Tories’ pre-election spending frenzy could derail NDP budget vow

Opinion

Hey there, time traveller!
This article was published 10/08/2023 (764 days ago), so information in it may no longer be current.

NDP Leader Wab Kinew promised this week to keep the Stefanson government’s tax cuts, invest more money in front-line services and balance the books within four years, should his party win the Oct. 3 provincial election.

It’s a doable pledge, depending on how much the NDP promises to spend.

Under current economic projections, the Manitoba government is predicting this year’s $363 million provincial deficit will shrink to $53 million by 2026-27. By the spring of 2027 — six months before the next scheduled election — whichever party is in government should be able to announce a balanced budget for the 2027-28 fiscal year.

That’s a long time from now. Anything can happen over that period (including a recession, another pandemic or, hopefully, an economic boom). That’s why Manitoba Finance also provides projections if the province’s GDP falls short of expectations. The department’s worst-case-scenario shows a deficit of $853 million in 2026-27, if the economy tanks, and a $595 million surplus if it performs better than expected.

The middle-of-the-road projection, calculated based on the average of nine private-sector economic forecasts, is a reasonable guidepost, at least for planning purposes. Most political parties will use it as a basis for their fully costed spending plans, which will likely be released next month.

The problem for the NDP is spending projections in Manitoba Finance’s fiscal outlook are limited. The big spending increases already occurred in this year’s Tory budget.

After seven years of austerity, the Progressive Conservative government jacked up spending by a staggering 9.9 per cent this year. Some of that reflects higher costs related to inflation, but most of it was a one-time spending binge the Tories hope will turn their electoral fortunes around.

Manitoba Finance’s deficit projections are based on average government spending increases of just under 2.9 per cent a year between now and 2026-27. That’s enough to maintain current expenditure levels with modest top-ups, but little more. There’s no room in those projections for significant increases in departmental spending. That means if the NDP plans to substantially increase funding for health care, education or other front-line services, they will have to show voters where that money will come from. If not from cancelling some of the Tories’ tax cuts, then where?

Kinew said Wednesday the NDP will announce “savings” and “efficiencies” in the coming weeks that can be redirected to front-line services. That’s a popular line used by political parties in election campaigns. However, it’s rarely enough to free up the kind of money (usually measured in the tens of millions or hundreds of millions) required to substantially increase spending on front-line services.

The Tories are in the same boat. They haven’t said how they plan to finance the spending spree they announced in the weeks leading up to the pre-election blackout period that kicked in last week. The Stefanson government unveiled hundreds of millions in new spending commitments over the summer that weren’t part of the 2023 budget.

The only reason the PC government was able to spend as much as it did in the 2023 budget, and cut taxes at the same time, is because of massive transfer payments from the federal government.

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The only reason the PC government was able to spend as much as it did in the 2023 budget, and cut taxes at the same time, is because of massive transfer payments from the federal government. The Tories received more than $1 billion more in federal transfers this year compared with last year ($7.3 billion, up from $6.25 billion). They used those funds, in part (and borrowed more), to cut income taxes and provide Manitobans with education property-tax rebates.

Future generations will have to repay that money, with interest, so today’s Manitobans get a tax break. It’s a continuation of former premier Brian Pallister’s misguided policy of borrowing money to cut taxes while underfunding front-line services. It’s fiscally irresponsible and it’s bad for the economy.

The New Democrats are keeping the tax cuts and the rebate cheques because they don’t want to give the Tories a wedge issue in the upcoming election. It’s a political decision that neutralizes the debate around taxes and shifts the focus to other areas, such as health care, education and chronic homelessness (which the NDP promised on Wednesday to eliminate in eight years).

The responsible thing to do would be to cancel the Tories’ education property-tax rebate cheques (which disproportionately benefit higher-income Manitobans) and redirect that money to front-line services, including public schools, while balancing the books and paying down debt. Unfortunately, politics has trumped sensible policy-making, for both major political parties.

tom.brodbeck@freepress.mb.ca

Tom Brodbeck
Columnist

Tom Brodbeck is an award-winning author and columnist with over 30 years experience in print media. He joined the Free Press in 2019. Born and raised in Montreal, Tom graduated from the University of Manitoba in 1993 with a Bachelor of Arts degree in economics and commerce. Read more about Tom.

Tom provides commentary and analysis on political and related issues at the municipal, provincial and federal level. His columns are built on research and coverage of local events. The Free Press’s editing team reviews Tom’s columns before they are posted online or published in print – part of the Free Press’s tradition, since 1872, of producing reliable independent journalism. Read more about Free Press’s history and mandate, and learn how our newsroom operates.