Nova Scotia is in economic and demographic decline.
At the root of the problem are the public finances. Our taxes are too high. We can’t control our spending. Our present level of public services is unsustainable. Our provincial governments have been running serial deficits and have grown the public debt to a projected $15 billion. Interest on that debt approaches $1 billion annually.
It did not happen overnight. Nova Scotia has been a have-not province for decades, the recipient of grants from the federal treasury that now is almost $3 billion annually. This pays for what we cannot pay for ourselves — health care, education, social services.
We can rake over the history and there are lessons. The reality is that in a competitive world, Nova Scotia is not an attractive place to do business or to find a job.
We are overtaxed and over-regulated. Our political parties have failed us. They have contributed little in the way of public policy and regularly deliver mediocre candidates for public office.
Governments have failed us. There have been too many inept or timid MLAs and cabinet ministers. Some lacked ability, some the courage of their convictions. The “vision thing” has been lacking for a long time, but successive governments have not even been good stewards of the public purse.
The reason we are in this fix is failure of leadership. The answer to these problems is also leadership.
A notion of a unity government has been floated as if this will provide the answer. It is exactly the wrong approach. Such an approach entrenches mediocrity and reduces transparency.
We have a long-established system of democracy that is messy, but it works. We need a strong government with a positive articulated agenda. We need a strong opposition that will challenge government in a proactive and constructive fashion. This will be no bandwagon. There will be difficult decisions to take. It will hurt. Many people will be unhappy and upset. There will be more marches on Province House.
What must government do now?
We must reduce personal and business income taxes in Nova Scotia as well as sales taxes to well below the national average. This is essential in order to become competitive. Reducing taxes also creates jobs. If our youth cannot stay, then neither will immigrants come.
To reduce taxes, we must reduce spending. When spending is reduced, deficits are eliminated. When deficits are eliminated and public debt is managed, taxation can be reduced. Then government has the flexibility to act. The province can invest in targeted and essential infrastructure, research and development.
The provincial government needs to ensure that municipal taxation is restrained.
This will mean the encouragement of municipal amalgamation and the discouragement of municipal government extending its reach into areas that do not involve the delivery of essential municipal services. This requires oversight and legislation.
In order to gain control of spending, the provincial government needs to address in a comprehensive fashion the cost of public sector employees. Temporary restraint measures, such as wage or hiring freezes are only a stopgap measure.
The size of the public sector needs to be rationalized. Public-sector wage increases need to be constrained, not only within the limit of inflation but also within the limits of economic growth.
Ultimately, public-sector compensation should be tied to private-sector compensation. There is no logical reason for the taxpayers, as employer, to pay compensation to public sector employees beyond what the private sector taxpayer earns.
Public sector pensions require urgent address. In 2011, the provincial budget took a charge of $536 million to fund the underfunded public sector pension plan. This charge was largely responsible for the huge deficit of that year. This and previous similar periodic bailouts (costing hundreds of millions of dollars) to the public service and teacher pension plans are major contributors to our looming $15-billion accumulated debt.
The way government has permitted these plans to be funded has been grossly unfair to the general taxpayer. These unsustainable public sector defined benefit pensions must be abolished and replaced with accountable, self-funded, defined contribution plans which are common in the private sector.
We do not need to wait or consult for 10 years. These tax and spending reforms are really “Now or Never.”