Repaying debt might not be best use of offshore money

November 20, 2008

As announced on Sunday, July 11, Nova Scotians are finally going to benefit from the good fortune of having fossil fuels not far from our shores.

The offshore deal was signed in 1986, and revenues are expected to continue to be paid out for another 15 years. Over nearly 40 years - two generations - it is expected to pay out over $850 million. How should we invest that much money, for that many people, over that much time? This should be a momentous decision. Thinking too narrowly means failing Nova Scotians today and in the future.

Of the initial instalment of $234.4 million - money already deferred up to two decades - we have been told that about one-third ($75 million) will go to three areas previously announced by the government: university infrastructure, offshore research and development, and land conservation. The remaining two-thirds, as well as all future revenue expected over the next 15 years - over 90 per cent of the total revenue - will be devoted to debt reduction.

In other words, the government has decided to put over 90 per cent of its eggs into the debt-reduction basket. Thus far, we have heard the premier being congratulated for making this commitment. This decision, we are told, is in our best interest because the savings from the interest payments can benefit more people and especially our children.

But is it the right choice? Investing for the future can take many forms, and even seemingly "safe" choices like debt reduction represent missed opportunities to invest in other ways that might be of greater benefit to all Nova Scotians, today and in the future.

Are there more productive ways to invest in the needs of Nova Scotians than choosing to send so much money to financial markets in Toronto and New York? Should paying off debt quickly be a priority to the exclusion of virtually everything else?

Provincial debt-load figures are alarming as an aggregate number and even on a per-capita basis. Relative to the size of the province's economy, however, Nova Scotia's debt load is more manageable than it has been in many years. Because the economy is growing, while debt is stabilized and interest rates are low, the portion of the provincial budget devoted to debt costs is at its lowest level since 1990 and declining.

If debt has stabilized, what could we achieve by investing some of those funds in other ways? Here are just a few ideas:

- Invest in disease prevention. Nova Scotia has some of the highest rates of chronic disease in the country, including the highest rates of cancer deaths. Ten years ago, GPI Atlantic estimated that the total burden of illness from seven preventable non-communicable chronic diseases was $3 billion or $3,200 per person per year: 13 per cent of our GDP. They further estimated that 38 per cent of the total burden of disease is preventable. Investing in disease prevention could yield massive savings in health care costs and lost productivity.

- Invest in energy efficiency and public transit. Energy costs have skyrocketed in the last few years, but our government is spending the same amount on energy efficiency programs as it was five years ago. And while the average provincial investment in public transit is $34 per person, in Nova Scotia it is only $1.38. Nova Scotia is far from energy-independent and as a coastal province, is vulnerable to the impacts of climate change. What better way to spend the money from a non-renewable resource than becoming leaders towards a more sustainable future?

- Invest in reducing poverty. There is a striking disconnect in the discussions in this newspaper about what the government should do with the offshore money and how we might help poorer Nova Scotians. Surely, one of the goals of the "faces of poverty" series is to get us to stop and think about those who are less fortunate. Those who are suffering among us today need our help now. Just $37 million can provide 900 new or renovated affordable homes in Nova Scotia. Poverty remains the best predictor of poor health, so investing in poverty reduction could also reduce health care costs in the long run.

Clearly, there are a lot of ways in which this money could be spent. While debt reduction has its merits, it is only one among many possible options. This is what is perhaps most disturbing about Sunday's announcement: that the premier is committing enormous sums of money to a single particular purpose, without even a whiff of consultation.

How ought Nova Scotians to invest nearly a billion dollars over two generations? That is a question that deserves serious public debate, not something snuck past us on a lazy Sunday afternoon.

Christine Saulnier, PhD, is the director of the Canadian Centre for Policy Alternatives-Nova Scotia. Andrew Biro, PhD, is a Canada Research Chair at Acadia University, a CCPA-NS research associate and chair of the Research Advisory Committee for CCPA-NS. A slightly edited version of this article originally appeared in The Chronicle-Herald - Halifax.