Revenue Plan

Mr. Speaker, the contribution of the oil industry to the provincial economy and treasury has changed dramatically over the past five years. The oil sector now contributes approximately 16 per cent to provincial GDP and about 18 per cent to provincial revenues. This compares to a contribution in 2002-03 of 7.8 per cent to GDP and 3 per cent to revenues.

In 2006-07, the province is expecting to generate royalties from oil production of $703 million and corporate income tax from companies operating in the offshore area of $224 million. This represents direct revenue from offshore oil of $927 million in this year alone. This forecast assumes the average price per barrel of oil will be $US57. Added to this is the benefit accruing to the people of the province from the Atlantic Accord arrangements which will contribute an additional $329 million in 2006-07.

As a benefit of our actions and successes of the past year, we are now in a position to announce that there are no new taxes and, with one exception, no tax rate increases in this year�s budget.

Our primary reason for implementing this solitary tax increase is not to raise new revenue, but to further discourage our people from smoking, particularly our province�s young people, whose spending decisions tend to be more price-sensitive. Effective a minute after midnight tonight, we will raise the tax rate by one cent per cigarette and by five cents per gram of fine-cut tobacco.

A critical element of a competitive economy is its taxation regime. This province has been forced to impose a tax burden on its residents that is high in relation to other jurisdictions. Over the coming fiscal year, our government will undertake a review of the province�s overall tax structure. The government will also give consideration to whether it will mirror federal changes to the dividend tax credit, once details are released by the federal government. This will be done in conjunction with a review of the potential impacts of income trusts on corporate income tax.

Expenditure Plan

Mr. Speaker, we are delighted that, as a result of hard work over the past two years, we are no longer in the position of requiring significant additional revenues from Newfoundlanders and Labradorians. But having made significant fiscal progress and having secured significant new revenues through the Atlantic Accord and other initiatives, we would be fooling ourselves and undermining our future if we were to lose sight now of the purpose for which we sought fiscal stability in the first place. Newfoundland and Labrador continues to carry a heavy burden of net debt � in total, about $12 billion � more than $23,000 for every person in our province, from the oldest to the very youngest. Servicing that debt each year draws hundreds of millions of dollars away from the resources we might otherwise use to strengthen our social programs and grow our economy. The government is obligated to cover liabilities in various pension plans which previous administrations over the years raided to cover their other expenses. We are the future generations that have inherited the consequences of those decisions. We will not burden our grandchildren with the consequences of our own. But we also recognize that there is more to growing an economy than simply reducing the debt. Newfoundland and Labrador also has a significant infrastructure deficit caused by years of neglect of our roads, ferries, hospitals, schools and other public buildings. Reliable infrastructure is essential to attract investment, capitalize on opportunity and stimulate sustainable economic activity. No less essential for economic sustainability are strategic initiatives that will harness our resources, diversify our economy, educate our people and reduce the barriers to growth and success. It is only by striking an optimal balance and continuing to lay the foundation for economic growth that we will move beyond the downward spirals of the past and fuel the momentum that is advancing us toward a sustainable future.

So with our goal of a strong and self-reliant Newfoundland and Labrador clearly in view, we are moving ahead this year to strike the perfect balance that marries fiscal stability with strategic economic investment. Firstly, we are investing responsibly in reducing our exposure to debt by applying a significant portion of the Atlantic Accord revenue against our pension plan liabilities � liabilities that we would otherwise have to borrow significantly to cover when they come due. This investment will actually free up money we would otherwise need to allocate toward debt servicing. To reinforce our commitment to fiscal prudence, our government will also move to bring balanced budget legislation forward for consideration by this House before the end of this mandate. The days of passing a debt burden on to our children and grandchildren must end. Secondly, we will invest strategically in a bold range of measures to strengthen our education system, unleash an innovation revolution, bolster our public infrastructure, diversify our rural economies, empower Labrador, invigorate our cultural industries, reduce poverty, secure our communities and enhance our public health care system for the long-term benefit of all Newfoundlanders and Labradorians. This is the perfect balance. These are the right choices to sustain momentum for growth and prosperity in Newfoundland and Labrador.

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