You can hear that pretty clearly in the most recent episode of On Point. The political panel talked about a couple of cock-ups by the Conservatives last week.
While you are busily mulling over the possible implications the drop in oil prices might have on the provincial government’s budgets, distract yourself by pondering some of the other implications of low oil prices on the provincial economy.
The Paris-based International Energy Agency thinks that about 25% of Canadian energy projects would be in jeopardy if oil goes below US$80 a barrel and stays there for any length of time. As the Financial Post noted in its report last week on the IEA opinion, that would put a number of newer more expensive projects in Alberta and maybe in Saskatchewan in doubt. Norway’s Statoil has already shelved an oil sands project.
Globally, the low prices would also make about three percent of all energy projects dodgy propositions. Some of those are deep water projects like those in the Orphan Basin offshore Newfoundland. The Orphan isn’t turning up in any of these global forecasts because people don’t know enough about the prospects there to determine if they are even commercially viable.
As it turns out, Corporate Research Associates president Don Mills had lots to say to the St. John’s Board of Trade besides a few guesses.
Newfoundland and Labrador can’t create economic booms in every nook and cranny. Instead, we should focus on growth centres where people are moving anyway.
Such radical - dare one say revolutionary - ideas. How blessed the Board of Trade members were to hear these comments the likes of which they have never heard before.
Surely.
Never heard the likes of it before, except for the 1992 Strategic Economic Plan.
…who have suddenly discovered that the provincial economy is in serious need of diversification: a 2010 series called the Fragile Economy.
If they really want to get a handle on economic diversification, BOT chair Steve Power and his colleagues could start by reading the 1992 Strategic Economic Plan. What the Board of Trade has been slavishly been supporting since 2003 is diametrically opposite to the 1992 SEP and its call for diversification based on – gasp! – entrepreneurship, competitiveness, and innovation.
Frankly, it’s been pretty bizarre since 2003 to have a bunch of business owners who endorsed excessive public sector spending and clammed up about entrepreneurship, competitiveness and other subversive ideas. In November 2010, here’s what the chair at the time said:
Chairman of the Board of Trade, Derek Sullivan said government contracts give a competitive advantage for local businesses and “can be a very powerful and reliable revenue stream.”
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About four years ago, your humble e-scribbler pointed out a fundamental strategic problem with the way the provincial Conservatives spent money.
The premise was pretty simple: at the same time that we knew - as a matter of irrefutable fact - that provincial costs for things like health care were going to skyrocket, the provincial government wanted to start building megaprojects.
In 2008, we were just talking about Hebron and the few hundred million dollars. We didn’t know and still don’t know how much the final costs will be. That was before the Premier and other ministers acknowledged provincial spending was unsustainable. That was also before the global recession.
It was before the provincial Conservatives wanted to spend upwards of $10 billion on a hydro-electric project that won’t produce any revenue outside the province. And it was way before those same Conservatives decided to embark on a decade long period of public sector job lay-offs and spending cuts. Well, at least, that’s what CBC reported on Thursday night that the Tories plan to do. They were reporting on what finance minister Tom Marshall told the St. John’s Board of Trade at a luncheon speech..
If anything, that 2008 series of posts about the precarious provincial financial position understated things. Things are so bad that even Wade Locke had to warn his political friends in the Conservative Party that they needed to deal with the problem. Locke had this to say in 2011:
“It gets progressively worse as you go out, from five years onwards,” Locke said. “The next five years, it’s manageable, but after that it gets less manageable if we don’t start dealing with it now.”
…
“There is a a serious problem in terms of debt and deficits,” Locke said. “I understand that people believe that we are a ‘have’ province, which we are technically. However, they then believe that there’s unlimited money to address all of our needs and wants. That is not true.
People in Corner Brook are worried that the provincial government is going to have problems building the new hospital they promised in 2007. They were supposed to start construction this year but, as it now appears, they won’t be ready to start work for at least another year.
People are nervous. The politicians are more nervous. You can tell they are nervous by the way Tory politician Vaughn Granter shat massive, enormous, huge bricks on Twitter Thursday night. 
If he could, Granter probably would have used a 72 point font in addition to the capital letters to make sure everyone knew just how enormously, massively complicated this hospital project is.
Huge, it is.
Bigger than humans have ever done before on the planet.
People on the island’s west coast won’t be persuaded by Granter’s amateurish horseshit. In fact, no one would be surprised if his nervous tweeting and the same sort of foolishness in person only served to increase public anxiety about the hospital.
Of course, as people start to realise the way all those big economic things are coming together, the provincial Tories will have a harder time persuading people that the hospital and other projects aren’t at some risk. It’s not like the Tories can avoid building something in Corner Brook. They need to replace Western Memorial Hospital. But that doesn’t mean that they will build the hospital they promised in 2007.
It wouldn’t take much to make the current tight financial situation all that much worse. Drop the price of oil at the same time that - as we know - oil production will drop off over the next decade. Drive up the cost of Muskrat Falls at the same time. Nothing radical and nothing at all unusual. Then think about building a hospital project that they said would cost the better part of a billion dollars before they started building it.
Then think about all those projects that were far less complicated, as Vaughn Granter would tell you, than the new hospital. Think of a small aquaculture office building, for example. Announced in 2007 to be finished in 2009. They didn’t start construction until 2009 and by the time they turned the key on the front door, the cost was more than double what they estimated originally.
Hospital in Labrador. Started at $56 million. Hit $90 million and still counting on a project that has actually been longer in the “planning” stage than the one in Corner Brook.
That’s a 60% increase in cost, incidentally. Sixty percent is the low end of provincial government cost over-runs, these days. So if, by some estimates, this Corner Brook hospital started out at $750 million, think of how much it might really cost. $1.5 billion wouldn’t be outrageous. $1.2 billion would put it on par with the Labrador cost over-run.
Now go back and lower the price of oil, increase the cost of Muskrat Falls and do all those other very likely things. The more people like Granter talk up the enormous cost and the complexity of the hospital and the longer they delay getting it started, the more likely people are to worry.
And it’s not like they weren’t worried already, before the politicians started protesting too much in their denials about a problem in Corner Brook.
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The people who run the province’s town and cites are looking to get a new financial arrangement from the provincial government.
Last week, the municipalities federation held an emergency meeting to discuss recent developments:
“What we’re asking government for today is very clear,” said Rogers. “Short-term help in this 2012 budget and a commitment to participation in the development of a long-term, strategic plan for the municipal sector.”
Sounds reasonable enough.
Odds are they won’t get anything in the near term. Give a listen to what municipal affairs minister Kevin “Fairity” O’Brien said at the outset of an interview with On Point with David Cochrane this past weekend. O’Brien quickly started into a recitation of how much money the provincial government has spent since 2008 on municipal infrastructure and things like fire trucks. he finishes off with the warning that any new financial arrangement has to be sustainable for taxpayers.
Coming from a guy who has helped boost provincial government spending to irresponsible, unsustainable heights without a toss about such ideas, those words sound a bit like a lead bell.
O’Brien is using coded language.
What he really was telling municipalities president Churence Rogers is a simple “f*ck off”. No one should be surprised if Rogers has heard something along those lines over the past few weeks, perhaps even from O’Brien himself. Maybe no one used the “f” word exactly, but language likely would have had the finger buried in it.
You see it all comes down to money, power and control.
Right now the provincial government has all of it.
And they will not give up any of it.
The provincial government isn’t interested in changing municipal funding at all. Any change to funding would have to transfer some of the provincial cash or the ability to raise cash over to the towns and cities.
If the province doesn’t have that cash, then it no longer has the power to control what goes on in the province. Fairity O’Brien may not have deliberately mentioned infrastructure and fire trucks, but there’s no coincidence that he did. That money and those items are part of the old pattern of politics in this province: patronage.
And that’s the money, power and control we are talking about.
None of that has anything to do with the very serious problem in many towns and cities in the province but frankly provincial politicians like O’Brien don’t give a rat’s backside about that.
Many parts of the province aren’t really doing all that well, despite the reports you may have heard. They don’t have the municipal tax base to come up with the sort of cash of their own they need to put into road work, water and sewer projects and other infrastructure.
Problems in the fishery, the loss of paper mills have all taken their toll. People may be working in Alberta and still living in Stephenville and Grand Falls-Windsor but it’s local companies that pay the taxes that help to keep the street lights on, quite literally.
What’s more, way too many of the towns on the island are full of retirees and not much else. People on fixed incomes don’t have the ability to tax up the tax slack. Those towns also have problems finding people to volunteer for municipal services like firefighting.
There’s a bit of a false impression of a boom in some places. People in Grand Falls-Windsor thinks everything is smurfy. Ditto Gander. But in both these towns the major economic engine is the provincial government and a level of spending that we know is unsustainable.
What’s more, the provincial government doesn’t pay taxes to municipalities. They do – however – collect taxes on every municipal purchase through the harmonised sales tax (HST). The effect is to claw back a portion of the money the province grants in the first place. Until the fictitious oil royalty claw back, though, this one actually reduces the amount of money the towns and cities in the province have available to actually spend on services to residents.
And then when towns and cities go looking for cash, politicians like Kevin O’Brien start coming up with all sorts of excuses for why things must remain as they are. The miserable, dark joke in all that shouldn’t be lost. Towns and cities in the province are looking for a fair shake on provincial funding. Kevin O’Brien is the guy who told us all that the province just wanted “fairity in the nation.”
David Cochrane exposed the fundamental bullshit of government’s position. Cochrane asked why it was that O’Brien was talking about the impossibility of making commitments of funds for a few millions in the short term to towns and cities while government was prepared to forecast the price of oil for 55 years in order to justify Muskrat Falls. All O’Brien had was talking points.
O’Brien also couldn’t explain or justify the four years that it has taken for O’Brien to start getting around to talking about a new financial arrangement for towns and cities. Municipal leaders have asked for predictable funding. All O’Brien has said is that he and his colleagues in government are willing to talk.
The real bottom line is that people like O’Brien who have politicized the purchase of bed pans and fire trucks simply want complete control over spending in the province for their own, pork-barrel, patronage reasons.
All municipal leaders want is fairity.
They aren’t going to get it from Kevin O’Brien.
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Newfoundland and Labrador has one of the highest illiteracy rates in the country.
There’s a huge demand for skilled labour in the province and that illiteracy level doesn’t help.
The 1992 Strategic Economic Plan recognised the connection between literacy and economic development: it’s not like government officials weren’t generally aware of the concept.
And yet:
“There are no province-wide initiatives to deal with family literacy, aboriginal literacy, English as a Second Language, GED (General Educational Development) preparation or workplace literacy and essential skills,” [Literacy NL executive director Caroline Vaughan] said.
That’s a killer quote taken from a story the Telegram ran Monday about a news release from Literacy Newfoundland and Labrador. They are wondering where the heck the strategic literacy plan went.
The Telegram again:
Literacy NL said is was told by the province last September the plan would be released in the 2011 calendar year.
In case you are left scratching your head, be assured that the provincial government started work on a literacy plan in 2008. They even had consultations.
As you can see from the picture, they started work on it so long ago that the link is dead from the news release announcing the consultation to the consultation document. In fact if you try and find anything on “literacy” in the education department, you’ll find yourself out of luck. Most the links in this search your humble e-scribbler tried on Monday night turned up 404s – page not found. Ditto another search run from the front page of the government website.
You really couldn’t make this shit up.
If you want a strategic literacy plan from the government, you can find one.
It’s a link to one developed 11 years ago when Judy Foote was education minister.
You really, really couldn’t make this up.
And if you want to find the adult learning and literacy section, you will have to guess that it is now part of Joan Burke’s new department of advanced learning and skills development. The government’s website won’t tell you where it is, though.
A search of the advance education department website for “literacy plan” redirects to a search of the old human resources, labour and employment department. That’s foolish since adult literacy belonged to education before the recent re-organization. Luckily for the government types, people who have a problem with literacy likely don’t have enough computer knowledge to get totally frigged up by the government’s website. They wouldn’t be able to get to the advanced education site to get misdirected by the search engine.
You really, really, really could not make this stuff up.
That’s not to say that successive ministers of education haven’t done something about adult literacy.
In 2010, education minister Darin King issued a news release that endorsed an awareness program on literacy being launched by the four Atlantic provinces.
In 2009, the education department issued a news release on behalf of the Council of the Federation to announce the Council had recognised someone here for achievement in adult literacy.
Aside from those news releases, though, the education department hasn’t been able to deliver the latest update to the provincial literacy plan.
Regular readers of these e-scribbles will be noticing a familiar pattern here. For whatever reason, the current administration cannot seem to deliver anything. They’ve got a chronic problem.:
The literacy plan joins a long list of commitments that are missing in action or went missing for years.
You can read Literacy NL’s submission to the consultation on the literacy plan here.
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The commission appointed to review the Hebron development application to the offshore regulatory started public hearings in St. John’s this week.
Most of the submissions are available on line. They are a study in contrasts.
The City of St. John’s, awash in oil cash from the industry directly or via the provincial government, had probably one of the lightest and most superficial presentations anyone could make.
Their Earth-shattering observations:
Lightweight, superficial, motherhood, apple pie, the flag and any other moth-eaten cliché.
The second bullet is a remarkable about-face for a city that waged political war against previous development agreements based entirely on what was – to be sure – partisan bullshit.
There’s an interesting contrast between the Board of Trade presentation and comments by NOIA, the offshore suppliers association.
The Board of Trade argues that one of the the real legacies of Hebron will be knowledge transfer and the development of a strong cadre of local companies that can compete globally for oil and gas work.
Each individual project gets us closer to a sustainable
oil industry in which we achieve benefits that extend beyond any one project. Skills can be exported to other harsh environments, like the Arctic, which might provide more opportunities in the near future. Experience can be applied to building new industries that will provide employment and wealth creation after the oil runs out. Improvements can be made in how we do business so
that we are a sought after place for future investment and growth.That is the potential project legacy if we make the right choices and investments.
But NOIA is complaining that the Hebron benefits agreement isn’t delivering as promised:
The Hebron benefits plan adds requirements that are beyond the scale of the current capacity of the local supply and service sector. The use of the phrase “globally competitive” throughout the benefits plan sets a standard that a small, young industry like ours will
struggle to reach in its present state. In NOIA’s view, the proponent should focus efforts on advancing the local industry toward global competitiveness, rather than make it a condition of local participation in the Hebron project.NOIA members expect each new project to “raise the bar” on local content and participation at all levels of development and operations – not just increase the person hours of work achieved. We want to see an increase in the level of specialized work, technology transfer and expertise gained.
That’s actually not surprising. When the provincial government unveiled the memorandum of understanding and then the final agreements, a number of local observers privately noted that the local guaranteed work components were things the province would get anyway. Beyond that, the work was relatively unsophisticated work scarcely more advanced than the stuff they did on Hibernia 15 years ago. What’s worse, other components that could have been developed here wound up going off to other places.
As it appears the provincial government fought hard to get a few things for itself – like an equity position – and left the other local benefits slide. That’s a very significant departure from the standards set by the development agreements signed before 2003. Those would be the ones the City of St. John’s now praises.
If NOIA’s contention is true, incidentally, that basically means the provincial government oil policy has shifted radically under the Conservatives. As SRBP noted in 2006:
The Wells administration's 1992 Strategic Economic Plan, by contrast, emphasized government policy aimed at strengthening the private sector, diversifying the economy and increasing the ability of local companies, including in the oil and gas sector, to compete effectively on a global basis. Crown corporations were sold off or shut down.
…
Williams' new Hydro corporation returns to an older model based on government subsidy and government dependence. Beyond the attractiveness to some businesses of relying on whatever contracts they can secure from the new Hydro corporation, the political and financial muscle of the state-owned company will likely make it considerably more attractive an investment than a private sector venture, since it will always carry with it a government guarantee of its operations and expenditures. The end result will almost inevitably be a weakening of the local private sector.
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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:
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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:
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
Natural Resources Canada news release:
“The Honourable Christian Paradis, Minister of Natural Resources, and Nathalie Normandeau, Quebec Deputy Premier, Minister of Natural Resources and Wildlife and Minister responsible for the Northern Plan, today announced that the Governments of Canada and Quebec have reached an important accord on the development of oil and gas resources in the Gulf of St. Lawrence.
"This is an important day that is the result of a great deal of hard work," said Minister Paradis. "Under a co-management framework, Quebec will derive significant financial benefits from resource-related activities. This accord is a concrete example of the two Governments collaborating to create jobs, energy security and economic opportunity in resource communities in the regions of Quebec and Canada. The Government of Canada will continue to work with Quebec to ensure the responsible and sustainable development of our natural resources."
"This is an historic day for Quebec. After more than 12 years — and thanks to the tremendous work of our two governments — we are very proud to announce that the Province of Quebec has an agreement that will give us 100 percent of the revenues from the development of our oil and gas in the Gulf. It's truly a great day for Quebec," said Minister Normandeau.
The Quebec government is undertaking a strategic environmental evaluation before allowing the development of oil and gas in the Gulf of St. Lawrence. The results of this evaluation will be known in 2012.
Since 2006, the Governments of Canada and Quebec have achieved several milestone collaborations. The accord is a key element in the continuation of that work.
The accord will be implemented by means of mirror legislation that will be tabled by the federal and provincial governments before the Parliament of Canada and the National Assembly of Quebec. The accord will be implemented in steps, and rigorous environmental assessments will be conducted before any oil and gas development begins.”
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Australian miner Paladin Energy Ltd (TSX:PDN)(ASX:PDN) announced Friday that it has concluded a definitive agreement for the purchase of the uranium assets of Aurora Energy Resources Inc.. Aurora was a wholly owned subsidiary of Fronteer Gold (TSX:FRG)(NYSE Amex:FRG).
Aurora Energy holds title to significant uranium assets within the highly prospective Central Mineral Belt in Labrador, including the Michelin deposit as well as the Jacques Lake, Rainbow, Nash, Inda and Gear deposits and has secured the most prospective ground within the CMB.
Paladin will pay Fronteer Cdn$260.87 million for Aurora through the issuance of new shares in Paladin.
According to a news release, “Paladin considers the CMB to be one of the few remaining, underexplored uranium districts globally and this acquisition not only provides Paladin with a noteworthy mid-term development asset but also offers an excellent opportunity for both significant new discoveries and expansions of the existing deposits. This highly strategic transaction fulfils Paladin's long held ambition to expand its footprint into Canada, a leading country in uranium mining, both in terms of resources and its stable political and business environment, providing the Company with an important new platform from which to plan its continued growth.”
Paladin plans to continue further testing and exploration to define the size of the assets it now holds. John Borshoff, managing director and CEO of Paladin said that the company intends “to advance these assets and will commit to regional target identification and testing upon resolution of the current uranium mining moratorium, which was put in place by the Nunatsiavut Government to provide the necessary time to complete a Land Use Plan and Environmental Protection legislation, both on track for completion by March 2011. The goal will be to advance towards a definitive economic study and district development plan once a sufficient resource base has been defined thus benefiting Paladin shareholders, our customers and the stakeholders of Nunatsiavut and Newfoundland and Labrador.”
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The Globe and Mail version by Kevin Milligan.
From the 1992 Strategic Economic Plan, the Government of Newfoundland and Labrador’s idea for income support reform as a means of promoting fundamental economic and social transformation:
The unemployment insurance system was originally intended to provide temporary income to people seeking alternative employment who had lost their regular jobs in the work force. The system was not designed to provide basic income support, or as supplemental income for short-term, seasonal jobs. The present downturn in the economy has pointed to weaknesses in this system which must be addressed and corrected.
Strategy Statement. The Province will work with the Federal Government to ensure that the inevitable changes to the current income security system are designed so that basic income support is provided to every household, and that weaknesses in the present system are corrected to encourage the economic growth that is needed to reduce dependency on income security itself.
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Public consultations on a strategy for “the inclusion of persons with disabilities” in society.
In the 21st century.
A strategy to include people with disabilities in society.
Another consultation to develop a strategy for early childhood education.
Novel idea.
41 cash announcements in the month of August alone, according to the Telegram editorial, a great many of which involved the announcement – yet again - of earlier announcements. In some others, announcements include money for new food carts in hospitals and nursing homes.
Announcement of a plan to install a new set of road scales in Labrador.
A gaggle of ministers and government members of the legislature visit a shipyard to look at construction of new ferries that have been in the works for most of the current administration’s tenure.
And then there’s the study of garbage.
This is a provincial government that talks more and more about less and less.
The reason is simple enough: we are in a pre-election/pre-leadership period. We know that, all things being equal, there is an election in October 2011. We also know that Danny Williams will leave politics sometime over the next two to three years.
Now governments in either of those phases alone aren’t famous for doing much of anything new. Pre-election governments like to spend cash, as everyone in the province saw in 2007’s Summer of Love vote-buying orgy from the Reform-based Conservative Party currently running the local show. Pre-leadership governments usually get caught up in the internal division as people jockey for position in the party leadership race. And since they can’t get any agreement on any major initiative until someone winds up as leader, there is nothing knew likely to happen until the leadership issue is resolved. Well, nothing that is except spend money,
Governments in the double-whammy of pre-election and pre-leadership are rare. But what they do is guarantee a unique kind of lowest-common-denominator politics. Money is everywhere for everything. In addition to that, you have the raft of consultations on things that are the sort motherhood issues not likely to raise controversy. Inclusion? Early childhood education? These are hardly debatable subjects.
Even John Hickey - seldom heard from any more - is getting in on the act. He’s got an information session scheduled for Churchill Falls. Apparently there is something about the Northern Strategic Plan they haven’t heard yet.
You can tell these things are busy work, by the way. First of all, there is that word strategy. This is nothing more than the latest government cliche. Second there is the schedule. A good half of the consultations on childhood education take place in the afternoon, a time when the people most likely to be concerned about the subject are working. As the video of the session from Mount Pearl showed, the room was nearly empty and two of those in the audience were cabinet minister Dave Denine and his executive assistant.
Added to this whirligig of deep thoughts are the early stages of a leadership racket. Until lately, cabinet ministers seldom showed up to talk about anything substantial with anyone. Danny and Liz wouldn’t let them. But now education minister Darin King is on any radio station with a phone to discuss his early childhood education initiative. Health minister Jerome! Kennedy is the face of health care spending. Note the number of news stories about multiple sclerosis that described government spending as something Jerome! himself was doing personally.
Personally is the clue. Cabinet government is normally collective government. Sure there is a powerful front man, but cabinets wind up being committees that share the load of deciding on this problem or that one. Except of course, in the Danny Williams administration. It’s only natural that those who wish to replace The Old Man should work hard to be seen as the one person with an idea.
And while all of this consulting, and announcing and news conferencing is going on in public, not much else is happening. No discussions about labour relations. No talk about reforms to economic development policy, the fishery, a strategy to address problems in the labour force or anything else that might actually involve some serious discussion and tough choices that everyone in the province has a right to be involved in.
No.
That’s the sort of stuff that will have to wait until after the next election and Danny’s successor is firmly in place. Meanwhile, the people in government no one has heard much of in a while are busily sorting out the budget for 2011.
That’s right.
We are now half way through 2010 and it is usually around this time that government officials try and figure out what next year will look like. For the past seven years that’s been pretty much Danny’s exclusive responsibility and odds are that’s where he’s been holed up lately. He’ll work hard into the winter and make the big decisions well before sending old Tommy Marshall out for that biggest consultation farce, the one on the budget.
While the Old Man works quietly in the background on the stuff that involves real choices, government officials are wondering if you think that in 2010 we should find ways to allow people with disabilities to become fully contributing members of our society.
The busy-work will continue. The number of news releases and consultations will only multiply as time goes by. It’s all part of an effort to make it seem like stuff is happening when, in truth, not much of consequence is. But it will certainly seem important, as only a Fernando Administration would allow. It is better, after all, to look busy than to be busy.
And lest you doubt all this consider that coming soon to a motel meeting room or bingo hall near you, is a round table on that burning question on the minds of fish plant workers, and foresters and soccer moms everywhere - puppy dogs: cute or what?
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That is an area [innovation] we are now moving in. It is a very, very important area that we have to address and this government is committed to putting that money into that research. That is why the experience that I had yesterday was an incredible experience, but it goes to show the importance of using those monies in the proper areas so that we can prepare for the future at a time when the oil and gas is gone.That event, incidentally happened actually two days before he made those remarks. The province’s new research and development corporation announced $775,000 in funding for different research projects.
Education is the key to economic development. Studies have shown conclusively that skills, qualifications, innovation and the adaptability of individuals are critical determinants of economic performance and the success of enterprises.The 1995 Strategic Social Plan, while never implemented, included significant reforms in our education system.
Introduced in 1995, the Economic Diversification and Growth Enterprises program – known as EDGE – is the most successful economic development program currently offered by the provincial government.
According to an article in the March 20 issue of the Telegram,
The province estimates that EDGE has created 1,500-1,600 jobs over the years. The government has forked out $17 million in rebates to employers under the program. Those rebates are linked to things like provincial income tax, payroll tax and corporate income tax.
Roughly 40 municipal governments also signed on to the EDGE scheme, providing their own tax relief to qualified companies.
Within the past five years alone, 30 companies have applied for support under the program and two thirds were accepted.
Compare that to the hand-out programs introduced under the current administration. Of the $75 million budgeted over the past three years, the programs have only managed to give away $14 million; of that amount $8.0 million went to a company that promised to increase its workforce but in the end cut jobs.
The provincial government is reviewing the EDGE program to see how it can be improved. Currently 69 companies hold EDGE status. A further 54 held the status at one point but no longer qualify.
As the Telegram described the EDGE program:
To be eligible, a company must create and maintain 10 new permanent jobs in Newfoundland and Labrador and make a minimum capital investment of $300,000 or have incremental annual sales of $500,000.
Tax incentives are provided to EDGE-designated companies for a period of 10 or 15 years, followed by a five-year period of partial rebates.
Part of the program’s enduring success is the philosophy behind it. EDGE recognised the changed global economic circumstances and placed its greatest emphasis on encouraging the private sector to develop innovative, globally-competitive industries that could survive without extensive government cash support.
The background to the program is contained in a public consultation paper released in the summer of 1994. The main sections of that document are reproduced below. in light of the current government policy and the review of EDGE, it would be useful if more people in the province were aware of an economic development philosophy that continues to deliver strong results almost two decades after it first appeared.
Excerpts from:
Attracting new business investment: a White Paper on proposed new legislation to promote economic diversification and growth enterprises in the province
(June 1994)
1.0 BACKGROUND
The Strategic Economic Plan for Newfoundland and Labrador, which was released in June of 1992, outlined the economic challenges facing the Province and charted new policy directions to guide economic development over the long term.
The Strategic Economic Plan noted in particular that the globalization of economic activity and the liberalization of world trade presents significant new export opportunities for manufactured goods and commercial services. Technological advances made in transportation and communications over the past decade, combined with the shift towards a more knowledge based world economy, have also reduced the relative importance placed on geographic location for many industries and firms, and this has created further opportunity for the development of new products and services. At the same time, however, these trends have brought increased international competition for economic activity, not only in the development of new products and services, but in respect of many of our existing industries as well.
These profound changes in global trade patterns, investment flows and technology constitute the driving force behind the fundamental economic restructuring that is now occurring in many countries. In an increasingly competitive and knowledge based world economy, it is clear that we can no longer rely on traditional approaches to attract new business investment and expand existing business enterprises. We will, out of necessity, have to become more outward looking in our approach to economic development and create an appropriate investment climate that supports international competitiveness.
It must also be recognized that the private sector is and will continue to be the engine of economic growth. This is a key principle embodied in the Strategic Economic Plan and reflects the reality that the private sector is the most effective vehicle through which lasting economic wealth and employment opportunities can be created for the people of this Province. It is the role of government in this context to create the economic climate in which private sector investment can occur and be successful.
2.0 GOAL
The goal of attracting new business investment as a means to create additional employment opportunity for the people of this Province is not a new concept. Indeed, various governmental incentive programs have met with measured degrees of success over time in this regard. However, the rapidly changing global marketplace and the province-wide impact on the economy resulting from the collapse of the groundfish fishery have heightened the need to significantly improve the attractiveness of the Province to the private sector as a place to invest and prosper. New business investment directed at economic diversification and general economic growth is not only an objective but an imperative at this juncture of the Province's history.
The Government of Newfoundland and Labrador intends to adopt bold and innovative measures to transform the Province into one of the most attractive locations - not only in Canada but in all of North America - for new business investment and to take aggressive new steps to market and promote the Province's strengths in this regard on a national and international basis.
The main elements of this new program will be reflected in legislation to be known as "An Act to Promote Economic Diversification and Growth Enterprises in the Province". This legislation will be presented to the House of Assembly for its consideration in the fall of 1994 and will provide an enhanced "business friendly" regime for new and expanding business enterprises in the Province.
3.0 SCOPE OF PROPOSED LEGISLATION
3.1 Eligibility
New business enterprises wishing to establish in the Province and existing businesses wishing to expand their enterprises will be eligible to receive a range of special business development incentives, provided that certain conditions are met. These will be in addition to any other incentives the enterprise may be eligible for under other assistance programs established to encourage business development in the Province.
To qualify for the special incentives, an enterprise must meet the following tests:
Both new businesses and existing businesses expanding their operations will be eligible for the special incentives. However, in the case of existing businesses, only those elements of a company's operation which are incremental to its existing scale of operation will be eligible for the incentives.
3.2 Review and Approval Process
Companies seeking the special incentives available through the new legislation will be required to provide documentation in the form of a comprehensive business plan to allow for a thorough assessment of its proposal. The specific requirements in this regard will be outlined fully in the legislation.
Particular attention will be given during the review process to the commercial viability of the proposed business activity over the long term. It is not the intent of the legislation to artificially support new industries or new business activity in the Province, but rather to attract and assist in the development of viable and sustainable economic enterprises and employment opportunities for the long term benefit of the people of this Province.
All applications received under the new legislation will be reviewed by a committee of Cabinet Ministers chaired by the Minister of Industry, Trade and Technology, with final decisions on eligibility to be made by Cabinet. Part of the process in making a determination as to whether or not the special incentives will be granted to a company will involve a public notice procedure whereby Government will invite interested parties to make submissions respecting all proposals received. This is intended to ensure that all proposals are available for public scrutiny in respect of their potential competitive impact on existing business enterprises and jobs. Appropriate steps will be taken to protect the proprietary and commercial interests of the company when this public notice procedure is invoked.
While all proposals made to Government under the new legislation will be thoroughly assessed to protect the general public interest, Government is committed to a timely review process such that potential investors are not unduly delayed in the implementation of their business plans. Once the committee of Cabinet Ministers is satisfied that it has all the information it considers necessary to properly evaluate a proposal, a decision will be rendered by Cabinet on acceptance or otherwise of a company's proposal within 60 days.
Successful companies will be expected to enter into a formal contract with Government in which the Province will guarantee the benefits provided in the new legislation and the company will bind itself to implement the business proposal as accepted by Government. Notification will subsequently be given to the House of Assembly of all such contracts entered into, and ongoing monitoring of their terms and conditions will be carried out by senior officials.
3.3 Incentives Available through the Legislation
3.3.1 Taxation Incentives
The private sector is presently faced with a relatively high burden of taxation which impedes new investment and the creation of new employment opportunities in the Province. While a number of significant changes to the existing business tax structure have been made by Government in a number of areas in recent years, the entire taxation regime requires further attention if it is to be used as a means of promoting the Province as a highly competitive location in which to do business. Accordingly, the following taxation incentives are proposed for those companies qualifying for assistance under the new legislation:
(i) A full tax free holiday for ten years in respect of provincial corporate income tax, the health and post-secondary education "payroll" tax, and retail sales tax.
(ii) Further relief in these specific tax areas for an additional five year period on a reduced scale, commencing in the first year at 80% of total taxes payable and declining by a factor of 20% each year thereafter.
Municipalities will also be given the necessary legislative authority to grant full property and business tax exemptions on the same basis as outlined in (i) and (ii) above with a majority vote of the respective municipal council. At present, municipalities do not have the legislative flexibility to offer tax relief to individual companies to the extent contemplated herein.
3.3.2 Productivity Incentive
All new and expanding business enterprises experience a significant "learning curve" during the formative years of their operation. Part of this process inevitably results in a productivity "loss" that is incurred by the company at all levels in the organization.
To offset part of this productivity "cost", the Province will provide financial assistance to new and expanding business enterprises in an amount of $2,000 for each full time job created in the Province during its initial five year operating period where the company employs a resident of the Province to permanently occupy the job from the time of its creation.
Appropriate provisions will be included in the legislation to protect the pubic interest in the event of failure by a company to fulfil the conditions upon which the productivity incentive has been granted.
3.3.3 Labour Relations Incentives
A new approach to labour-management relations is required to attract new investment and stimulate new business enterprises in the Province. Government remains fully committed to ensuring that adequate safeguards are in place to protect the legitimate interests of employees and unions. However, it is in the broader public interest to achieve this objective in a balanced manner that also assures those who wish to make new business investments and provide economic opportunity in the Province have a reasonable prospect of receiving an acceptable level of return on their investment without undue risk from uncertain labour relations conditions.
Pursuant to a commitment made in the Strategic Economic Plan, Government is presently developing a comprehensive consultation document which will address various concerns respecting the general labour relations regime in the Province. While the intent will be to develop consensus on changes necessary to make the general labour climate more favourable for all businesses, Government believes that extraordinary measures are required beyond this if new business enterprises are to be stimulated in the increasingly competitive global economy.
Government's proposal in this regard is to make available different Labour Relations Act provisions to new enterprises wishing to establish in the Province and to do so in a manner that will not affect the application of current labour legislation to existing businesses. As well, any existing business where a bargaining agent has been certified for the employees of that company prior to the time it wishes to expand and take advantage of the special incentives under the new legislation will not be eligible for the labour relations provisions of the legislation. Considerable difficulty from a number of perspectives would be encountered in applying two different labour relations regimes to a single business operation, as one firm could have two separate collective bargaining processes, labour contracts and wage rates applying to employees doing the same kind of work. Accordingly, the labour relations provisions of the new legislation will apply to new business start-ups only.
The main features of the proposed new labour relations provisions are as follows:
a. All collective agreements entered into between a company and the bargaining agent for the employees will remain in force for a period of at least five years, unless the contract entered into between the Province and the company in respect of the business undertaking as a whole expires in a period of less than five years.
b. In circumstances where a company and a bargaining agent engage in collective bargaining but are unable to reach a collective agreement, a special panel consisting of a representative appointed by each of the parties and a chairperson appointed by the Minister of Employment and Labour Relations will establish a collective agreement by addressing those specific matters in dispute at the time the matter is referred to the panel.
c. Where a company and a bargaining agent are unable to conclude a collective agreement and the matters in dispute are referred to a panel, the company will not be permitted to lock-out the employees and the employees will not be permitted to strike.
d. A panel, in concluding a collective agreement, will take into account the following factors:
(i) the overall policy objective of the new legislation which is to create conditions favourable to the establishment of new businesses and the expansion of existing businesses in the Province (this factor will be given paramount consideration by the panel);
(ii) the effect of the agreement on the profitability of the business;
(iii) the terms and conditions of employment of employees in occupations in the same or similar businesses both within and outside the Province, with consideration to be given to geographic, industrial, economic, social and other variations that the panel considers relevant;
(iv) the need to establish terms and conditions of employment that are fair and reasonable in relation to the qualifications required, the work performed, the responsibility assumed and the nature of the service provided; and
(v) the needs of the employer for qualified employees.
e. An agreement concluded by a panel will be binding on all parties.
f. The panel will be required to conclude an agreement no later than 90 days after disputes are referred to it for resolution.
g. Every collective agreement entered into between a bargaining agent and a company, including an agreement concluded by a panel, will contain provisions:
(i) requiring the application of progressive work practices in the work place including the use of composite crews;
(ii) relating to wages and to wage increases of employees during the term of the agreement, but those increases will not be permitted to exceed the percentage rise in the consumer price index as reported by Statistics Canada for that area; and
(iii) respecting the final and binding resolution of disputes without work stoppage.
Notwithstanding the provisions outlined above, where a company and a bargaining agent both agree that it would not be in their collective interest to apply the labour relations provisions of the new legislation in its entirety or in part, then those provisions will not apply to the parties concerned. Similarly, in circumstances where a panel has concluded a collective agreement, the parties concerned may, where they mutually agree, vary any term or condition the panel has applied, provided that such agreement does not offend other applicable provisions of the new labour relations regime.
3.3.4 Access to Crown Land
Crown land that a company may require to implement its business plan as approved by Government will be leased to the company for a nominal sum of $1.00.
3.3.5 Appointment of a Facilitator
Upon the request of a company, Government may appoint a person, either from within or outside of Government, to assist the company in obtaining governmental permits, licenses, options for use of Crown assets, and any other authorizations that the company may be required to obtain in connection with its business. This will expedite the processing of all applications for regulatory approval of the business plan and thereby allow the business plan to be implemented in a timely manner. The responsibility for actual decision-making in these areas will, however, remain with the appropriate regulatory agency.
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