The government must cut spending and raise taxes to move toward a balanced budget within the next six years, concludes the final report of the Premier’s Economic Recovery Team.
Committee chair Moya Greene delivered her final report Thursday to Premier Andrew Furey. Titled The Big Reset, it lists four “strategic resets”: Reimagining Government and Governance, Transition to a Green Economy, Social Compact Refocused, and a Financial Improvement Plan.
The plan proposes across-the-board increases to income taxes, and recommends creating wealth and second-home taxes. It also recommends reducing spending by a factor of 2:1 over revenue increases. It also urges the government to monetize assets to pay down debt and reduce core spending by 5 per cent.
The report recommends reducing operating grants to Memorial University and the College of the North Atlantic by 30 per cent over six years, reducing operating grants to the regional health authorities by 25 per cent over six years, and reducing grants to other government agencies by 20 per cent.
The report also recommends eliminating Nalcor Energy and rolling it back into Newfoundland and Labrador Hydro. It advises a review of public sector union contracts and compensation, leading to a wage freeze and converting public service pensions to a defined contribution plan.
Moya Greene says the provincial government’s current rate of borrowing is unsustainable. The province has added $12.6 billion to its total debt over the past seven years. When government business enterprises, other liabilities and obligations are included, the report says the province’s total financial exposure was $47.3 billion for 2020-21. Debt servicing costs were 11.1 per cent of total revenue in 2019-20, the highest rate in Canada.
She says the debt puts the province at risk of not being able to cover its financial commitments, such as paying salaries, operating hospitals, offering other public services and paying pensions.
“Our conclusion is that a debt wall is fast approaching and it is unreasonable to pass high debt levels to our children,” the report says.
The report recommends the government introduce balanced budget legislation to eliminate the deficit in five or six years, and create a “Future Fund” to pay for a transition to a green economy and reduce debt. Greene says 50 per cent of oil revenues and money from asset sales could go into the Future Fund.
Other recommendations include improving spending transparency through mandatory reporting of compensation over $80,000 a year, discontinuing services that can be offered by the private sector, accelerating the transition to electric transportation, and supporting the technology sector.
Because of low birth rates in the province, the report says the government must prepare children to contribute more than was expected of any previous generation. It says outcomes in the K-12 school system must be improved, and MUN and the College of the North Atlantic should become centres of excellence in green technology.
“We need a different social compact to meet the changing needs of our people,” the report says.
Improvements are also needed in providing care and housing options for seniors.
“Decisive action right now by the provincial government and by the people of the province is the only way to a stable future,” the report says. “With determination and focus, this province will be in a stronger fiscal position within six years.”
The report can be found online at https://thebigresetnl.ca/.
- Increase all personal income tax rates by one percentage point and introduce tax credits for the lowest income group.
- Increase the corporate tax rate by two percentage points.
- Increase the HST by one percentage point.
- Increase the gasoline tax by 1.5 cents a litre.
- Increase the payroll tax by half a percentage point.
- Increase the tobacco tax by 5.5 cents a cigarette.
- Increase fees and fines by 15 per cent.
- Work with Ottawa and other provinces to implement a wealth tax of one per cent on wealth exceeding $10 million.
- Implement a luxury tax on high-end vehicles, but exempt electric vehicles.
- Implement a gift tax for the transfer of all types of assets over $10,000.
- Establish a minimum tax for all residences outside incorporated areas.
- Develop a tax for second residences and vacation homes valued at $100,000 or more.
- Institute a progressive tax on all land transfers.
- Reduce core government expenditures by five per cent with no growth for six years.
- Reduce operating grants to MUN and the College of the North Atlantic by 30 per cent over six years.
- Reduce operating grants to the health authorites by 25 per cent over six years.
- Reduce operating grants to N.L. Housing and Legal Aid by 2 per cent.
- Reduce operating grants to other government agencies by 20 per cent.
- Wage freeze.
- Set legislative target to balance the budget in five or six years.
- Create a “Future Fund” with money from asset sales and 50 per cent of oil revenues.
- Make public all wages, pension contributions and other compensation over $80,000 a year.
- Legislate that MHAs can no longer receive multiple government pensions.
- Freeze public sector wages and convert public sector pensions to a defined contribution plan in three years.
- Eliminate Nalcor Energy and the Oil and Gas Corporation and merge them back into Newfoundland and Labrador Hydro.
- Install a new Hydro board with a mandate to lead the transition of Hydro to a private entity.
- Offer transmission and distribution assets and island generation assets for sale to the private sector.
- Sell the province’s oil and gas equity interests when oil prices rise.
- Sell the Bull Arm Fabriction Site.
- Sell all or majority interest in the N.L. Liquor Corporation.
- Sell Marble Mountain Ski Resort.
- Package the Churchill River resources as a single opportunity, including Muskrat Falls, Gull Island and the upper Churchill contract and seek federal government and private sector partners to maximize economic value.
- Amend the Electrical Power Control Act to facilitate private sector investment in electric vehicle charging infrastructure.
- Eliminate the English and French school districts and place program administration in the Department of Education.
- Allow Memorial University to be fully autonomous in setting tuition fees.
- Institute a moratorium on building new long-term care facilities to determine the right mix of seniors care and housing options.
- Consolidate the four regional health authorities into one.
- Modify social programs to eliminate disincentives for people to take job opportunities when they become available.