HST hike and cuts to civil service prominent in provincial budget
On February 2, the provincial government released its 2016-17 budget. In an address to the legislative assembly, Finance Minister Roger Melanson outlined the implications of the new budget in terms of savings, revenue, and the protection of healthcare and education. Facing a disparate economic situation, the province is attempting to balance the budget.
Prior to releasing the budget, the government had outlined six main choices of major financial significance, said Melanson, including downsizing government bureaucracy, deep cuts to education and health care, highway tolls, and adjustments to corporate taxes and HST.
Post-secondary education tuition increases will be capped at 2 per cent, this limitation does not apply to out-of-province or international students. The freeze on operating grants will remain for the time being.
“However, the Education and New Economy Fund will make strategic investments in projects that will help ensure the best education system for New Brunswickers,” said Melanson. “The Education and New Economy Fund contains funding for a new tuition assistance program for those with the greatest financial need and for other targeted individuals.” Details of this program will be released after further consultation.
According to Melanson, the department of health escaped major cuts but will see changes in its future.
“Simply directing more money at our health-care challenges, without changing our approach, will not change our results,” said Melanson. “Opportunities exist to redesign our health-care system to have better health outcomes in the province.” Melanson said the province will invest in “an enhanced community-based, primary health-care service” with an increased emphasis placed on preventative health.
Changes to taxes include an increase in HST from 13 per cent to 15, effective July 1, 2016. “When we completed our review of the books, it was clear that there would be no way to lay the foundation we need without an HST increase or significant cuts to education and health care,” said Melanson. He said it was clear that residents of N.B. did not want to see cuts to education or health care.
A return on this HST will be set up for lower-income households, with household incomes of less than $35,000 receiving the full credit. Melanson’s budget said the credit will return approximately $100 million to residents of New Brunswick.
Additionally, corporate income tax will increase from 12 to 14 per cent, and the tobacco tax will also see an increase.
Highway tolls will not be implemented at this point, said Melanson, as no consensus could be reached regarding the location or timing of their installation. Leading to the budget release, there had been concern surrounding the possibility of a toll between the N.B-N.S. border.
Changes in the bureaucracy of the N.B. government will also largely impact the budget. One thousand three hundred civil service jobs are set to be cut within the next five years, the number of government departments will decrease, and senior bureaucrat positions will be cut by 30 per cent. This is expected to find the government $46.4 million.
Privatization in the department of transportation and infrastructure is expected to help decrease unnecessary government expenditures. Visitor information centres in Cape Jourimain and Campobello are being closed and the Gagetown ferry will be discontinued.
Other changes include consolidating non-medical laboratory services, merging government call centres, consolidating 13 land registry offices into one, and performing an organizational review on court services.
“Today’s budget establishes the foundation for our future – a future that will lead to sustainable budgets that support the necessary investments in jobs, education and health care,” said Melanson.
Even with these changes, a $347-million deficit is expected for 2016-17 and a balanced budget is not forecast until 2020-21.