St. John’s, NL—At a time when global austerity measures are causing profound hardship among populations and are proving harmful to their economies, a report by the Canadian Centre for Policy Alternatives (CCPA) says public spending cuts could deeply damage Newfoundland and Labrador’s economic and social well-being.
Prosperity for All: An Alternative Economic Path for Newfoundland and Labrador, by Diana Gibson and Greg Flanagan, presents evidence showing how the province can avoid the kind of austerity measures destabilizing economies the world over.
“Compared to other Canadian provinces, Newfoundland and Labrador is in an enviable financial position,” says CCPA Research Associate Diana Gibson. “The province’s economic fundamentals are strong. The task for the government is to ensure it doesn’t rock the boat and damage the province’s economy and social fabric with spending cuts.”
Among the report’s key findings:
- The province has a history of understating fiscal revenue projections. Given the province’s healthy economic fundamentals, it’s likely the 2013 prediction of a $725.8 million deficit is overstated. The bulk of the deficit drivers are temporary, not structural;
- Compared to other provinces, Newfoundland/Labrador is not a big spender: public spending is about 20 per cent of GDP, down from 30 per cent in the 1990s. Given its geographic and demographic pressures, this is not high;
- The province’s revenue streams are healthier than most Canadian provinces, and additional revenue options exist;
- The province has done a laudable job in reducing its debt. Debt has been brought down to the current low of less than 25 per cent of GDP. A remarkable turnaround that left the province in a strong position to weather the current global economic turmoil;
- The province isn’t capturing the level of tax revenues from corporate gains that it could. A significantly higher share of the economy is going to corporate profits than in other provinces and a higher portion of those profits is foreign owned; and
- NL should consider implementing a fourth income tax bracket for higher income earners like other provinces have done. The province’s tax cuts have disproportionately benefited the wealthy, resulting in lost revenues of $500 million.
“Newfoundland and Labrador would be well advised to steer clear of a radical shift in course,” says Gibson. “Instead of austerity, the province should maximize revenues and invest in sharing the prosperity, reducing inequality and mitigating the negative impacts of the boom for the average citizen.”
Prosperity for All: An Alternative Economic Path for Newfoundland and Labrador is available on the CCPA website: www.policyalternatives.ca.
For more information please contact Trish Hennessy at (416) 525-4927.