Province’s Spending is Excessive, says Analyst

Frontier Centre, Media Appearances, Role of Government

EXCESSIVE government spending in Manitoba is depressing the province’s economy, an analyst with the conservative Fraser Institute said yesterday.

Niels Veldhuis, a senior research economist at the institute’s headquarters in Vancouver, said the projected 3.5 per cent increase in spending in the provincial budget Finance Minister Greg Selinger handed down this week is greater than can be justified by inflation and the province’s population growth.

And net government debt continued to go up, Veldhuis said. Debt is projected in the budget to increase to $16.4 billion from $16.1 billion. That “is a very dangerous thing,” he told a breakfast meeting in Winnipeg organized by the Frontier Centre for Public Policy.

The analysis of Veldhuis is at odds with a TD Bank Financial Group provincial budget analysis released this week, which said Manitoba is in a solid fiscal position that will help it weather economic challenges such as the increased value of the Canadian dollar. The bank said that although government debt is rising, it is shrinking as a percentage of Manitoba’s GDP.

Veldhuis said studies have shown growth of government negatively affects economic growth. In Manitoba, government spending accounts for 47.5 per cent of the economy when municipal, provincial and federal spending are included, he said.

A level of government spending equal to about 30 per cent of GDP would be closer to what is optimal, but Alberta is the only province where the government spending level is below 30 per cent, he said.

In Manitoba, “nearly half the economy is taken up by government spending,” he said.