DANIEL McHARDIE
Times & Transcript Staff

FREDERICTON
— Finance Minister Jeannot Volpé is uncorking a provincial budget that will cut personal income taxes by less than two per cent and set aside cash for a variety of new investments but he insists spending is not out of control.

“We are not just opening the door to spend whole kinds of cash. We still have to live within our means,” Volpé said yesterday.

Promising to continue on a prudent course of cutting taxes and targeting specific investments, Volpé said the economy is performing well and that is giving him more flexibility in drafting his budget. The finance minister will deliver the budget speech today, and many of the major initiatives contained in the annual financial document have already been revealed.

For instance, the province will cut personal and small business taxes, hand another $5 million to the New Brunswick Innovation Foundation to spur on economic development, hire 85 new teachers and increase operational funds to universities as well as offer $20 million for deferred maintenance costs for post-secondary institutions.

The Conservative government will also roll out a $2 million fund for wellness promotion as well as a $28-million, three-year initiative to help strengthen community infrastructure, such as rinks, playgrounds and walking trails.

The sudden spree of new investments is a stark contrast from last year’s budget where Volpé was forced to ratchet back spending and eliminate jobs. The finance minister said the government has “turned the corner” and aided by new federal health and equalization dollars, the province is ready to start reinvesting in priority areas.

“We will have a little bit more flexibility this year, you will see it through a lot of new initiatives that we are putting in place this year,” Volpé said.

Personal income tax cuts were conspicuously absent from last year’s budget, but the finance minister committed to lessening the tax burden for New Brunswickers in 2005-2006.

“I would say it is probably a little less than two per cent,” Volpé said.

The Conservatives promised a five per cent personal income tax cut in the 2003 election campaign, which followed up on a 10 per cent commitment four years earlier. While the Tories did not cut 10 per cent out of each income tax rate, the government reduced the amount of tax collected by about 11 per cent. Since 1999, the Department of Finance has collected $471 million less in personal income taxes.

Moncton North Liberal MLA Michael Murphy, the opposition’s finance critic, said the Tories brag about cutting taxes but they have play a game of “stealth taxation” by jacking up fees and fines.

“They are taking more money out of the pockets of taxpayers than any government in the history of this province. They are playing a shell game,” Murphy said. “They are reducing personal income tax, while taking the money out of the other pocket.”

Murphy said he isn’t going to argue with the idea of cutting taxes to create more investment, but he said people looking to set up in New Brunswick want more than just low taxes.

“You have to have a quality of life that is buffered by low power rates, low insurance rates, low property rates and you have to have support for immigrants,” Murphy said. “We don’t have any of those anymore. We have lost all of those since 1999.”

Bruce Winchester, the director of research services for the Atlantic Institute for Market Studies, said he will be watching the New Brunswick budget to make sure spending remains focused and the government pays attention to its debt level.

“I think it is good that the finance minister and the government want to be aggressive on the tax side but they can’t do that to the detriment of keeping their books balanced and adequately dealing with the fiscal realities, like eliminating some debt,” he said.

The Conservatives announced in the speech from the throne they would reduce the small business tax rate to one per cent from 2.5 per cent by 2007.

Stephane Robichaud, the director of provincial affairs for the Canadian Federation of Independent Business, said the small business tax cuts don’t amount to a lot of money but it sends the right signal to the corporate community.

Robichaud said it’s positive to see the government lower taxes slowly.

“At the end of the day from our perspective it comes down to this, is zero better than a small reduction. We can’t afford big reductions. We don’t have that kind of economy,” Robichaud said.

“We got to the high taxes we have today by small incremental increases over a long period of time, so the only way we will get out of it is this way, over time.”