Graham Steele: Stephen McNeil's options on gas prices are limited
Prediction: he'll de-regulate
Gasoline prices hit record highs in Nova Scotia this week.
Whenever a consumer price gets too high — think gasoline, electricity, furnace oil, auto insurance — the cry goes out to the government from the public and the opposition: “Do something!”
It's a cry few politicians can resist. They scurry around looking for something, anything, that will quiet the hubbub. It doesn’t matter whether what they propose makes sense. Politically, the important thing is to do something.
When it comes to gas prices, the options in front of the McNeil government are fewer and more complicated than they thought. I've been there.
When you're in the opposition, it all looks so easy. I’ve been there, too. You can stop charging sales tax on gasoline (15 per cent, or at least the 10 per cent provincial share). You can lower the gas tax (15.5 cents per litre). At the very least, you can stop charging HST on the gas tax.
Few options open to a premier
Then you get into government. The staff from finance sit you down and tell you how things really work.
No, you can't stop charging tax on tax. Under the HST agreement with the federal government, the HST always goes on last. The federal finance department will never agree to change the order.
So when Premier Stephen McNeil says he'll approach his Atlantic counterparts and the federal government to amend the HST agreement, he will get nowhere.
No, you can't just take off the provincial sales tax off. Again, the HST agreement forbids it. There's a limit to how much of the tax base can be exempted and exempting a major commodity like gasoline would take us way over the allowable limit.
The federal government will never agree to raise the exemption ceiling.
Whalen vs. McNeil
But there is one action that is totally within the control of the provincial government. Progressive Conservative leader Jamie Baillie correctly points out that the provincial government could immediately cut the gas tax, which is a flat 15.5 cents per litre (15.4 cents for diesel), without needing anyone's permission.
Except Finance Minister Diana Whalen says she won't do it.
Part of the finance minister's job is to make sure there's enough revenue to pay for public services.
When you're the finance minister, people are always after you to give up your revenue. Cut this tax, axe that fee, drop that toll. But the whole point of taxes is to generate enough money to pay for services. Doctors, nurses and teachers don't work for free. Roads don't pave themselves. Drug companies aren't charities.
So it didn't surprise me at all to see the finance minister saying that a cut in the province's revenue will have to wait.
What did surprise me, greatly, is that she was publicly contradicting her premier. In politics, that's the closest thing to an absolute no-no that there is.
But somebody has to be sensible about money, and it may as well be the finance minister.
Diana Whalen knows that gas taxes aren't driving up the price, so she knows that cutting them can't be the right answer. As she points out, since the province is already running a deficit, we'd be borrowing money to pay for a tax cut.
Here comes deregulation
So what are the Liberals to do?
Here’s my prediction: The Liberals will "do something" by speeding up their commitment to abolish gas price regulation.
They will argue that regulation produces no benefit and has only added cost to the system. They will argue that the best way to get lower prices is through unrestricted competition.
Best of all, axing regulation costs the government nothing.
The Liberals will promise savings for consumers, though the direct savings from axing regulation will be a penny per litre, at best. That penny, if we see it at all, will very quickly become invisible because of price volatility.
But whether it makes sense or not, and whether consumers notice or not, the McNeil government will have answered the call to "do something."
Just like Donnie Cameron's Progressive Conservative government, who in 1991 took gas price regulation off.
Just like John Hamm's Progressive Conservative government, who in 2005 put gas price regulation back on.