The provincial Auditor General delivered another of his regular reports on matters financial last week, and once again sermonized about our dire fiscal condition. It marked the second time in less than a year that Michael Pickup saw fit to spice up an otherwise routine presentation with his own headline-grabbing views about Nova Scotia’s finances. And just as he did last February, the AG left out facts that would get in the way of his dour analysis.
As argued in my post of Feb. 26 (“New AG picks up where Lapointe left off”) Pickup’s initial foray into the politically-loaded issue of fiscal policy inappropriately used five-year comparisons with a selected group of provinces to support his grim view of Nova Scotia’s debt picture. He included in his analysis two provinces – Saskatchewan and Newfoundland – whose finances improved immensely over the five-year period with the run up in petroleum or potash prices. He ignored the fact that among the seven provinces without significant resource revenues, Nova Scotia had the smallest increase in net debt per-capita between 2009 and 2014. But by including the two resource-rich provinces, Pickup made Nova Scotia look like a C-, rather than near the top of the class in fiscal prudence.
In his latest exercise, Pickup conceded that with a significant decline in the deficit in 2014-15 Nova Scotia’s financial condition improved, but also noted an “overall unfavourable five-year trend.” In demonstrating that five-year trend, he dispenses with comparisons and editorializes based solely on Nova Scotia’s performance over the last five years. The reason he gives for dropping the comparisons with other provinces to show the supposedly unfavourable trend is that “not all comparable jurisdictions’ public accounts have been released.” That reasoning is somewhat peculiar, given that Finance Canada’s annual Fiscal Reference Tables, based on the 2014-15 public accounts of the federal government and the provinces, were published in September and can be found at http://www.fin.gc.ca/frt-trf/2015/frt-trf15-eng.pdf.
Had the AG included that readily available information in his analysis, the September fiscal numbers compiled by Finance Canada would show that for the erstwhile “comparable jurisdictions” only Saskatchewan, with a small surplus, had a better fiscal record in 2014-15 than Nova Scotia. Newfoundland, hard hit by the drop in oil prices, experienced a huge 12.9% increase in its net debt last year. The other comparable provinces – P.E.I (up 2.4%), New Brunswick (up 3.2%) and Manitoba (up 8.3%) – all had increases in net debt last year higher than the 1.8% recorded by Nova Scotia. So, for that matter, did Quebec (5.0%) and Ontario (6.3%). Only British Columbia and Alberta managed to finish in the black,and in the case of the latter, we know that will not be repeated this year, thanks to oil prices. As for the five-year trend, Nova Scotia’s increase in net debt of 16.6% over five years from 2010 to 2015 was even better than it was from 2009 to 2014. It was the lowest of any province except Alberta – and that includes resource-rich Saskatchewan with an increase of 46.8%. So, Nova Scotia may show an “unfavourable five-year trend”, but eight other provinces have trends that are even more unfavourable.
Fiscal Reference was not the only data source the AG overlooked in staying aboard the McNeil government’s austerity bandwagon. Nova Scotia’s debt-to-GDP ratio improved in 2014-15, but you wouldn’t know that from the AG’s report. On the grounds that official GDP numbers were not yet available from Statistics Canada, Pickup used 2013-14 GDP numbers (apples) and 2014-15 debt numbers (oranges) to show a rounded-off debt-to-GDP ratio of 38% in 2014-15, same as in 2013-14. However, we know that Nova Scotia’s debt-to-GDP ratio dropped to 37.0% in 2014-15, down from 37.7% in 2013-14. We know it because it was reported in the Public Accounts for Nova Scotia and highlighted by Finance Minister Randy Delorey when the accounts were released in August. As Delorey put it in his covering letter:
“The Province’s Net Debt as at March 31, 2015 was $15.0 billion. Nova Scotia’s growth in real GDP was 1.6 per cent in the calendar year 2014 and an expected 1.4 per cent in the calendar year 2015. As a result, Net Debt-to-GDP for 2014-15 was 37.0 per cent, 0.7 percentage points lower than the prior year.” (Italics added)
Oops. If you can’t believe the Auditor General’s numbers, whose can you believe? In future, Pickup should maybe concentrate on getting his numbers straight and leave the fiscal policy debate to elected politicians.