We Could Have it All

Halifax Daily News
Saturday, February 12, 2000

We could have it all
Premier Hamm needs courage, not a task force, to take us from our have-not status

By Brian Lee Crowley — Special to The Daily News

Premier John Hamm says his government wants to make Nova Scotia a have province by the end of a second term of office. This is a worthy goal, and is achievable. But it will not and cannot happen unless the government comes energetically to grips with its vast debt and deficit problem. Unfortunately, for all its good intentions, the recent report of the fiscal management task force on how to bring the province’s spending in line with its means does not provide the blueprint Premier Hamm needs to realize his goal. Reports are not leaders. What Nova Scotia needs is not another report, but inspired leadership.

To become a have province, Nova Scotia has to grow, and grow quickly. Not only do we have to grow faster than we have done, but we have to grow faster than the Canadian average, a pretty tough test in these economically robust times.

With high taxes, we won’t escape our status

What can the Hamm government do to spur such rapid wealth creation and employment growth? The international evidence is clear, from places as diverse as Ireland, Holland and Georgia in the American South. Taxes and public debt must, at a minimum, be stable and, ideally falling. And those taxes must get us good quality public services. None of these things is true in Nova Scotia. As long as they are not, we will never escape our have-not status, and will remain dependent on the generosity of taxpayers in other parts of the country.

That is why the task force report is so disappointing. The report divides its recommendations into two categories: the short-term crisis and long-term problems. It correctly says that overcoming a culture of spending beyond our means requires much more than strategic cuts over the next few years. But only decisive action will help to shift that culture.

One searches in vain for such a call to action in the report. Of the 19 recommendations on the short-term crisis, only three even deal with reducing government expenditures.

Those recommendations include: cutting the number of agencies, boards, and commissions; providing grants or forgivable loans to business only in the most exceptional circumstances; and hedging all of the province’s foreign debt (so that a falling Canadian dollar doesn’t drive up our debt payments).

All of these are sensible steps. On the other hand, it is hard to see how they could cut spending by even as much as $100-million a year, while the deficit this year is five times that.

In a recent paper, Five Easy Pieces: Solving the Deficit Puzzle (available at www.aims.ca), the Atlantic Institute of Market Studies showed how, through five simple measures, the government could not only cut the deficit but achieve a surplus within three years. The plan cuts no essential public services, imposes no new taxes or user fees, and fires not a single civil servant.

Fully hedging foreign debt is just one piece of the solution. Another is a principled stand against corporate welfare, eliminating all discretionary loans and grants. A third is the immediate closing and sale of Sydney Steel Corporation and Nova Scotia Resources Limited.

Further spending reductions are possible through attrition, compulsory competitive tendering, doing away with needless duplication, and getting out of businesses such as the Liquor Commission which are not core government functions.

This approach achieves savings of nearly $1.5-billion over three years – $600-million in the third year alone – whereas the task force’s concrete proposals cannot claim to even approach that. Such a determined approach to spending cuts makes room for tax cuts and/or debt reduction by the third year.

In other words, the task force report, while long on generalities, is far from giving specific guidance on balancing Nova Scotia’s books. And it is far from laying out a blueprint for the kind of high-performance government that the province needs if it is ever to break out of dependency and become the have province of the premier’s vision. The quality of public policy, and the value government services offer for taxes paid is one of the most important determinants of economic growth.

Task force too timid

Unless the government sees well beyond the timid specifics of the task force report, we will continue to spend too much on public services, get poor value in return and slide deeper into debt. We may preserve the occasional job in government, but it will be at the price of lost opportunities, lost economic growth and another generation of young people lost to Alberta and Ontario.

To be fair to the task force, however, its members are not the province’s political leadership. They can only report on what they think is acceptable to public opinion. But the job of leaders is to make it possible to do what they truly believe needs to be done, and to move public opinion decisively in favour of needed change. No appointed group can provide that kind of leadership.

That’s John Hamm’s job – if he is serious about leading Nova Scotia out of dependency.

Brian Lee Crowley is the president of the Atlantic Institute for Market Studies, a Halifax-based public policy think-tank.