CCPA-NS responds to budget consultations

February 2, 2010

In The Shock Doctrine Naomi Klein shows that a perceived crisis can be used to frighten people into accepting unpopular “reforms” as “solutions,” such as shrinking of the state, privatization and the loss of public services.  But, she notes, a crisis can also motivate people to defend the institutions they have built to make their lives meaningful and to help one another.

Nova Scotia’s Finance Minister, Graham Steele, is holding 23 public meetings (as well as private ones with Chambers of Commerce) to ask how the government can deal with its fiscal problems.  Steele said that perhaps government “might have to do less[1].”  Indeed, in the current recession governments again claim ‘we can no longer afford’ all of our public services.

But before we panic along with the Finance Minister, let’s remember one simple, overwhelming fact: In the past twenty-five years, the province of Nova Scotia has become more than 60% RICHER (in real GDP per capita.)  That is, collectively, we are 60% better able to afford the things that make our lives better and make us even more productive, such as health care, education, sewers, clean water, good roads, art galleries and museums.  And we’re 60% more able to care for those who cannot care for themselves[2].

So, if we are richer, why do politicians tell us ‘we can no longer afford’ medicare, higher education, and home care?  This is a question everyone should ask the Finance Minister (Actually, we’re not all richer.  The boom in Nova Scotia prosperity benefited mainly the wealthy and corporations while the average real earnings of Nova Scotians actually dropped, but that’s another story[3]).

In assessing the province’s economic performance, we must be aware that Nova Scotia is, in effect, two economies – one doing quite well and the other doing quite poorly - we must tailor our approach accordingly.  In fact, the Halifax Regional Municipality outperforms most of Canada.  According to CIBC, Halifax stood first among twenty-five Canadian cities in economic performance at the height of the recession.  Says CIBC Senior Economist Benjamin Tal, “The nation's leading ranking of Halifax … reflect[s] its relatively diversified sources of economic growth and reduced vulnerability to economic shocks.[4]" Unemployment, at 5.2 percent, is lower than the country (8.5 percent) and the province (9.6 percent.)

Nova Scotia outside HRM is a different story and presents a serious dilemma for the NDP.  It was because of rural Nova Scotia that the NDP moved from an opposition party to the government.  With both heavy and light industry abandoning the countryside and small cities in recent years, their major employers are now the schools, universities and health care institutions.  Any move to downsize those public institutions will create even more misery and cost the government dearly because any move away from key infrastructure support will make the urban-rural divide worse.  Rural Nova Scotians did not elect the NDP to balance the budget on their backs.

In the midst of a recession, provincial economic growth has slowed.  Government tax revenue has fallen while expenditures (like social services) have risen.  The government has gone from surplus to deficit.  This is inevitable in the economic cycle.  In the recession in 1990-91, Nova Scotia economic growth faltered and even fell for a year, bringing about government deficits.  But the economy recovered, long-term growth resumed, and surpluses replaced deficits.  Recessions come and recessions go, but this government acts like this one is permanent.  It insists that drastic measures need to be taken but there is a great danger in doing that.  The government’s Economic Advisory Panel says, "There is no need for the government to push the panic button. Even the situation described in the worst of the projections examined — status quo policy — is not a looming catastrophe[5].”

Panic about the fiscal situation can stampede the public to support governments to restrain spending too far and too quickly.  Timing is very important in climbing out of a recession.  Moving timidly can create problems because we don’t want an unnecessary debt, but moving too aggressively can be worse because it can result in permanently shrinking our collective capacity to boost the economy and to take care of one another.

This happened in Saskatchewan in the ’90s.  In a serious recession, a new NDP government eliminated hundreds of civil service position, cut payments in health, education and to municipalities. It closed 52 of the province’s 132 hospitals.  Within three and a half years, an ostensible financial near-death experience became the first balanced budget in the country at the time, followed by a series of almost embarrassing surpluses.  But rather than fully restore services, the government cut personal and corporate taxes.  The Saskatchewan model was copied across Canada.  From the late ’90s to the mid-2000s alone, Canadian governments cut more than 250 billion dollars in taxes, more than enough to cover its stimulus package [6].  The federal government’s cutting the GST by 2 percentage points alone has cost it $12 billion in revenues,[7].  The missing funds make us all more vulnerable to economic storms.

We should therefore be very reluctant to agree to severe fiscal restraint in Nova Scotia.

As a small province without a large manufacturing or resource base, Nova Scotia has to be prudent in both its taxation and its spending and but also its restraint of spending.  We can and should increase income taxes, but not the HST.  But we are poised to emerge from the recession less damaged than most other provinces.  We should look upon this as an opportunity for real reforms. 

If we seize this opportunity we can make Nova Scotia a more equal, more resilient, more compassionate society and economy. 

- Michael Bradfield, Larry Haiven


[1] Malloy, Jason. 2009. “NS: Be prepared for cuts to services, warns finance minister.” The Truro Daily News.  December 10.  Retrieved January 23, 2010 from

[2] Dufour, Mathieu and Larry Haiven. 2008. Hard Working Province: Is it Enough?  Rising profits and falling labour shares in Nova Scotia. Ottawa:Canadian Centre for Policy Alternatives. available at

[3] Dufour and Haiven, above.

[4] No author. 2009.  “Recession officially over but Canadian cities still hurting: CIBC World Markets.” December 1. CNW Group. retrieved January 23, 2010 from

[5] Economic Advisory Panel. 2009. Addressing Nova Scotia’s Fiscal Challenge: A report prepared by the Nova Scotia Economic Advisory Panel for Premier Darrell Dexter, Province of Nova Scotia.  Halifax: Province of Nova Scotia. page 40. available at

[6] Yalnizyan, Armine. 2004.  Can we afford to sustain Medicare? A strong role for federal government. Ottawa: Canadian Centre for Policy Alternatives.  available at

[7] Johnson, Andy. 2009.  “Has the GST cut helped or hindered our economy?” News. Jan. 29. retrieved January 23, 2010

[8] No author. 2009.  “Recession officially over but Canadian cities still hurting: CIBC World Markets.” December 1. CNW Group. retrieved January 23, 2010 from


Responses to Questions

Charlene Croft, Mike Bradfield


Since 2000, the Nova Scotia office of the Canadian Centre for Policy Alternatives (CCPA-NS) has participated in the dialogue about Nova Scotia’s economy through their ‘alternative budget’ document, a tool that can assess the fiscal situation and the choices available to governments in Nova Scotia.  Provincial budgets, like all public policy, are about choices and values. Through the budget, our governments make important choices that have serious implications for the everyday lives of Nova Scotians, now and in the future.

The 2010 CCPA-NS Alternative Budget Working Group, which is comprised of a coalition of academics and community representatives, is currently developing the 2010 Alternative Budget.  In an effort to contribute to these current financial consultations, the Working Group would like to offer the following responses to the government’s 4 questions posed in these consultations.


What should the government do to increase revenues and reduce spending?

The government should primarily use income taxation to increase revenues, specifically by increasing the marginal income tax rates for the top 1% of earners and by imposing "luxury taxes" on products with large ecological footprints and which exemplify conspicuous consumption (luxury and gas-guzzling vehicles, yachts, diamonds, etc.). 

Another way to generate revenue is to develop public corporations which directly benefit Nova Scotia’s economy.  This could be a boon to the many rural communities where valuable industries have been abandoned but the workers’ skills could be used to produce new products – such as the Trenton Car Works.  The creation of Nova Scotia Savings Bonds would provide the government with lower interest funds while acting as a vehicle for Nova Scotians to invest their savings at home.  These bonds could be tied to specific sectors, such as a provincial transit system and alternative energy research and development crown corporations.

The government should avoid reductions at the expense of effective social programs and services.  It should reduce corporate subsidies.   In Nova Scotia and many other jurisdictions, we have learned that public private partnership may delay costs but do not save money in the long run. The only spending the government should be reducing is that which is redundant, ineffective and does not directly benefit Nova Scotia and her citizens. 

What changes should be made to programs and services? Are there things government should do better, stop doing, or do more of?

The government needs identify its core programs and services objectively evaluated using full-cost (GPI-style) accounting.  Evaluations should not be about affordability as much as they should be about appropriateness, considering outreach, delivery and effectiveness.  All of Nova Scotia's programs and services should be guided by a fluid, integrative and focused provincial strategy which is relevant and beneficial to the actual functioning of our communities and our citizens, rather than trying to “pick winners” among  private interests and enterprises.

The most crucial functions of government are to provide Nova Scotians with quality programmes in health, education and social services to help us realize our full potential, as individuals and a community.  The government should not spend money simply because something might create jobs or expand exports.  The primary function should be meeting the needs of Nova Scotians.  For instance, improving social assistance will do more to create employment and to help vulnerable members of our community than will subsidising convention centres or professional athletics.  We need bread, not circuses.

What investments should be made today that will help to grow the economy in the long term?

The investments we make in education, health care, and community services today, will strengthen our foundation for growth and reduce expenditures in health and community services in the future.  It is recommended that the government focus investment on securing basic needs for all Nova Scotians in their home communities.  Basic needs include: housing, food security, education, decent jobs, clean environments, and healthy lifestyle facilitation. 

How soon should government bring Nova Scotia’s finances back to balance?

The government should bring Nova Scotia’s finances back to balance without jeopardizing the social well-being and economic security of its citizens.  The Economic Advisory Panel was clear that there is no current crisis.  The CCPA has shown that a short-term rise in our debt can be managed with long-term economic growth and with income tax policies to occupy tax room that has been vacated by the federal government.  The government should also strive to make the tax system more equitable, for instance, income raising taxes for municipalities which reduce their property taxes.