Newfoundland and Labrador is reporting a more positive fiscal picture in a budget that stays the course and does not follow through on previously planned spending cuts.
“A budget is about choice,” Finance Minister Siobhan Coady said in her budget speech Thursday afternoon in the St. John’s House of Assembly.
“Your government has chosen to support you, to invest in health, education, the economy.”
This choice includes some measures to help residents struggling with inflation and cost of living pressures, as well as new tax credits to stimulate targeted industries.
The provincial deficit for the just-ended 2021-22 fiscal year came in at $400 million, less than half of the initial projections.
For 2022-2023, the deficit is expected to decrease further, to $351 million.
These numbers mark a sharp turnaround from the terrible early days of the pandemic, when the COVID-fueled fiscal chaos ripped a huge hole in the balance sheet.
The 2020-21 deficit was nearly $1.5 billion.
The province reiterated that it is now on track to balance the books by 2026.
Assistance to owners, drivers
The budget includes some new relief measures to, Coady says, “put money back in people’s pockets.”
She says there is no provincial fee increase or tax increase.
Retail sales tax on home insurance will be eliminated for one year.
Registration fees for passenger cars, light trucks and taxis will be reduced by 50%, also for one year. Registration for a car will drop from $180 to $90.
There are also new tax credits “to encourage business investment and grow our economy,” Coady said.
These include a new green technology tax credit, a manufacturing and processing investment tax credit to help sectors like fishing, agriculture and forestry, and an tax for film and video production.
The theme of the budget is “change is in the air”.
But this change is less dramatic than previous announcements had suggested.
Less than a year ago, a high-profile report commissioned by Prime Minister Andrew Furey recommended deep cuts in public spending.
This does not happen.
Coady told reporters that some of the advice from initiatives like the Greene report and the health accord are “carrying through” to recent budgets.
In a significant move, the government plans to merge the province’s four health authorities into one.
Spending continues at record highs
Less than a year ago, initial projections showed the province planned to cut spending significantly in 2022-23.
At the time, officials said up to half a billion dollars of the planned cut was structural.
Instead, spending is on the rise again.
Last year, the province forecast spending would fall from more than $9.3 billion in 2021-22 to less than $8.5 billion in 2022-23.
Actual spending for last year, 2021-22, fell below $9.1 billion.
But now the province is planning spending of more than $9.4 billion for the coming year.
Coady pointed out that hundreds of millions of “flow-through funds” are included in that total, tied to federally funded programs and contributions Ottawa has made to the province.
She told reporters there were also “strategic investments” in health care.
Government revenues are expected to increase by more than $9 billion this year, or $400 million more than in 2021-22.
Officials said higher iron ore prices lead to higher corporate income tax revenues, as well as higher expected sales tax and income tax revenues. , as reasons for this.
We have weathered this storm. We may have been whipped by it, but the day dawned with clearer skies and calmer seas. The fog lifts.– Siobhan Coady
Oil royalties are expected to fall next year from over $1.1 billion to $866 million.
If the budget deficit projection holds, 2022-23 would be the best provincial fiscal performance in nearly a decade. While Newfoundland and Labrador posted a surplus in 2019, it was thanks to the accounting treatment of billions of dollars in federal payments under the Atlantic Accord that span years and decades to come. .
In his first pandemic-delayed budget 18 months ago, Coady said, “Our fiscal situation is a blinding storm; we are in the middle of a storm.
Coady again turned to a nautical theme, as she outlined the plan for 2022-23.
“We have weathered this storm,” the minister told the House of Assembly. “We may have been whipped by it, but the day has dawned with clearer skies and calmer seas. The fog is lifting.”