Expect a stand-pat budget… for now

Opinion

Hey there, time traveller!
This article was published 28/05/2016 (2889 days ago), so information in it may no longer be current.

It has been a very long time since the Manitoba legislature played host to so many Liberals.

With the federal Liberal party in Winnipeg for its biennial policy convention, the new provincial Progressive Conservative government seized the opportunity for some non-partisan chats and photo opportunities. A steady stream of social media showed Manitoba Tories warmly welcoming Liberals into the legislature.

Premier Brian Pallister tweeted photos of meetings with Ontario Liberal Premier Kathleen Wynne, Newfoundland and Labrador Liberal Premier Dwight Ball and New Brunswick Liberal Premier Brian Gallant, all in town for the convention. Manitoba PC Finance Minister Cameron Friesen got in on the act, tweeting out a chummy photo with federal Liberal Finance Minister Bill Morneau.

There is no word on what Pallister or Friesen talked about with their new Liberal best friends; these meetings are typically confidential. Still, it was an excellent time for Manitoba Tories to gather perspectives from leaders outside Manitoba as the new PC government here gets ready to table its first-ever budget.

The Liberal premiers, and Morneau, would all have some perspective on the challenges facing Manitoba; regardless of political stripe or region, Ottawa and the provinces are all facing the same economic and fiscal challenges.

Economic growth and government revenues are anemic. The upward pressure on the cost of providing core government services continues unabated. In Manitoba, the equation is complicated by a budget deficit that, at last count, is hovering near $1 billion.

The conventional wisdom — based in large part on previous statements by Pallister and some of his ministers — is this will be a stand-pat budget. That is to say, there will be very few new tax measures, spending, or cuts in this fiscal year. Pallister has been clear many of his campaign pledges will not be enacted until the “first full year” the Tories are in government. Some, such as the pledge to roll the PST back to seven per cent, will be pushed to the back end of Pallister’s first mandate.

What could we reasonably expect in this budget? It seems inevitable Pallister will reduce ambulance fees, a small but relatively achievable election pledge. He may index income tax brackets to inflation. There will be more, of course, but nothing fiscally seismic.

Easier to predict is the tone of the budget. Pallister tipped his hand in fairly obvious fashion last week when he delivered his response to the throne speech, a wide-ranging commentary on the mess left behind by the NDP and the new government’s commitment to protecting services and balancing the budget.

Not surprisingly, Pallister continued the narrative from the election campaign, assuring Manitobans he will not impose severe austerity to solve his fiscal problems.

“We know also that sweeping measures of austerity are not going to work,” Pallister said Thursday. “They would only cause harm to our most vulnerable citizens. And so what is needed is an approach different from the one taken previously, a careful and sensitive approach that will eventually restore Manitoba to fiscal balance. And that is the approach that this government will be taking.”

When you break it down, there are really two parts to what Pallister is saying. First, he continues to reject the concept of severe austerity, and for good reason. Stephen Harper’s Conservative government, and its increasingly austere policies, left this country somewhat traumatized and concerned about the viability of core services. Pallister does not want to trigger those concerns.

And yet, if you listen carefully to the second part of Pallister’s statement, you can see there is something else coming. Pallister claims his government will operate differently than the NDP in offering a “careful and sensitive” approach to balancing the budget. The mathematical reality is that to balance the budget, he must either find ways of dramatically increasing revenues — which is improbable — or reducing expenditures. That will require cuts to something. It will be Pallister’s challenge to make sure Manitobans believe any cuts are justifiable and do not weaken core services.

Pallister has said often government does myriad things that are outside of core service areas that could be reduced or eliminated; and has promised an audit to identify about $50 million in savings. However, the province has only just issued a tender for a consultant to conduct this audit, so it will be some time before Pallister can act on any savings identified.

It’s also important to note that Pallister excluded health care from this audit. Although this makes political sense, it makes his goal of balancing the budget more difficult. Health care captures more than 40 per cent of all government spending. If it is off limits for the audit, that leaves much less room for Pallister to find savings large enough to make a dent in the deficit.

Perhaps that reality will dull Pallister’s appetite for tax cuts, which continues to form an important part of his pledge for a “Better Manitoba.” Again, reality says every dollar Pallister gives away in tax cuts will require at least $2 in spending cuts if he hopes to shrink the deficit. That mathematical reality explains why no other premier currently facing a deficit is talking about tax cuts.

Pallister was smart to take meetings with the other Liberal first ministers, as was Friesen in seeking out face time with the federal finance minister. Now that Pallister is governing, he has much more in common with these Grits than ever before.

And maybe — just maybe — those meetings gave him some perspective on the challenges he faces, and the true path to lasting solutions.

dan.lett@freepress.mb.ca