Nova Scotia

AG defends report questioning ethics of debt

Nova Scotia's auditor general defended his right to question the ethics of government debt Wednesday as the NDP took aim at everything from the scope of his criticism to his choice of words.

Nova Scotia's auditor general defended his right to question the ethics of government debt Wednesday as the NDP took aim at everything from the scope of his criticism to his choice of words.

In a report released Wednesday, Jacques Lapointe asks whether it's fair for governments to spend more than they earn while leaving the tab for someone else.

"Government's practice of borrowing to pay for current expenditures raises ethical questions," he said in the report.

"Is it right for Nova Scotians to expect, and receive, government services that they as a group do not completely pay for, deferring part of the payment to future generations?"

Finance Minister Graham Steele said the comments were tantamount to a "thoughtful essay on debt," though he did not agree with all Lapointe had to say.

He took particular issue with Lapointe's use of the term "ethical."

"I do think the word chosen by the auditor general is probably an unfortunate choice of words," Steele told a news conference on Wednesday.

"The word 'ethical' is such a loaded word with so much baggage that it's possible to say an issue is a serious issue that needs to be seriously discussed without adding into the debate a loaded word like the one he used."

The comments are contained in Lapointe's 81-page report on financial issues, which also makes recommendations to improve financial control within the government.

Province in an 'exceptional circumstance'

In his report, Lapointe warns the province's debt is limiting the government's ability to deliver public services. He also said the poor fiscal state is a drain on current and future resources.

Lapointe said while the government has the ability to spend in excess of its revenues, to do so is financially irresponsible except in exceptional circumstances. He said those would be in times of emergency, borrowing for large-scale capital projects that could not proceed otherwise and to maintain services during an economic downturn.

"In all other cases, I believe government has a responsibility to its citizens to live within its means," he said in the report.

Lapointe later told reporters he believes Nova Scotia is currently in an "exceptional circumstance" given ongoing economic troubles. The report makes no specific recommendations on the matter.

Lapointe said he merely wanted to raise the issue out of concern for the province's well-being and financial health.

Government backbencher Howard Epstein said Lapointe moved himself into the realm of economics and politics, which he described as "unfortunate."

"I want to assure everyone that Nova Scotia is not going bankrupt," he said.

"His language, I think, and his analysis was beyond really where it should have been. He is not an economist and really tried to give us economics advice and that was inappropriate."

He accused Lapointe of offering a "glib" analysis on debt that made Nova Scotia appear as though it is in crisis, lamenting that the report made no mention of the government's plan to tackle its financial problems.

Lapointe told reporters he wasn't singling out the NDP government or commenting on government policy, but raising concerns about what is a long-established problem in many provinces.

"I'm not making comments about a particular situation today in Nova Scotia or commenting on the actions of this particular government," he said.

"That's outside my mandate and I won't talk about those things. I'm making these comments to generate some thinking and some other viewpoints around this issue."

Auditor general doing his job: opposition

Conservative Leader Jamie Baillie said he was disappointed the government would dismiss Lapointe's comments as an essay.

"The auditor general is doing his job, which is to give his opinion on some of the great risks that we face as a province, particularly financially," he said.

Liberal member Diana Whelan said the New Democrats are being defensive because they have raised taxes and cut services while ignoring the debt.

"They have been adding to the debt.… We need to see a plan to stop doing so," she said.

"Balanced budgets alone won't guarantee that the debt doesn't grow."

Last July, the government reported that the province's net debt fell to $12.8 billion for the 2010-11 fiscal year — a decrease of $217.8 million over the previous year. But it also forecast the net debt to grow to $14.1 billion by March 2013.

Steele said Lapointe's suggestion that the government come up with a plan for eliminating the debt would involve massive surpluses of about $500 million, tax increases and service cuts.

"I don't think that's realistic, frankly," he said, adding that the government is instead aiming toward a long-term, steady decline in the debt-to-GDP ratio.

Last week, New Brunswick's auditor general released a similar report, warning that debt will affect that province's ability to meet public demand for services if it's not addressed.