Fiscal outlook for Newfoundland and Labrador dire, CTF says no to federal bailouts

The federal government remains lackadaisical in efforts to reduce spending in Newfoundland and Labrador, despite the latter’s dire fiscal outlook.

Prime Minister Justin Trudeau announced today that the Trudeau Liberals will spend $2 billion bailing out Newfoundland and Labrador’s Muskrat Falls hydroelectric project. A further $3.2 billion will be transferred to the government of Newfoundland and Labrador through proceeds from the federal government’s stake in the Hibernia offshore project.

"[These bailouts] won’t solve all of Newfoundland and Labrador’s problems, so it’s imperative for the province to find savings so we don’t see a second or a third bailout," said Franco Terrazzano, Federal Director of the Canadian Taxpayers Federation (CTF). Newfoundland and Labrador’s own recent economic recovery report opposed a federal bailout. "A federal bailout is not the answer," read the report. "A bailout, and all that it implies, will have a negative long-term impact."

The CTF is warning that the bailout for Newfoundland and Labrador sets a bad precedent for other provinces that may be looking for a taxpayer bailout. With $400 billion of debt, Ontario is the most indebted subnational government in the world.

Newfoundland and Labrador have the highest per-person program spending of all provinces. If the province brought its spending in line with other provinces, its taxpayers would save more than $1 billion annually.

"This means all Canadian taxpayers are now responsible for the bad decisions made by big-spending politicians in Newfoundland and Labrador," said Terrazzano. "Not only is this bailout a huge cost for Canadian taxpayers, but there aren’t any strings attached to force the province to save money," adding: "We need provincial balanced budget legislation to make sure all Canadians are not on the hook for every provincial politician’s pipe dreams."

The federal government projected another $2.7 trillion in debt before balancing the budget in 2070. This is in addition to the current $1 trillion in existing federal debt. Interest charges will cost taxpayers about $3.8 trillion by 2070. The federal government won’t return to a balanced budget until 2070 under the status quo, according to supplementary data released by the Parliamentary Budget Officer in its most recent Fiscal Sustainability Report.

CTF said Finance Minister Chrystia Freeland has failed to present a long-term plan to balance or cut spending, stating the federal government instead focused on ensuring federal stimulus dollars aid an economic recovery.