Following a week of pre-election spending totalling almost $340 million, the Liberal government of Newfoundland and Labrador tabled its budget on Tuesday, April 19 then called the provincial election on Wednesday, April 20. Since the budget was not passed, there will be no provincial budget until some point after the election on May 16th.
The election features four political parties but only the Liberal and Progressive Conservative Parties have a realistic opportunity to form the next government. The province is finally beginning to see some economic growth after 5-6 years of extremely challenging economic times. However, the province is still grappling with a massive debt, chronic government overspending and an economy that is heavily reliant on the oil and gas sector. Many challenges remain and thus, the election ballot question will likely be framed around public opinion on who can best lead the province into an uncertain future.
Highlights of the tabled budget include:
This year’s budget is less an economic plan for the upcoming year than it is an election platform for the governing Liberals. The government eliminated the 13% tax on automobile insurance while not raising any other taxes or fees. The government will also eliminate the unpopular deficit reduction levy by the end of 2019. Regrettably, there is no real plan to reduce expenditures and pay down the province’s massive deficit and debt.
For 2019-20, spending is projected to increase by another $152 million to $8.4 billion.
Deficit and Debt:
- The deficit for 2018-19 is $522 million
- The recently renegotiated Atlantic Accord with the federal government has committed federal money totalling $2.5 billion for the province. This funding will be provided in annual increments until 2056 but under accounting rules, most of this total must be booked for the 2019-20 fiscal year. The result of this good fortune is that the provincial Liberal government enters the election campaign promoting a $1.9 billion surplus for 2019-20. If not for this windfall, the deficit would have been projected at $575 million.
- The province is projecting deficits for 2020-21 and 2021-22 before finally returning to a real surplus in 2022-23.
- The provincial debt currently stands at almost $13.8 billion for a population of just over 525 thousand people.
Of note to retailers:
For the Building Supply Retailers:
- An additional $594.3 million has been invested in infrastructure to support ongoing efforts to build schools, roads, bridges, affordable housing and municipal infrastructure.
For Pharmacy retailers:
- The budget added fifteen new drug therapies to the Newfoundland and Labrador Prescription Drug Program, eight of which are for oncology.
- Lifting the age cap for those currently enrolled in the Insulin Pump Program to ensure continued coverage for individuals who rely on the program.
Following the election, Retail Council of Canada (RCC) will push for the new government to take more meaningful steps towards curbing spending and balancing its budget. Given the volatility of the oil and gas sector, combined with the province’s debt problems, it will likely be many years before RCC could make a responsible call for corporate tax relief and HST relief. RCC will continue to work with stakeholders to push the Newfoundland and Labrador government to develop a plan to grow the economy that is not so dependent on oil and gas.
If you have any questions or concerns, please don’t hesitate to contact: Jim Cormier, Director (Atlantic) at: [email protected] or (902) 422-4144