"It’s been an interesting year. It would be an understatement, I guess, to say that." - Tom Marshall, NL Minister of Finance, Nov. 17, 2011
Tom Marshall was right on both counts the day he delivered his mid-year budget update, promising a $756 million bonus for the treasury due to increased oil prices and higher production. Interesting. And an understatement. And he might have added "relief". Relief at not having had to make the speech that a predecessor did exactly 36 years ago.
Bill Doody was Frank Moores’ finance minister, and the man unlucky enough to have the job in 1975. The national inflation rate was running about 10 per cent, revenue was plummeting in both St. John’s and in Ottawa. The more cynical would have suggested Doody and Moores knew things were bad during the election that returned them to power two months earlier in September 1975.
A month later, Moores went on television to lay out the seriousness of the problem. A month after that, on Nov. 24, 1975, Doody delivered a "supplementary budget", the first such move, he claimed, since Confederation.
The medicine was tough. Negotiated wage increases with 27 public-service bargaining units, some averaging more than 25 per cent, would be renegotiated in line with wage and price controls passed by the Trudeau government.
That was only part of the cure Doody prescribed that day. He increased the sales tax from 8 to 10 per cent; put up income tax by two points; he deferred all hospital construction; the Lower Churchill project at Gull Island — hit hard by [cost] "escalation and interest during construction" — was essentially stopped, or as Doody delicately put it, there was a "need to phase the project..."
The tax increases hit everyone. Liquor prices went up. The cost of a drivers licence went from $3 to $5. Registering a car in Labrador increased from $5 to $8, and on the island, from $19 to $30.
Bill Doody didn’t have a lot of space to manoeuvre. Forty per cent of Newfoundland’s revenue came from Ottawa. Have-status was a phrase, infrequently in use in Newfoundland.
Newfoundland’s debt costs were $86 million in 1975, equal to one-half of the interest savings since oil allowed the province to start paying down debt.
In the midst of the dark cloud he presided over that day, Bill Doody tried delivering some words of comfort. He talked about the potential of offshore oil and gas, calling it "the most important natural resource in the history of this Province."
"Discovery and development", he claimed, "would completely change the financial picture of the Province..."
An understatement, 36 years early.
And Tom Marshall, for one, is relieved.