Ottawa (10 March 2022) — A report released today by the Canadian Centre for Policy Alternatives (CCPA) shows that there no rational reason for provincial governments to introduce austerity policies. According to the report, Disappearing Act, The state of provincial deficits in Canada, the provincial government finances have bounced back far better than expected when provinces released their 2021/22 budgets.
Instead of large deficits, most provinces will be running budget surpluses. Other provinces will see budget deficits falling to a level where they will be wiped out by small improvements in economic growth.
"Even when government finances are in bad shape, austerity policies can make things even worse," said Larry Brown, President of the National Union of Public and General Employees (NUPGE). "But what this report shows is that attempting to introduce austerity policies now they would be making a good situation bad."
Majority of provinces expected to have surpluses in the next 2 years
By the end of the 2022-23 fiscal year 6 provinces will have had budget surpluses. 3 provinces — British Columbia, Nova Scotia, and New Brunswick will have surpluses in the 2021/22 fiscal year.
What is also clear is where provincial deficits are dropping more slowly the main reason is policy choices by provincial governments, not lack of fiscal capacity. For example, both Ontario and Saskatchewan both provinces collect less taxes as a percentage of GDP than most provinces and this means their deficits are dropping relatively slowly.
The other province where the provincial deficit is dropping relatively slowly is Newfoundland and Labrador, but that province is expected to benefit from recent increases in oil and gas prices.
Time to rebuild
During the COVID-19 pandemic, Canadians relied on public services in ways that we haven’t seen for years. But the pandemic also exposed the consequences of over 20 years of austerity policies. In areas like long-term care, the consequences of a combination of austerity and privatization were appalling.
If we are going to build back better from the pandemic, public services like health care need to be able to respond to the challenges that will come. The events of the last few years have also provided a powerful reminder that we need to act faster to reduce emissions that cause climate change.
What the CCPA report shows is that provincial finances are in good enough shape that there should be no debate around our ability to build back better — particularly if the federal government and provincial governments take tax fairness seriously.
Large corporations, the wealthy will be demanding tax cuts
With provincial government finances looking better than expected, large corporations, many wealthy individuals, and the think tanks and lobbyists they fund will pushing for more tax cuts. In many cases, the voices calling for tax cuts that disproportionately benefit the wealthy will be the same ones that were calling for austerity measures when large deficits were expected.
If governments have any sense, and any decency, they will refuse requests for more tax cuts for the wealthy, and instead will introduce measures to make the tax system fairer.
The tax cuts introduced over the last 4 decades have failed. Instead of delivering economic growth, they increased inequality. Instead of helping all Canadians, they resulted in cuts to public services and support programs that made life less affordable for low- and middle-income Canadians.
Time for large corporations and the wealthy to do their share
The there is the question of fairness. Large corporations and wealthy individuals have not had to do their share during the pandemic. Many of them became richer than ever at the same time millions of people were losing their jobs or having their hours cut. Nor did the wealthy face the same dangers as essential workers who had to go into potentially dangerous workplaces where they were at risk of becoming serious ill or even of dying due to COVID-19.
"During the pandemic we asked essential workers to make huge sacrifices to ensure we could keep going. They did," said Bert Blundon, NUPGE Secretary-Treasurer. "If we really meant it when we called them heroes, we will put improving their lives and working conditions ahead of tax cuts that will go to executive bonuses or buying a second vacation home."