Provincial cuts will slow economic growth, Higgs says

The Alward government is admitting that its spending cuts and the lack of major infrastructure projects on the horizon will hurt economic growth in New Brunswick.

The Alward government is admitting its spending cuts and the lack of major infrastructure projects on the horizon will hurt economic growth in New Brunswick.

Finance Minister Blaine Higgs introduced the Alward government’s second budget on Tuesday, which lowered the province’s deficit to $183 million from the $471-million deficit projected for 2011-12.

The finance minister announced a series of civil service reductions and internal cuts that would help curtail the deficit.

But Higgs admitted those provincial cuts combined with federal spending restraint and a lack of major construction projects in the future will mean lower growth than would otherwise be the case.

"Reduced levels of public sector capital spending along with the absence of any new major projects in the private sector will limit the contribution of capital investment to economic growth," Higgs said in the legislature.

"As well, fiscal consolidation at all levels of government will serve to weaken overall economic growth."

The Department of Finance is projecting the province’s economy will expand by 1.3 per cent in 2012. That is a drop compared to budgets in the mid-2000s. For instance, New Brunswick’s economy expanded by 2.4 per cent in 2003-04.

An improved North American economy could see the growth rate climb to 2.1 per cent in 2013.

But the finance minister isn’t promising any major projects in order to rev up the economic engine.

In fact, Higgs blames those major infrastructure projects started by the previous Liberal government for the province's huge deficit.

"The big mega-projects, we don't see those right now, in the foreseeable future, and for us to put a number in there that suggests otherwise would not be responsible," he said.

Stimulating the economy

New Brunswick’s unemployment rate hit 10.1 per cent in February, up from 9.5 per cent in January. The rise came as the economy shed 2,600 jobs.

The Liberals focused their budget attack on the Alward government’s inability to stimulate the economy and create jobs.

Liberal MLA Donald Arseneault, the opposition’s finance critic, said the provincial government has a role in helping the economy recover.

"You've got to start having specific initiatives to try to create growth in New Brunswick and this has been lacking from this government for two years," he said.

Fredericton is one of the province’s economic regions that consistently has among the lowest levels of unemployment. But it could be the hardest hit in the next three years when the provincial government moves to reduce the civil service.

Higgs said 4,500 people will leave the civil service in the next three years and he estimates that 1,500 will not be replaced.

The finance minister estimates the reductions will save $86 million over the three years.

Arseneault said it's too big a cut to the bureaucracy and that it will hurt government services.

"A civil servant is not just someone stuck in an office in Fredericton. They're social workers, they're nurses, they're teachers. It has a tremendous impact on New Brunswickers," he said.

Even if the Alward government cut 1,500 civil servants by 2014 that would bring the number of civil servants to 45,288, which includes health workers, school employees and staff in government departments. That would still be higher than the 45,139 members of the civil service in 2005.

When Higgs walked into the legislature to table his latest budget, he was greeted by protesting union members.

Many of those outside the legislature were upset at the provincial government’s plan to reduce the civil service.

Danny Légère, the vice-president of the Canadian Union of Public Employees in New Brunswick, said those jobs could be paid for if the Tories reversed a corporate tax cut by the Liberals in 2008.

"Not just CUPE members, but other social activist groups and other people of the province told Mr. Higgs that they valued public services, and they were prepared to pay more for public services. I guess that fell on deaf ears because that obviously didn't happen," he said.

Mixed reaction

New Democratic Party Leader Dominic Cardy offered the Higgs budget faint praise. He said the Tories are turning out to be better fiscal managers than the Liberals were.

But he's criticizing the budget for funding increases to health and education that are less than the rate of inflation.

He said that calls into question what the Tories want to achieve.

"They're managing what we've got much better than the Liberals, I'll give them credit. for that. But why? What is the purpose of this government? What is it they want to say is their accomplishment in two years time when they go to face the people?" Cardy said.

"What are we going to be doing in 10 or 20 years time? So nice job at not completely blowing the whole place up which I think the Liberals came close to doing, but why are we here?"

The Canadian Taxpayers Federation offered the Alward government's new budget a more ringing endorsement.

Kevin Lacey, the federation’s Atlantic director, said the decision to cut civil servants is a better plan than raising taxes.

"If the province is going to move forward economically, it has to have a competitive tax structure, and what David Alward has said today to those groups who want to see more taxes and more spending, is, ‘No, we're going to have a competitive tax regime and move the province forward,’" Lacey said.