Weighing the “fiscal fitness” of New Brunswick

For more details

Restoring Canada's fiscal fitness

Tools to reform government spending by 2020

Of further interest:

• News Release: NB at top of list for unsustainable spenders

While Canada may have weathered the recent economic downturn better than most, we did not escape without our fair share of scrapes and bruises. In the race to inject billions of taxpayer dollars to "stimulate" the economy, the federal government sank further and further into debt.

Although Canada as a whole is middle of the road on the scale of total government spending (38.4 per cent of GDP) compared to the rest of the world, the provinces and territories are all over the map.

New Brunswick is fiscally the worst in Canada - tied for top spot with Ontario. Most other provinces can cap spending growth to match inflation and they can be back to balance by 2011-12.  However, New Brunswick would only make it back to black by 2020 and still carry a mounting debt. New Brunswick must freeze its spending or find itself in financial ruin.

To illustrate the fiscal challenges being faced by governments, we have developed a long-term model of federal and provincial finances projecting to 2020. The good news is that many governments are appearing to put the brakes to spending growth, but the margin of error is thin-any backsliding could push the debt balance in the wrong direction. Even tying government spending to the rate of growth in the economy would push today's $1 trillion in government debt to $1.8 trillion in the next 10 years.

While balanced budgets should be the goal of New Brunswick, they can easily mask unsustainable spending patterns as documented in this report. Although no government in Canada has legislated government spending limits, evidence from south of the border with Tax and Expenditure Limitations is positive and something all governments here should look at adopting.

We recommend that New Brunswick embrace the following principles to demonstrate good "fiscal fitness":

• Implement legislation that focuses on controlling expenditures, not just balancing budgets;
• Be specific enough to ensure the spirit of the legislation is followed without creating loopholes; and
• Ensure legislation focuses on long-term sustainability of government finances.

For more information please contact us at 506-855-2526 or msnb@cfib.ca.