COMMENTARY: P.E.I. government should follow New Brunswick’s lead on fiscal policy
Alex Whalen and Jake Fuss are analysts on the Fraser Institute.
By Alex Whalen and Jake Fuss
Dennis King’s administration not too long ago introduced some good fiscal information. Due primarily to elevated income because the financial system rebounds from the pandemic, Prince Edward Island will run an $86-million surplus in fiscal 12 months 2021/22, not the beforehand forecasted $112-million deficit.
Nevertheless, long-term sustainability stays a priority. Regardless of the excess, the province recorded a slight improve in internet debt final 12 months (as a result of the province in the end spent extra money than it obtained attributable to capital spending) and the its trajectory on debt accumulation is unsustainable, a priority famous by the auditor normal.
To proper the fiscal ship, the King authorities should restrain spending and persistently stability the funds. For an instance of a strong fiscal framework, look no additional than New Brunswick.
In response to a brand new research revealed by the Fraser Institute, New Brunswick Premier Blaine Higgs was the top-performing premier in Canada on fiscal points. The research ranked premiers in all 10 provinces on their relative efficiency on three core parts of fiscal coverage — authorities spending, taxes, and deficits and debt.
What has Higgs executed proper?
Merely put, he’s demonstrated essentially the most spending restraint of any premier and was the one premier to maintain the tempo of development in authorities spending (excluding debt curiosity prices) under the tempo of his province’s financial development throughout his tenure (2018 to current).
In response to a brand new research revealed by the Fraser Institute, New Brunswick Premier Blaine Higgs was the top-performing premier in Canada on fiscal points.
In distinction, King ranked eighth worst in Canada on spending, forward of solely Saskatchewan’s Scott Moe and François Legault of Quebec. Throughout King’s tenure, authorities spending (once more, excluding curiosity prices) has grown, on common, by greater than 9 per cent yearly.
In the meantime, in New Brunswick, due to spending restraint, the province has run constant funds surpluses — that’s, when authorities spends lower than what it collects in income in a single fiscal 12 months. New Brunswick managed to even run surpluses all through the pandemic, a novel feat in Canada as all different provinces selected to borrow cash and plunge deeper into debt.
Consequently, New Brunswick’s debt as a share of the financial system declined by the best share of any province between 2018 and 2022. Clearly, spending restraint is paying off. With ongoing surpluses and declining debt, New Brunswick now has the fiscal room to deal with different urgent challenges together with the province’s excessive tax charges.
In P.E.I., whereas Premier King deserves credit score for balancing the funds in two of his three years in workplace, substantial spending will increase mixed with projected deficits and debt accumulation with make tax reform —one thing P.E.I. additionally desperately wants — tougher.
The longer term financial success of provinces is in the end linked to accountable fiscal administration. Prudent fiscal coverage entails spending restraint, being intentional about balancing budgets and avoiding substantial tax burdens that dampen financial exercise. Laying a strong basis of fiscal coverage offers the financial system the perfect probability to develop and folks to prosper.
P.E.I.’s balanced funds in 2021-22 is nice information. However the King authorities ought to restrain spending and persistently stability budgets to keep away from saddling future generations of Islanders with a large debt burden.
