Atlantic provinces’s approach to inflation questioned by economist

As rising inflation erodes the purchasing powers of households around the country, provincial governments in Atlantic Canada have rolled out a variety of different programs in response.

In April, the national year-over-year inflation rate hit 6.8 per cent after hitting 6.7 per cent in March. Each of the four Atlantic provinces has announced some form of lump sum payment to low income households, while others have looked to cut taxes or raise wages.

New Brunswick became the last Atlantic province to roll out what it’s calling a “food and fuel” program. The $20 million program is providing one-time payments to social assistance recipients in June. Individuals will get $225 while families will get $450. A $1 million donation was also made to the province’s food bank system.

Premier Blaine Higgs hasn’t ruled out the possibility of future payments, but says there is no plan to go beyond the June social assistance boost at this point. The premier said the province wanted to ensure that the relief program was targeted to those who need it the most, without heavily impacting the province’s fiscal standing.

“It’s kind of trying to balance out what we can do … it’s trying to provide that level of comfort of ‘OK there is some additional assistance here,'” Higgs told reporters on June 3.

Across the Northumberland Strait in Prince Edward Island, Premier Dennis King announced a similar program in March, where people making under $50,000 a year will get a one-time payment in July. Those making under $35,000 per year will get $150, while those making between $35,000 and $50,000 will get $100.

Nova Scotia announced a $13 million inflation relief program in March as well, including extra funding for food banks and a one-time payment of $150 to people on income assistance and to those eligible to receive the province’s heating assistance rebate.

But Premier Tim Houston has been under pressure to do more with Finance Minister Allan MacMaster promising two weeks ago that more would be done to help low income Nova Scotians.

Speaking to reporters on Thursday, Houston said the province is looking at options, but he doesn’t want to jeopardize delivery of services with March’s budget already projecting a $500 million deficit.

“Taking a short-term measure that could potentially have long-term ramifications that are negative on the ability to deliver services in health care, in education, in addictions support,” Houston said.

“We have to make sure we have a long term view here.”

The only province doing something different is Newfoundland and Labrador, where the provincial gas tax is being cut by 7 cents until the end of the year. The province also announced a one-time payment for social assistance recipients in this year’s budget. Payments of $200 for single people and $400 for families went out in April.

According to Herb Emery, the Vaughn Chair in Regional Economics at the University of New Brunswick, these targeted relief measures are the right response, though he believes they need to be more generous.

“The frustrating part is that the vulnerable have been left exposed by a housing boom that they had no ability to join in on,” Emery said.

“The correct response, if you’re a government that can’t fix the root cause of the lack of affordability and the erosion of purchasing power, is it’s your job to relieve the households that are suffering the most.”

Beyond cutting one-time cheques, Emery says governments should consider indexing social assistance, rent subsidies and minimum wage increases to the Consumer Price Index in order to ensure the purchasing power of low income people is somewhat protected.

“We’re now seeing why, when we move from a stable price environment to an inflationary one, why that’s so important to do,” he said.

“We already do that for seniors, we do that for people who are in collective agreements.”

While Newfoundland and Labrador is the only province in the region to reduce the provincial gas tax, the move has been called for in New Brunswick by the official opposition. Alberta announced it would suspend provincial gas tax indefinitely earlier this year and reducing the fuel tax in Ontario was part of Premier Doug Ford’s election campaign.

But Emery said that strategy isn’t particularly effective.

“It tends to help people who use the most fuel (and) need it the least,” he said.

Ultimately, Emery said provincial governments in the region are ill equipped to address the inflation crisis, which he believes requires a more fulsome approach.

“There’s no discussion in any of these provinces about a rational approach to alleviating poverty, a rational approach to supporting vulnerable households. They’re still doing it as reactionary and ad hoc pretending like this will never happen again,” he said.

“But for vulnerable households they’ve been going through shock after shock after shock. It’s the rest of us that are starting to feel the pain.”