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Budget Speech

Our Challenge

Mr. Speaker, the people of the province have always known that our rich natural and human resources can be a magnet for economic opportunity, but they have also felt something was not right. They knew, intuitively, that government’s financial course was unsustainable and that this was a huge hindrance to economic growth. Yet, the previous government was reassuring them that all was well.

Today we know differently.

In November, the new government commissioned an independent assessment of the province’s finances by the chartered accounting firm of PricewaterhouseCoopers. Their report, which was released to the people of the province in January, revealed that the fiscal outlook for the next four years - 2004-05 to 2007-08 - was much worse than anyone outside government expected or imagined.

The report showed that we faced an average cash deficit over the next four years of more than $660 million a year and an average accrual deficit of almost $1.1 billion a year. By 2007‑08, the cash deficit would exceed $700 million a year with no relief in sight.

Let me put this in historical context. The cash deficit exceeded $300 million only twice in our history, and has never exceeded $350 million. For each of the next four years, we were looking at cash deficits twice the size of the biggest deficit in our history.

Left unchecked, the net debt of the province would reach $15.8 billion by 2007-08. When compared to our $6 billion debt in 1992-93, this would represent an increase in net debt of 163 per cent. By 2007-08, the higher debt load would cost the province an additional $150 million in interest payments every year.

Mr. Speaker, the government finds itself in this position largely for four reasons:

One, a long-term pattern of consistently spending more than the government could afford;

Two, a reliance on one-time money to fund ongoing programs;

Three, spiraling health costs that are growing at more than double the rate of growth in government revenues; and

Four, unilateral changes in federal transfers, which reduced the federal government’s share of the cost of health, education, social services and equalization.

Revenue vs Health Expenditure Growth

 

Total Health and Social Spending vs Federal Cash Health and Social Transfers

PricewaterhouseCoopers, using the same figures the previous government had in their possession before they left office, estimated a cash deficit of $602 million and an accrual deficit of $989 million for the coming year.

Mr. Speaker, that is what we have inherited.

It represents an enormous challenge, but we are absolutely committed to getting our financial house in order.

The year ahead, 2004-05, is the first year of our four-year plan. The actions we take in this budget will reduce the deficit projected in the PricewaterhouseCoopers report by 40 per cent, from $602 million to $362 million. The accrual deficit will fall from $989 million to $840 million.

Despite our best efforts, the cash deficit for 2004-05 will still be the largest in the history of the province.

In the following years, the full impact of the government’s restructuring strategy and program renewal will kick in, and we will move, progressively, to a zero cash deficit by 2007-08.


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