The Nova Scotia legislature will convene for one of its rare meetings this coming week. The budget for 2026-27 will be the main item of business and Nova Scotians are being primed from all sides to expect austerity.

A projected $1.4 billion operating deficit for the current year is routinely described as “record breaking” by the media and the opposition and the province’s Auditor General has highlighted the fact that spending increased by 43 per cent between 2021 and 2025. The opposition parties and the media have also made much of the government’s chronic inability to stick to the spending estimates contained in its budgets, overspending by more than $5 billion since coming to power in 2021. The bond rating agency, Standard and Poor, has further inflamed things by downgrading the Province’s credit rating.  And the Premier has predicted there will another deficit in the upcoming budget for 2026-27 and “it will be big.” 

As a result, the PC government has a plan to shrink the size of the civil service and departments are being asked to model 10 percent cuts in discretionary spending and program grants – fruits of the latter diktat emerging early with the impending demise of several local museums and tourist bureaus and layoff notices for as many as 70 employees in tourism and other departments.

Premier Houston has suggested that health and long term care will be spared, but his chosen health care apparatchik tells a different story. Karen Oldfield, longtime PC insider appointed head of the Nova Scotia Health Authority in 2021 to fix healthcare, “whatever the cost,” recently told a legislative committee that “we can’t keep spending uncontrollably on health care.” So it seems that even health spending – previously untouchable and a significant cause of the current deficit panic – is at risk.   

Governments citing deficits to justify political ends is a familiar tactic. At the federal level, the Liberal government of the mid-1990s used a growing deficit as an excuse to save money by re-jigging federal-provincial fiscal arrangements to the detriment of the less wealthy provinces. In that same decade, the Nova Scotia PC government of Donald Cameron privatized Nova Scotia Power to reduce the deficit with a one-time revenue hit. Two decades later, Stephen McNeil magnified the deficit inherited from the previous NDP government to support steamrolling the rights of public sector workers in order to reduce expenditures.

Early indications are that Houston may be trying something similar, already taking advantage of the deficit scare to restructure the Department of Natural Resources to water down wildlife protection. How much further Houston will go in this direction will be revealed in the fullness of time. But assessing those actions – and identifying possible underlying agendas – will benefit from a closer examination of some of the rhetoric surrounding spending levels and the sudden emergence of the “record deficit.”

On spending levels, is Nova Scotia, as Karen Oldfield would have it, “spending uncontrollably” on health care or overall? And how much concern should be attached to the Auditor General’s highlighting of the 43 percent increase in spending since 2021?

Health care spending deserves a separate analysis, but for a sense of total provincial government expenditures over time and how Nova Scotia compares with other provinces, an excellent source is Finance Canada’s annual  Fiscal Reference Tables. Using those tables and Statistics Canada’s population on July 1 for the appropriate years I calculated provincial expenditure per capita in all ten provinces and the rate of increase between 2021 and 2025. Details are in the table below, but the key takeaway is this. In 2024-25 Nova Scotia’s per capita expenditures were the third lowest per capita in the country, higher than only Ontario and Alberta. This represented a change from 2020-21 when Nova Scotia was the second lowest in expenditures per capita, just ahead of Ontario, but is consistent with 2013-14 when this province was also third lowest, with only Ontario and British Columbia spending less.

Table 1: Ranking Per capita spending by Province 2020-21 and 2024-25

ProvincePer-capita 2024-25 Per-capita 2020-21Percentage Increase
Newfoundland &Labrador$19,492$16,73316.49%
Prince Edward I.$18,292$14,62125.11%
Quebec$17,928$14,82520.93%
Manitoba $17,086$14,88914.76%
Saskatchewan$16,911$13,40026.20%
British Columbia$16,116$12,25231.54%
New Brunswick$16,021$12,57027.45%
Nova Scotia$15,954$11,93033.73%
Alberta$15,105$13,9288.46%
Ontario$14,076$11,16726.05%

Source: Finance Canada, Statistics Canada (my calculation)

With population growth factored in, the increase between 2020-21 and 2024-25 was not the Auditor General’s 43 percent, but a more modest 33.7 percent. As the Table shows, that was the largest per-capita increase of any province. So while there’s no question that provincial spending has increased at a high rate in Nova Scotia most other provinces have also increased spending significantly over the the past four years. 

No one would question the need for prudent spending or doubt that there are efficiencies to be found. But it is important to note that despite the recent increases Nova Scotia continues to be one of the lowest spending provinces in the country – lower than the other so-called “have-not” Provinces. And even with the surge in spending, the Province’s net debt to GDP ratio, measuring the Province’s ability to pay its bills, was only 33.4 percent at the end of the 2024-25 fiscal year. Although higher than New Brunswick and PEI, it was well below the 36.8 percent debt to GDP ratio recorded for 2020-21.  

 Revenue the problem

Since the deficit bogeyman burst on the scene last fall, most of the political focus has been on the spending side of the ledger, with less discussion about the revenue side. This does not come as a surprise given that only 15 months ago the three major parties ran on platforms calling for tax cuts of varying depth – this despite a warning in the September 2024 budget update of a “slight softening in the growth rate of provincial tax revenues.” 

The Liberals were the most profligate with their promised cuts – $542 million through a two percentage point reduction in the HST and over $400 million from income tax cuts. The New Democrats were more selective, proposing a gas tax holiday, targeted cuts to the sales tax and, like the other two parties, a 40 percent cut in the small business tax rate. 

The PCs were in the middle, promising a one point reduction in the HST and implementation of tax bracket indexing and increased personal tax credits promised in the 2024 budget. Houston also threw in abolition of tolls on HRM’s harbour bridges. Based on platform costing released during the election campaign it appears that foregone revenue from the bridges, combined with the tax changes that came into effect in 2025, represents a revenue hit of at least $400 million.

The PC platform did not try to hide the fact that if they were re-elected and kept their platform promises there would be deficits – $324 million in 2025-26, $336 million in 2026-27 and $56 million in 2027-28. What they can be accused of is underestimating the size of those deficits in their platform. In the 2025-26 budget tabled just three months after the election, the projected deficit for 2025-6 had grown to $698 million, up more than $300 million from the platform. It is now projected at $1.3 billion and rising to perhaps $1.4 billion – with another “big” deficit to be unveiled in this week’s budget for 2026-27. 

So if the deficit does come in at $1.4 billion this year, it’s reasonable to suggest that a good chunk of that – almost 30 percent – is the result of tax cuts and bridge toll removals. And that could be just the tip of the iceberg in terms of revenue losses. 

Before getting down into the weeds on this, it’s important to note that in recent years budgets tabled and voted on in the legislature have been mostly notional. The fact, noted above, that the PCs have overspent their budgets by about $5 billion over the past four years is evidence of that. That they were able, until this year, to overspend while continuing to run modest operating surpluses shows that their revenue estimates have also been wrong – albeit, and fortunately, underestimated. 

A much more reliable source of data on revenue and expenditure is Volume One of the Public Accounts, the basis of a recent review by the Auditor General. Spending and revenue amounts in the Public Accounts are made up of actual audited numbers, not the estimates presented in the budget or the forecasts contained in budget updates.The public accounts figures, reviewed by the AG, call into question the numbers the government has been using to make the case for cutting programs and reducing the size of the public service. 

The most recent budget update from the Finance minister was on December 18, 2025. It forecast the following for the current (2025-26) fiscal year:

  • Revenue $16.65 billion;
  • Expenditure $18.29 billion.

The public accounts for 2024-25 show the following:

  • Revenue $18.22 billion;
  • Expenditure $17.96 billion.

The Table below shows the year-over-year change between actual spending in 2024-25 and the latest forecast for 2025-26.

Table 2: Revenue and Expenditure estimates 2024-26


2024-2025 Public Accounts 2025-26 Budget UpdateIncrease/Decrease%
Revenue $18.22B$16.65B-8.62%
Expenditure$17.96B$18.29B1.84%

The column on the right shows the problem – expenditures forecast to increase only 1.84 percent this year while revenues decline by 8.62 percent this fiscal year. A revenue decline of that magnitude is likely unprecedented. Finance Canada’s fiscal reference tables for Nova Scotia going back to 1991 show that the largest drop – 2.70 percent – occurred between 2010-11 and 2011-12, during the hard luck NDP administration.  

Admittedly, we are comparing apples (the public accounts) with oranges (the budget update). But public accounts are based on actual numbers, while the budget updates are based on forecasts, which have been notoriously inaccurate in recent years. 

On the eve of a big-deficit budget, with people and programs at risk in what is shaping up as  a rush to reduce expenditures it would seem that a decline in revenues – caused at least in part by politically-motivated tax cuts – has got us to this place. It will be interesting to see the spin the budget applies in order to obfuscate all of this.

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