renew genuine pride, self-reliance and entrepreneurship. We must once more become outward-looking, enterprising, educated and innovative. 
• We must change government.   Our people do not need saviours or demigods.  They can run their own affairs.  We must introduce fundamental democratic reforms.  Decisions about education, health and economic development must be made closer to the people directly affected by them. The role of government is to create an environment in which the private sector can develop economically and environmentally sustainable  businesses.
• We must change relationships. We must replace the chaotic, secretive and highly centralised government of the past decade, with mature, professional and open government based on sound long-term planning and a genuine understanding of the province’s long-term interests.  Beyond that, we must forge new relationships among governments, business, labour, academia and community groups of the sort envisioned two decades ago. We must build a strong relationship between the federal and provincial governments in order to deliver government services as efficiently and effectively as possible while ensuring that the people who pay for those services can hold the right government to account for what they do.

The ideas that will follow in posts over the coming days and weeks are nothing more than the starting point for discussion.

Only through vigorous, free-wheeling public debate can we build a mutual understanding among all the people of the province on both the necessity of change and of the specific changes themselves.

Change is not a luxury.

Change is not merely possible.

Change is essential.

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Next:  Building the Fishery of the Future

15 ideas (and more) for a stronger Newfoundland and Labrador – Introduction

In her first speech to the House of Assembly as Premier – which she and her staff erroneously and arrogantly like to call her inaugural speech – Kathy Dunderdale claimed that, since 2003, she and her party had “demonstrated an unwavering commitment to fiscal responsibility”.

The words turned up again in the Speech from the Throne and found their way into the finance minister’s budget speech for 2011.

There was nothing surprising about this.

The claim of fiscal responsibility, of having transformed the province’s finances from catastrophe to prosperity is the one thing that the provincial Conservatives claim as their singular achievement since taking power.

Last week the people of Newfoundland and Labrador learned that  - in the words of a famous politician – nothing could be further from the truth.

Through the 1980s and early 1990s successive Liberal and Conservative administrations managed to steer the provincial government successfully through treacherous financial times.  They laid firm foundations for future prosperity based on a diversified economy.  Included in that diversified economy was supposed to be an oil and gas industry that included local companies capitalising on local knowledge and experience to compete globally.

“One day the sun will shine,” Conservative Brian Peckford said, “and have not will be no more.”

“I can’t wait for the day”, said Liberal Clyde Wells less than a decade later, ”when we don’t get a penny” in federal hand-outs.

Last week, Memorial University economist Wade Locke described a future for Newfoundland and Labrador that is far bleaker than anything that either Wells or Peckford faced.  As the Telegram reported:

Unless something changes, Locke said the government’s debt could be up to $10 billion within the next 10 years. By 2020, he said the government could run a $1.6 billion deficit on the provincial budget.

“If we don’t start dealing with it, it will become quickly unmanageable,” he told reporters after the event.

The situation is far bleaker because the government is in this state despite having unprecedented income. It is far bleaker because the problem comes not as the result of global economic circumstances or forces beyond anyone’s control.  The financial mess is directly the result of actions taken by the provincial government since 2003.

Regular readers will know the story all too well.  Your humble e-scribbler first raised concerns in 2006 and each year after that as concerns grew.  Telegram editor Russell Wangersky’s column this weekend reminded everyone of his own comments over the years. As Wangersky notes, the province’s auditor general has also warned about the current administration’s spending. So too did former cabinet minister Paul Oram and at least one of the provincial government’s bond rating agencies.

With their one claim to fame now shown to be a complete fraud, the provincial Conservatives have even more problems to worry about as they head toward this fall’s general election.  The truth about their record of financial irresponsibility only compounds their dwindling public support.  Inevitably it will only add to public unease at the Conservative plan to increase the public debt beyond what Locke has forecast and at the same time saddle domestic electricity consumers with ever-increasing electricity prices while selling cheap power outside the province.

Even if the Conservatives could admit the province faces a financial mess of their making, they would be hard-pressed to do anything about it.  Election years are never good years for an incumbent government to face problems.  What’s more, Kathy Dunderdale remains a place-holder leader put in place via a backroom deal to avoid a possibly contentious leadership contest during an election year.  If voters re-elect the Conservatives under Dunderdale, they can bet on a new Premier within four years.

For their part, the New Democrats won’t be promising to do anything to clean up the mess. Federation of labour president Lana Payne already dismissed Locke’s analysis out of hand.  With the province’s labour unions taking a reactionary position, New Democratic Party leader Lorraine Michael will follow suit, first rejecting Locke’s assessment and most likely proposing policies that will make the bad situation that much worse.

While the Liberals under Yvonne Jones were quick to endorse Locke’s idea of a task force to study appropriate financial policies, it still isn’t clear what sorts of policy ideas the Liberal party will offer heading into the fall election.  They will likely be tempted to follow along with the others and offer ideas that look like what everyone else is talking about.

It wouldn’t be the first time.  Political parties in Newfoundland and Labrador seldom offer bold and innovative thinking.  They tend to rely on the hackneyed - blaming Ottawa in one way or another is a popular distraction – or the grandiosely ridiculous like Danny Williams 2003 obsession with an economically foolish stunnel to the mainland.

This post is the start of a series on some options for the future of Newfoundland and Labrador.  The next post will set the table, as it were, by describing the domestic, national and international environment in which the province must operate. Some of that will be a quick summary of other posts.  Some of that will be new.

After that, successive posts will explore a series of ideas for change.  They cover the economy,  government and society. They are offered to stimulate further discussion.

Some of you may notice that the series goes back to one started in 2008.  While the series never got beyond the first post,  the ideas didn’t die. Now that more people are seeing the situation as it is, perhaps this is a better time to talk about options and ideas.

The future is not bleak.

The future is ripe with opportunity.

We just have to be open to taking the first step toward a future that works.

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15 ideas for a stronger Newfoundland and Labrador

Introduction

When Brian Peckford and Clyde Wells spoke of getting the provincial government off Equalization, they understood that such a development would merely reflect a greater strengthening of the provincial economy and society. Their policies and those of successive administrations aimed at economic development and diversification which would deliver a stronger economy that would in turn create wealth for Newfoundlanders and Labradorians.

The current state of affairs in Newfoundland and Labrador reflects more the result of those policies coupled with the unexpected good fortune of global economic conditions than it does a sustained commitment by the provincial government to implementing coherent strategies.

The following series of posts will offer 15 ideas on different areas of social, political and economic affairs aimed at strengthening Newfoundland and Labrador.

Strengthening the treasury

1.  Reduce the public debt by 50% within 10 years.  Beginning in the early 1990s, successive administrations restructured public borrowings to convert debt held in foreign currency.  As a result, the current burden on the treasury is significantly reduced and uncertainty due to currency fluctuations has been all but eliminated. 

Since 2003, the accumulated borrowings of the provincial government and its agencies has grown and the current government commitment is to increase public debt to meet any unforeseen needs. Direct debt had actually declined before 2003.

Debt servicing costs - paying only the interest on the debt - is one of the largest amounts spent by government annually.  Paying down debt frees up more money to spend on needed programs and services and improves the ability of government to meet any economic downturns without resorting to borrowing.

2.  Balance the books, every year.  Government surpluses in recent years have been built on the blind good fortune of astronomical oil prices.  Those prices are an unreliable source of cash.  On a cash basis, the provincial government has actually been in debt each year since 2005.  That means new borrowing to add to the burden of public debt.

Balancing the books is possible.  It just needs the political will to do it.

3. Limit annual spending increases to the rate of inflation.  Provincial government spending has increased by as much as seven times the annual rate of inflation in each of the last three years. That's unsustainable in the long run and with the current economic crisis, the excesses of the past three years are about to catch up to everyone.

Limiting spending to the rate of inflations allows for natural increases and commits government to eliminate unnecessary, ineffective or wasteful spending.

4.  Make non-renewable resources revenues a long term benefit by creating an investment fund, paying down debt and funding infrastructure. 

5.  Ensure that any new programs can be funded within the spending limits for annual increases and anticipated revenues.  Review existing programs annually to ensure they meet objectives and are run as efficiently and effectively as possible. 

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