Wab’s Harsh Realities

It is but a few days before the New Year, and it has been only three months since the NDP became Manitoba’s provincial government. The recent election was much tighter […]

It is but a few days before the New Year, and it has been only three months since the NDP became Manitoba’s provincial government.

The recent election was much tighter than many people thought. The NDP won with just 4% more votes than the PC’s tally.  And, the turn-out was at historically low levels, – only 55% of eligible 885,000 Manitobans actually voted. The NDP won the election with the support of only 25% of eligible voters.

So, despite the rah rah tone of some press partisans, 75% of eligible Manitobans either voted for other parties, or did not vote at all. And, considering actual votes, two of the three parties, the PC and the Liberals, registered 254,000 votes to the NDP’s 221,000.

The Kinew Government is fortunate to currently have special spendthrift friends in high places!  The feds have committed to pay for a $475 million upgrade to the Pointe Dubois Dam at perennially cash strapped Manitoba Hydro.  Then, also extremely fortuitously, Manitoba’s equalization grant is to be increased 24% next year, effectively bringing another $900 million in free money from the feds.

Going forward, such Santa Claus level federal grants may hopefully move the provincial budget closer to balance.  But the Kinew Government should not expect such federal generosity to continue past 2024-2025 – because, very likely, federal government changes are coming.

And, with the woeful history of Manitoba government finances and deficits, to which we can add a recently updated forecast of a large government deficit for 2023-2024, ask – can the generous labour settlements by the Kinew government be sustained – as Canada heads into a recession?

The new NDP government has already signalled that public sector wage increases are coming. But they can be risky and expensive.  The government’s bench is comparatively ‘young’ and inexperienced, and there is a real risk of dangerously naive “magical thinking” from the public sector and identity politics activists that dominate Kinew’s caucus.

The jury is still out.

Yet, give the Kinew government credit for not abandoning PC government tax reforms – particularly those that benefit low-income tax filers.   As well, the PC government was reducing municipal property taxation, dropping 50% of the tax related to school levies (with an intent to increase the reduction to 100%). This is good policy and the standard across the country – property tax should not pay for education costs.  Hopefully the new NDP government will follow this through to elimination, to help (again mostly lower income) taxpayers. To meet the competitive standard of other provinces, the payroll tax should be dropped and phased out, as soon as possible.

Unfortunately, the new NDP government will have little luck improving health care. Why? Because its union masters will lobby to continue the status quo approach of just throwing more money at broken systems.

Which gets back to the Kinew government’s Achilles Heel.

Here is the harsh reality – higher taxes will backfire with usually lower than projected revenues.  And, federal equalization transfers will be slashed.  Hard. Like they were in 1990s by the Chretien government. Plan for it.

Which leaves us with the more complicated approach of spending smarter on existing services. Now, Manitoba spends comparatively too much on core public services.  Education and healthcare spending, for example, are among the highest per capita in Canada – while Manitoba’s outcomes are bottom of the barrel.  They need to be properly reformed.  Not easy.

And, at that point, the Kinew government might recognize that it’s perhaps fatally handicapped by its traditional domination by the unions.

 

Graham Lane had a 40 year career as an executive in both the private and public sectors, He is a retired CPA CA and PUB Chair. He is on the Frontier Centre’s Expert Advisory Panel.

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