On September 30, 2020, the government of Newfoundland and Labrador presented its pandemic delayed 2020-21 budget. It is the first budget for new Premier Andrew Furey and it featured a massive deficit with no real plan to deal with the province’s financial situation. Understandably, spending is up as the government deals with the COVID-19 pandemic. However, despite the province’s $1.84 billion deficit and $16.4 billion net debt, the government did not provide a plan for the coming years, to reduce spending and the deficit. Instead, the government will add to its spending through the introduction of a $25-a-day child-care program in 2021.
The retail sector would not benefit from deep cuts to government spending. However, the apparent lack of any long-term plan to address the province’s ongoing fiscal malaise does not inspire confidence in the economic future of the province.
Of note to retailers, this year’s budget contained:
- $25 million program to help small businesses dealing with fallout from COVID-19
- $2.1 million to boost immigration targets over the next two years
- The insulin pump program will be expanded and 14 new drugs will be covered under the province’s prescription drug program
- A 20% tax will be brought in on vaping products
- Tobacco taxes will increase by 5 cents per cigarette and an additional 10 cents per gram of fine cut tobacco.
- Gasoline taxes will increase by 0.21 cents per litre while diesel taxes will increase by 2.68 cents per litre. These tax increases go into effect on October 1, 2020 as a response to the federally mandated carbon tax.
The government has appointed the head of an Economic Recovery Team. The mandate for this position and timelines for action remain unclear.
The government’s lack of commitment to deal with its fiscal challenges is not surprising. Provincial law mandates that an election be called within 12 months of a new leader being chosen for the governing Party. Andrew Furey replaced Dwight Ball as Liberal Party Leader in August 2020 and thus, he became Premier of the province. The Premier will have to call a provincial election before August of 2021. Given the timing of next year’s election, RCC is not optimistic that steps will be taken to deal with the province’s fiscal challenges until at least 2022.
RCC will continue to call for the government of Newfoundland and Labrador to develop and execute a long-term plan to deal with the province’s massive deficit.
If you have any questions or concerns, please don’t hesitate to contact: Jim Cormier, Director (Atlantic) at: email@example.com or (902) 422-4144