NDP urged not to panic over deficit

Mar 23, 2010

NDP urged not to panic over deficit

A Nova Scotia think tank is urging the NDP government not to panic when it brings down its provincial budget this spring. The Canadian Centre for Policy Alternatives (CCPA) says there’s no need to boost sales taxes or slash spending to reduce the deficit.

“The danger is you’ll actually shrink the economy if you panic,” says Larry Haiven, a professor in the Department of Management at Saint Mary’s University. “We have to deal with the deficit, absolutely,” Haiven adds, “but in a very tempered way.”

Haiven made his comments during a news conference today in Halifax to announce the provisions of the CCPA’s 10th Nova Scotia Alternative Budget. The 52-page document contains a wide range of suggestions for strengthening social programs while, at the same time, reducing this year’s provincial deficit. The Alternative Budget calls for $443 million in tax hikes and $150 million more for social spending. The social spending increases include a  reduction in university tuition fees, a new provincial crown corporation to provide inter-city bus service and gradual improvements  in welfare rates.

Charlene Croft, chair of the Alternative Budget Working Group, noted that NDP finance minister Graham Steele has been holding consultations around the province where he has warned that his budget will be full of “tough decisions” to deal with a big structural deficit. “Our budget challenges the assumption that we are facing such a fiscal ‘crisis’ and it calls on the government to address the real crisis of the ballooning social deficit,” Croft added.

Tax increases

The Alternative Budget calls for $399 million in personal income tax increases that would affect the top 40 percent of income earners with the largest increases paid by the top 10 percent. At the same time, the CCPA rejects any rise in sales taxes. Larry Haiven calls sales taxes “regressive because the poor pay more as a proportion of their incomes.” Haiven and his CCPA colleague Michael Bradfield, a retired Dalhousie economics professor, argue that Nova Scotians with the highest incomes benefited most from previous tax cuts and so, should contribute more to provincial coffers now.

The Alternative Budget also suggests a $44 million reduction in provincial tax write-offs to businesses. The CCPA calculates that such corporate tax subsidies amount to about $110 million a year.

“In these difficult times, we have to tighten our belts,” said Haiven. “Well, corporations should too.”

Tuition fee reductions

The Alternative Budget recommends that the province spend $18 million in the coming year to finance a $1,100 reduction in university tuition fees. It also recommends that $14 million be redirected from the Graduate Tax Credit into needs-based student grants and that the grant portion of every provincial student loan increase from 20 to 50 percent.

“In Nova Scotia, tuition fees more than tripled since 1989,” said Rebecca Rose who represented the Canadian Federation of Students on the Alternative Budget Working Group. “Students in this province currently pay the second highest average tuition fees in the country, next to Ontario. We were however, number one for 20 years, which resulted in the highest average student debt in Canada at just under $30, 000.” Rose added that high levels of debt force many students to leave Nova Scotia when they graduate to seek higher-paying jobs elsewhere.

The Alternative Budget also calls on the provincial government to eliminate tuition fees for students attending the Nova Scotia Community College. That would  cost the provincial government an estimated $18 million a year.

 “This measure would not only save the government money in other sectors of social services, such as income assistance and health care, but would also increase access and create a steady flow of educated workers who are not carrying large student debts,” Rose said.

New crown corporations

The Alternative Budget recommends that the province create three new crown corporations:

1. Transit Nova Scotia — modelled on a provincial transit company in Saskatchewan — would provide subsidized bus services to link Nova Scotia rural communities and larger cities. The CCPA envisions about 20 bus routes at an annual cost of just over $10 million. The province’s yearly share would be up to $6 million. The CCPA estimates that the initial cost of setting up Transit Nova Scotia would be $20 million. The new crown corporation would also study the feasibility of high-speed provincial rail services that, according to the CCPA, would  be less costly to operate and maintain than provincial highways.

2. An insurance corporation to provide public auto insurance. (Initial cost to establish: $15 million.)

3. A Workers Co-operative Corporation to assist worker-owned businesses. As the Alternative Budget explains:  “In Nova Scotia today, they [co-ops] contribute one-sixth of the economic activity in the province, employ 7,000 people and provide 6,000 people with homes. Three hundred and eight thousand Nova Scotians are members of the province’s 402 co-op businesses. These businesses are often the only provider of services in a community — credit unions are the only financial institutions in 34 Nova Scotia communities...To re-build the Nova Scotian economy, we cannot rely on tactics used in the last 25 years — investing in call centres simply won’t work...Instead of trying to attract international corporations who don’t care about the communities they operate in, we should invest in our people and in jobs that we know will stay in the province. The best way to do this is invest in workers’ co-operatives.” (Initial cost to establish: $15 million in 2010 with an additional $10 million in investment capital in each subsequent year.)

Strengthening social programs

The Alternative Budget recommends a wide range of social spending including $12.2 million in additional support for welfare recipients; $20.6 million to promote and help establish new community health centres; $25 million to strengthen government pharmacare plans; $2.4 million to introduce a phased-in pre-primary learning and child care system at 19 existing sites and $2.1 million to establish a provincially administered program for special needs students in elementary schools.

According to Larry Haiven, the province can afford to repair its social safety net damaged after years of budget cutbacks in the 1990s. Haiven showed a graph to demonstrate that the Nova Scotia economy grew by 63 percent in the last 25 years and is 36 percent more productive than it was a decade ago.

“We are a much richer province than we were 10 years ago and we shouldn’t forget that,” Haiven added.

Charlene Croft said that many might argue now isn’t the time for the Nova Scotia government to undertake new social investments.

“If now isn’t the time, then when is the time?" she asked.