N.B. budget hikes taxes, cuts spending

The Progressive Conservative government is delaying promised tax cuts, hiking gas and cigarette taxes and trimming provincial spending in its initial attempt to slay the provincial deficit.
Finance Minister Blaine Higgs talks with Mike Ferguson, the deputy minister of finance, before a news conference on Tuesday.

The Progressive Conservative government is delaying promised tax cuts, hiking gas and cigarette taxes and trimming provincial spending in its initial attempt to slay the provincial deficit.

Finance Minister Blaine Higgs announced New Brunswick’s deficit would fall to $448.8 million in 2011-12 by cutting $220 million in spending and then raising $100 million by pushing up taxes on tobacco and fuel.

The Tories are also saving money by limiting the number of top bureaucrats and taking an ax to a handful of government agencies, such as the Provincial Capital Commission, the Advisory Council on the Status of Women and the Secretariat for Community Non-Profit Organizations.

Higgs acknowledged the budget will not be universally popular but he said the Progressive Conservatives came to power in September on the promise to rein in the province’s growing deficit.

"The cultural change in government spending and reducing waste is underway. So too is the cultural change in managing the expectations of New Brunswickers," Higgs said in his budget speech.

"But like stopping a freight train in full motion, it takes time to change course fiscally and mentally. We are building the trust and the momentum necessary to achieve the ultimate success that collectively we are capable of."

New revenue

Higgs said in his budget speech that he heard during his pre-budget consultation tour that citizens would accept an increase in certain taxes in order to reduce the deficit. Higgs took that advice and at midnight Tuesday the tax on a carton of cigarettes will cost $34 up from $23.50, which represents the first time since 2002 that the provincial government has upped its tobacco tax.

As well, pump prices will go up at midnight when the gas tax will be raised to 13.6 cents a litre, up from 10.7 cents. The tax on diesel fuel will rise to 19.2 cents a litre from 16.9 cents.

Listen as CBC New Brunswick's political blog analyzes the provincial budget.

Donald Arseneault, the Liberal finance critic, said was sharply critical of the budget.

"We're still on the watch to cut $100 million in education. When you're talking $17 million just this year in the school district, that's going to hurt the classroom," he said. "In terms of revenue, where he's chosen to increase the revenues is going to hurt ordinary New Brunswickers."

Dominic Cardy, the NDP leader, also attacked the Premier David Alward's first budget. "This is a half-way measure and I don't have any real sense yet of what Mr. Alward or his government would like to do."

New Brunswickers who were counting on a personal income tax cut this year may also be disappointed with the Tory budget.

The Tories had promised in the provincial election to halt the planned tax cut on the highest income earners, as a measure to curtail spending.

Higgs, however, is moving a step further. He is also delaying the planned tax cuts on all personal income brackets.

By putting off the tax cuts, the provincial government is expected to save $21 million in the upcoming fiscal year.

Spending restraint

The Higgs budget also outlined a series of steps to control government spending.

The Provincial Capital Commission, which was a project initially started by Bernard Lord’s former government, has had its funding eliminated. The commission could continue to function if it receives new external funding.

The Advisory Council on the Status of Women is seeing its funding cut completely and its roles will be folded into the provincial government. The same will be done for the Secretariat for Community Non-Profit Organizations, which was set up by the former Liberal government.

The Tories are also eyeing the public service as it wrestles down its deficit. The provincial government will continue its hiring freeze for civil service positions and it will impose an "initial one-year suspension" of salary increases for non-unionized workers and halt any performance pay benefits for managers.

Higgs will also reduce the number of deputy ministers and assistant deputy ministers by 10 per cent.

Another initiative the Higgs budget outlines is a move to create a generic drug pricing policy. The policy will limit the amount the provincial government pays for generic drugs.

Among the $220 million of planned cuts, are $15 million of savings from ideas such as cutting civil service travel and consolidating office space, $20.6 million from reducing spending by the Regional Development Corp. and $1 million through a review of Communications New Brunswick.