Lies, damn lies and throne speeches

One of the glorious piles of foolishness you will see again in Monday’s provincial throne speech is the idea that no provincial or federal government before this current provincial one paid any attention to public sector capital spending.

For too many years, for want of proper infrastructure, our province languished while other regions of the country prospered.

It’s foolishness because every government delivered capital spending, even in the leanest of times.

Take a look at this table.  It shows public sector capital spending in the province from 1991 to 2011.  That’s federal and provincial spending combined and it includes construction as well as equipment.  The figures are compiled by the Statistics division of the provincial finance department using Statistics Canada figures.

The section marked Red I basically reflects provincial spending during the early 1990s recession combined with what appears to be any federal money that went into Hibernia.  That would account for the peak in 1995 and the drop off in the last year of the project before the GBS tow-out and first oil in 1997.

Blue II represents the combined federal and provincial Conservatives’ “stimulus” spending.

Red III  is a bit of an anomaly but since it covers both a federal and provincial election period, odds are good that there is a connection.  Anyone who can offer a reasonable explanation is welcome to chime in on that one.

What’s curious is that the first three years of the current provincial Conservative administration is roughly the same as that Red II period in terms of total capital spending.  It’s not because the provincial government was flat broke;  it wasn’t.

To the contrary, the provincial government had cash and announced a fair dollop of spending in the run-up to the 2007 election.  What seems to be reflected in this diagram is that a great deal of the capital works announced by the provincial Tories around the 2007 election just didn’t happen until two to four years later.

It’s one of those curious things but the current crowd what is ruling over us seem to have a chronic problem delivering their capital works projects.  They can announce them alright, but finishing the delivery seems to be a problem.

Oh.

And there is no coincidence that capex is peaking in 2011, a definite provincial and likely federal election year.

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Non-res building up 23.% in Q4

The value of non-residential construction in Newfoundland and Labrador increased 23.6% in the fourth quarter of 2010 compared to the third quarter, according to figures released Monday by Statistics Canada.

Of the $103 million in industrial, commercial and institutional construction in the province, $62 million of it was in the metro St. John’s region.

That’s interesting given a recent comment by finance minister Tom Marshall that it was time for the private sector to step in a drive the economy for a while. BMO noted recently that provincial economic growth is driven currently by capital spending. 

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No Muskrat Falls in BMO forecast

Curiously, BMO’s latest economic forecast for the province doesn’t include any reference to Muskrat Falls.

The bank’s economists forecast overall economic growth in the province of 3.,9% in 2011 driven by provincial government infrastructure spending totalling $5.0 billion “over the next several years.  BMO says that the province’s capital spending hit 3% of the province’s gross domestic product in 2010.

BMO forecasts continued strong capital spending over the next three years.  While the bank mentions Hebron, Hibernia South and Long Harbour, there’s no reference to Muskrat Falls. That stands out like the proverbial sore thumb since the forecast is up-to-date enough to note the change in Conservative leadership late last year. it’s also odd because the forecast of capital spending comes entirely from the provincial government’s figures.

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Related:  Labour force indicators raise questions about economic health and competitiveness

Williams-era capital spending pales in historical terms

Danny Williams is proud of how much money his administration spends, like, for instance, the amount spent on roads, bridges, schools and other public works.

In the run-up to the 2007 general election, Williams told the St. John’s Board of Trade that his administration “invested like never before in neglected and crumbling infrastructure, and creating significant employment.”

Here’s what he told a small audience in Ottawa in early June:

We [weathered the recession better than anybody] by taking our already aggressive infrastructure strategy from four years earlier and expanding it. "Stimulus spending" was well underway in our province long before it became the trend of 2009.

A five billion dollar infrastructure plan in a province of our size is substantial to say the least, and has not only helped to create jobs and boost consumer confidence; it is also rebuilding communities so that we have the economic foundations necessary to succeed.

He just “expanded” an “already aggressive” infrastructure strategy. That’s the same line he used on Calgarians in 2009.

But figures available from the provincial government show that Williams’ claims don’t match reality. There was no shortage of capital spending nor could Williams’ approach be characterised accurately as aggressive let alone unprecedented.

Between 1991 and 1995, for example, public sector capital spending in the province ranged between 25.4% and 30.4% of the total CAPEX spending in the province.  From a low of 9.4% in 2004, Williams has doubled the share of CAPEX spending but the highest year is still only 18.4%.

But the real tale comes when one looks at the actual amounts adjusted for inflation. In 1991, for example, while the province experienced the worst economic downturn since the Great Depression, public sector capital spending was $548.8 million in 1991 dollars.  It peaked at $898 in 1994.  During that time the entire provincial current account budget was less than $3.5 billion.

Adjusted for inflation (to 2009), though, capital spending in that same period ranged from $853.62 million to $1.284 billion.  The best the province has seen since 2007, by contrast is 2010, where public sector capital spending is expected to hit $1.127 billion.

The figures are available at the provincial finance department’s website.

This comparison does not take into account the project delays and massive cost over-runs experienced during the Williams period to date.  Almost half the capital works projects announced in 2009 as “stimulus” were either begun or announced previously. At least one dated back before 2003.

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