New Brunswick’s auditor general says the fiscal health of the province is improving, but warns that the revenue growth that drove last year’s historic surplus is not guaranteed to continue. That has the Liberal Opposition questioning the wisdom of a slate of proposed income tax cuts announced earlier this fall.
A report from auditor general Paul Martin says the province’s fiscal health is better than it has been in recent years, but urges the government to practise fiscal prudence.
The government posted a budget surplus of $777 million last year, up from $408 million the year before. The report says that surplus was driven by large jumps in revenue from the harmonized sales tax (HST), as well as personal and corporate income tax “that may not recur.”
“They benefited from additional revenues that may not reoccur, so we certainly recommend the government continue a prudent approach, manage their revenue and expenses in an appropriate fashion,” Martin told reporters on Tuesday.
The report warns the province shouldn’t bank on those revenues to continue coming in at the levels seen over the last year and “will need to continue to find ways to manage spending, consider revenue increases, or a combination of both in the future” to ensure the province’s long-term fiscal health.
Liberal finance critic Rene Legacy points out that the warning comes as the government looks to cut revenues by about $70 million with an income tax cut that will overwhelmingly benefit the province’s wealthiest earners.
“What we have with the tax cuts, they’re essentially decreasing revenue,” he said.
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“Last year, we finally had a $102-million increase in personal income tax and essentially they’re talking about wiping away $80 million of it with this bill.”
When asked if he considered the tax cuts “fiscally prudent,” Martin refused to weigh in since it’s ultimately a policy decision of government.
“It’s a decision and as we move forward and see the results of that, we’ll be able to audit and give some feedback on whether it was or wasn’t,” he said.
The province is projecting a $774-million surplus after two quarters and department staff says that number will likely grow before the end of the year. Legacy said he’d like to see the government focus on targeted relief for New Brunswickers while avoiding long-term revenue decreases or program spending.
Legacy said his caucus wants the government to look at using the surplus for removing HST from home heating bills, or issue energy rebates to help those who are struggling with rising costs, instead of putting all of it towards the provincial debt.
“You can’t just have the easy answer that we’re just going to keep putting it all on the debt and the interest that we save is going to help later on, there is the possibility to give direct help right now to the people of New Brunswick and just give them a little bit of relief without mortgaging the future,” he said.
The report did note the province’s progress on reducing the net debt, with a reduction of over $1 billion last year, bringing it to $12.4 billion. That put’s the province’s net debt-to-GDP ratio at 29.9 per cent, the best rate among similarly sized provinces other than Saskatchewan.
However, the report raised concerns over the province’s funded debt, which sits at $18.4 billion, a 10-year high, and has not been reduced despite recent surpluses.
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