HALIFAX, N.S. – Nova Scotia’s newly minted NDP government confirmed Monday it will amend the province’s balanced budget law to allow for a growing deficit, a move that prompted accusations of gross hypocrisy.
The former Conservative government, soundly defeated by the NDP in the June 9 election, tried to introduce amendments when it presented a budget a month earlier. But the NDP joined the Liberals to reject the bid, triggering the election race.
At the time, Dexter accused the Tories of trying to hide a deficit by engineering a complex legislative manoeuvre that would have suspended legally required debt payments to allow the province to remain in the black. He said the NDP would have agreed to the changes had the government been more open about what it was doing.
On Monday, rookie Finance Minister Graham Steele said he was left with no choice but to change the Provincial Finance Act.
He said the latest numbers from his department show the province’s 2009-2010 deficit stood at a whopping $590 million – a far cry from the small surplus the Tories had predicted.
“The coming budget will show a truer picture of the province’s finances than was presented on May 4,” he said in a speech to the Halifax Chamber of Commerce.
“Unfortunately, it’s not a pretty picture.”
Steele later tried to draw a distinction between the NDP’s proposed amendments and what the Tories had tried to do.
“What I can say to you today is that the amendments we will introduce will cover the current fiscal year – this is the situation that has been handed to us, the legacy we’ve been left,” he said after the speech.
“We really had very little choice in the matter … the decisions about what else to do about the Provincial Finance Act will be known to you when that act is tabled” in about three weeks.
Liberal Leader Stephen McNeil accused the New Democrats of saying one thing, then doing another.
“The hypocrisy that’s written all over this is incredible,” McNeil said in an interview.
“Here is a government doing the exact same thing they defeated the previous government on.”
As well, McNeil said the Dexter government was shuffling expenses around to inflate the deficit racked up by the previous government in a bid to make the NDP look good.
The Liberal leader noted that $340 million of the $590-million deficit is actually money set aside for future university funding.
“They just did the same thing with university spending that they criticized the previous government for doing … they did it because they’re ballooning the deficit to make it look like it was the Tories fault.”
By moving the cost forward, McNeil said, the NDP is putting itself in a better position to balance the books next spring without raising taxes or cutting spending – a key promise Dexter made during the campaign.
Steele said the Conservatives had set aside extra money in 2008-2009 to avoid spending any money on universities in 2009-2010, but the NDP decided that was not prudent accounting.
“The previous government had had no university funding … in this year’s budget, which is not sensible,” he said.
As well, he noted that government revenue collected since May was $125 million less than expected, mainly because of shrinking returns from natural gas royalties.
Conservative member Chris d’Entremont said the key question is: how will the NDP balance the books next year?
“They’re going to have to cut, and they’re going to have to cut deep,” he said, suggesting that health care spending will go under the knife. “They’re going to have to come clear with what they are cutting.”
The legislature will open for a new session Thursday with a speech from the throne, followed by the tabling of a budget next week, making Nova Scotia the last province in Canada to release a financial plan in 2009.
Steele said the budget will be “substantially the same” as the one introduced by the Tories four months ago, mainly because most departments are already halfway through their spending cycle.
Any changes to the budget now would only invite instability, he said.
Last Thursday, when Steele presented the public accounts for 2008-09, the document showed the province carried a $86.2-million deficit under the terms of the Provincial Finance Act.
The act was introduced to ensure the government adhered to a strict regime of balanced budgets and debt reduction.
Last month, the authors of an independent financial review suggested Steele should “revisit” the act, owing to the onerous financial pressures that the province is facing.
With the province’s revenue stream declining in the midst of the global economic meltdown, the Deloitte & Touche report concluded the province faces “the single largest financial management challenge … for the decade ahead.”
Bill Hogg, a co-author of the review and an associate with Deloitte in Halifax, said other provinces with balanced budget laws are facing similar challenges.
The report said the province should “create a revised policy approach to balanced budgets and debt management” – a recommendation that provided some political cover for the new government.
