Grey areas blur snapshot of fiscal picture

Hey there, time traveller!
This article was published 13/12/2023 (674 days ago), so information in it may no longer be current.

Fiscal blueprint or fiscal card trick?

On Wednesday, Manitoba Premier Wab Kinew and Finance Minister Adrien Sala provided a plan on how to they would pay for a handful of priority campaign promises without adding to what the NDP claims is a $1.6-billion deficit left by the former Progressive Conservative government.

In an exceedingly tidy plan, Kinew and Sala outlined how they found $123 million in efficiencies to help pay for $123 million in net new spending on health care, homelessness and — the big one — a gas tax holiday that will cost the province more than $82 million in revenue from Jan. 1 to March 31, 2024 (end of the fiscal year).

The efficiencies were plausible: cancellation of unneeded expenditures for personal protective equipment; disbanding of a costly diagnostic and surgical recovery task force; and elimination of a planned expenditure for a pandemic command centre that was never created.

However, that does not mean there aren’t any questions about the fiscal picture being painted by the NDP.

The now-Opposition Tories continue to argue Kinew’s allegations of a $1.6-billion deficit is a political fiction.

Pre-election, the Tories had posted a deficit of $363 million. Is it even possible to inflate the deficit that much in just a few months without resorting to political mischief?

The Tories believe its impossible and they should know: following the change of government triggered by the 2016 election, the Tories authored a whopper of fiscal fiction.

Just weeks after the April 2016 victory, the Tories issued a fiscal update that pegged the 2015-16 deficit at just over $1 billion, significantly higher than the $772 million claimed pre-election by the NDP.

Then, in late May, that billion-dollar deficit was used as the baseline for the PC government’s first budget for 2016-17.

Unfortunately for the Tories, the public accounts for 2015-16 were released a few months later (September 2016), showing the previous government had left a $846-million deficit — higher than the amount the NDP had claimed but significantly lower than the $1.011 billion the Tories had asserted.

Can anyone say definitively the new NDP government is not doing the very same thing? No, not at this point.

Annual budgets, fiscal updates and quarterly reports are not reviewed by the auditor general. All of the AG’s due diligence goes into the public accounts, which typically arrive six months after the end of a fiscal year.

That means the Kinew government won’t have to face its day of fiscal reckoning for another 10 months. And a day of reckoning it will be; Kinew and Sala have been definitive their $1.6-billion figure is fair and factual.

Kinew repeated a line he uses quite often: when facing a fiscal hole, the first job of government is to stop digging. That was the underlying principle in the efforts to find $123 million in savings to pay for $123 million in net new expenditures.

The premier also said, given economic uncertainty (consumers are expected to spend considerably less this holiday season), there is every reason to believe the situation could get worse before the end of the current fiscal year.

Or perhaps it could get much better.

The NDP does have some advantages when it comes to both defending the revised deficit number it has posted and creating a credible fiscal plan in the next provincial budget.

First, Kinew only needs to get through the next three months or so and close off the books for 2023-24. As long as nothing economically seismic happens during that time, his deficit forecast should hold true.

The other advantage working for the NDP is the glimmer of hope the global economy — crippled by high inflation and high interest rates — may be readying for a rebound. Inflation has stabilized and central banks seem to have lost their appetite for hiking interests rates. For now, at least.

That means if the NDP can stabilize the treasury over the next year, it is likely to be moving forward into much better economic conditions, with much more robust revenues. Again, the former PC government provides a case in point.

The Brian Pallister-led Tories, through no fault of their own, took over from the NDP right before Manitoba starting enjoying solid economic growth and receiving historically high annual increases in federal transfer payments.

In 2018-19 fiscal year, the Pallister government received $300 million more in transfer payments than the year before. That increase was nearly four times the total increase in transfer payments received by the former NDP government from 2012 to 2016 (the last four years it was in power).

It could be in reading the economic tea leaves, Kinew believes he has taken over at an inflection point where inflation, waning consumer confidence and economic growth will all improve. Not because of anything the NDP will have done, but certainly to its benefit.

When you come right down to it, that is the secret to governing.

Although being good is important, being lucky is essential.

dan.lett@winnipegfreepress.com