This week, in the midst of responding to an upsurge in COVID-19 infections and a housing crisis, the Nova Scotia government announced the launch of public pre-budget consultations.
Unlike the previous NDP government and the feds, the McNeil Liberals have approached these consultations in recent years as pro-forma, ass-covering exercises. The process inaugurated this week looks like more of the same.
According to the news release from the Finance Minister, Nova Scotians are “encouraged to submit their budget priorities by mail, email, on Twitter or by speaking with their MLA.”
Whether anyone in government will pay attention to the letters and tweets received is unknown and the public has no way of knowing who even bothers to submit their budget priorities. Add the fact that any Liberal Spring budget would be presented under an as-yet-to-be-determined Premier and the exercise seems even more pointless.
Nonetheless, in the event anyone reading this intends to take part in the diminished ritual several recent publications may be useful – especially if some notion of a “build back better” Nova Scotia is a motivating factor. One report from Statistics Canada deals with Nova Scotia’s fiscal past. The other, from the Parliamentary Budget Office, looks at the future. Both convey that, to paraphrase some bank’s slogan, “we are richer than we think.” But a third report, also from Stats Canada, demonstrates how social programs were squeezed in the process of achieving collective fiscal wellbeing.
Slow debt growth
The first Stats Canada report came out a couple of weeks ago. The Consolidated Government Finance Statistics (CGFS) play essentially the same role as government budgets and the annual public accounts with some important differences. For one thing, the stats are comparable across jurisdictions, meaning that when Nova Scotia’s finances are being judged against those of another province, it’s an apple-versus-apple comparison.
Secondly, the CGFS data differ from reports published by governments due to, among other factors, coverage, accounting rules and timing. Lastly, the data are based on the international government financial statistical standard, important when comparing Canada’s relatively healthy fiscal situation with other countries.
Much more detail with charts and graphs, is available at the Nova Scotia Finance website. For me, the key takeaway is the Stats Canada table showing debt per capita for the federal government and the provinces in 2008 and 2019. In 2019, Nova Scotia’s was the lowest of any province east of the Manitoba-Saskatchewan border. And as Table 1 shows, debt has grown more slowly than all but two provinces over the past 11 years.
Source: CGFS and my calculations
When the CGFS figures are compared with the most recent data published in Finance Canada’s Fiscal Reference Tables, Nova Scotia’s per capita debt in 2018-9 was $2,524 higher in the latter, but the growth rate of 19.6 per cent from 2008 was slightly lower than the increase calculated from the CGFS data, and the lowest of any province.[i]
In either case, through a decade and more of belt-tightening under both NDP and Liberal governments, Nova Scotia at the end of fiscal year 2019-20 stood as a beacon of fiscal restraint compared with most other provinces.
Of course, that was before the pandemic threw a monkey wrench into every government’s fiscal future, turning Nova Scotia’s modest projected surplus for this year into a deficit most recently forecast at more than $800 million. But that’s where the aforementioned report from the Parliamentary Budget Officer (PBO) comes in. On November 6 the PBO provided an updated Fiscal Sustainability Report addressing the impact of hundreds of billions in pandemic-related spending on government finances in the long term.
The PBO’s reassuring conclusion is that despite the “stark” immediate impact of the pandemic on pubic finances, current Canadian fiscal policy “is sustainable over the long term.” As discussed here, the PBO defines sustainability as meaning “that government debt does not increase continuously as a share of the economy.” So, according to the budget office, assuming no new programs are introduced and pandemic measures are wound down, “total general government net debt is projected to remain below its 2019 pre-pandemic level over the long term.”
Note the reference to total government. Only the finances of the federal government, Quebec, Ontario and – drum roll please – Nova Scotia are projected as sustainable. As things stood at the time of the PBO report, the remaining provinces will have to raise taxes or cut spending by $12 billion to stabilize debt-to-GDP. (This is mainly due to the health transfer formula which should be fixed, but that’s another story).
Note also that the PBO is talking long term: debt-to-GDP is not going back to pre-pandemic levels for a while. But over the long-term the federal government can increase spending or reduce taxes by $19 billion a year and remain sustainable while Nova Scotia has about $200 million leeway. And Nova Scotia’s debt/GDP ratio is not set in stone. As high as 47.1 per cent in 1999, it is projected in a November 12 report from RBC Economics to rise to 38.4 in 2021 before dropping to 34.9 the year after. It has room to grow without causing panic.
Bottom line: based on current – admittedly volatile – conditions, post-pandemic Nova Scotia can well afford to address outstanding needs, including the startling underfunding of some social programs as revealed by another Statistics Canada release last week, the Canadian Classification of Functions of Government (CCOFOG -pardon the acronym).
‘Social protection’ underfunded
As with the CGFS fiscal data, the CCOFOG uses common criteria to measure government expenditure by various components such as health, housing and ‘social protection’, which includes disability supports. I referred here to the 2018 data to show that despite having the highest rates of disability in the country, Nova Scotia spent about 20 per cent less per capita than the Canadian average on disability and long term sickness in 2017. That shortfall remains unchanged in the latest data, which also reveal that in stark contrast to most other provinces, expenditure on social protection has declined in Nova Scotia over the last six years.
In addition to sickness and disability, the social protection function includes help for families and children, housing support and measures to reduce social inclusion. As Table 2 shows, per capita spending varies widely between provinces. This is partly because the category covers some exceptional programs such as Quebec’s expansive childcare plan and Saskatchewan’s public automobile insurance program. But no matter how you look at it, Nova Scotia’s record stands out, second lowest among provinces, dropping from fourth lowest in 2013.
|Province||$ Per capita 2013||$ Per capita 2019||Percentage change|
|Newfoundland and Labrador||$1,318||$1,405||+6.68%|
|Prince Edward I.||$1,097||$1,187||+8.20|
|New Brunswick||$ 925||$1,626||+75.78|
In the table above, per capita spending figures in the third column are from the recent Statistics Canada release. The expenditure numbers for 2013 are my calculations based on Stats Canada table 10-10-0005-01.
New Brunswick’s jump in spending stands out primarily due to a large increase in 2016-17 for child protection and early childhood development programs. British Columbia has also significantly increased spending on housing support. However, even among those provinces that have carried on business as usual, Nova Scotia’s parsimony is shocking.
The decline over the six year period is the result of cuts over the last two years. About 70 per cent of social protection expenditures in Nova Scotia are for sickness and disability or social exclusion, the latter defined by the Organization for Economic Cooperation and Development as “benefits to persons who are at risk of being socially excluded, such as low-income earners, refugees and homeless persons.” Table 3 shows how spending for those groups has been reduced.
Table 3:Change in per capita spending by category Nova Scotia
|Sickness and Disability||$542||$517||-4.61%|
|Family and Children||$225||$233||+3.55%|
|Total Social Protection||$1409||$1336||-5.18%|
Source: Stats Canada Daily 2018-11-28 and 2020-11-27
It would not be an exaggeration to say that the sound financial state of which the McNeil government is so proud has been achieved at the expense of those in need of social protection. Finance Minister Casey’s media release announcing consultations said the upcoming budget will be shaped by a “new reality” created by the COVID-19 pandemic “taking steps toward economic recovery while continuing to support Nova Scotians.” So here’s my Tweet: THE “NEW REALITY” MUST ADDRESS FAILURES DURING THE OLD REALITY TO PROVIDE ADEQUATE SUPPORT TO SOME OF THE MOST VULNERABLE NOVA SCOTIANS.
[i] The provinces with the largest variations between the two sets of data were British Columbia and Saskatchewan. In B.C.’s case, the CGFS data shows a debt 70 per cent lower than the most recent Finance Canada data. For Saskatchewan, the astronomical increase of 915.9 per cent is the result of a CGFS calculation for 2008 that’s 84 per cent lower than a calculation based on Finance Canada data. According to Finance Canada data which comes from provincial reporting, the 2008 to 2019 increase in Saskatchewan’s per capita debt is 80 per cent. Determining a percentage increase for Alberta is beyond my math skills because the province went from net surplus to net debt during the period.