On Tuesday, New Brunswick Finance Minister René Legacy delivered his government’s budget, which puts the province deep in red ink. The Holt government plans four consecutive historically-large deficits and a massive increase in debt. Simply put, this plan threatens New Brunswick’s economic future. In defending the budget, Legacy made claims that deserve additional scrutiny.
Legacy told Brunswick News that the “bottom line does matter, and difficult decisions are inevitable”, yet there’s barely a hint of a difficult decision in this budget, which pushes the limits of spending. If the bottom line matters, Legacy plans to deliver the four worst bottom lines in provincial history (measured nominally) or the four worst bottom lines since 1988 (compared to the size of the economy).
The government wants to paint a picture that this is, to some degree, beyond their control. The budget address went to great lengths to highlight “global uncertainty,” a “volatile economic environment” and “fiscal reality that has evolved significantly in a short period of time.” This language aims to give New Brunswickers the impression that government revenues have collapsed amid hard economic times, leading to a dismal fiscal outlook caused by external events. But the numbers don’t back this up. According to the budget’s projections, revenue growth will be 5.6 per cent this year and 4.3 per cent next year, exceeding the rate of inflation plus population growth. There has been no collapse in government revenue—the Holt government has simply chosen to spend far more than what it takes in.
According to a Brunswick News article, the government is “claiming they will do everything possible to curb government spending” including a modest proposed reduction of the civil service headcount. In the pre-budget period, we argued that getting the government wage bill under control should be a top priority. Yet, this reduction—if implemented—won’t come close to reversing the large recent run-up in government employment. It also will not likely result in an overall reduction in the government’s headcount, given the province’s fiscal plan. And given that salaries and benefits account for roughly half of government spending, it’s hard to conceive that a government running four consecutive deficits exceeding $1 billion will reduce its headcount.
Legacy also said the government’s plan is “consistent with what we are seeing across the country,” which is false. New Brunswick projects a deficit equaling 2.7 per cent of the provincial economy (measurements as a share of the economy allow us to make reasonable comparisons across the country). To-date, there have been three other budgets delivered this season in Canada. Alberta’s budget delivered a deficit of 1.9 per cent of the economy, while Nova Scotia’s budget, which itself was considered spendthrift, projected a deficit of 1.7 per cent of the economy. New Brunswick’s deficit is only on par with British Columbia (2.9 per cent), which is pursuing a historically reckless fiscal plan.
In any event, if other provinces pursue a costly fiscal path, New Brunswick should not seek to be “consistent” with them. Look no further than during COVID when the Higgs government was the only in Canada to maintain a balanced budget. Every other government in the country hiked spending, much of which was reckless and wasteful. New Brunswick, in contrast, emerged in a strong fiscal position—progress that the Holt government has now eliminated.
This new budget is a costly one for New Brunswickers, and the data simply do not support Legacy’s claims.