I would like first of all
to extend best wishes on behalf of our government to you and your loved
ones for a healthy and happy new year.
I asked for broadcast
time tonight as a first step to keeping you informed about the major
issues that face our province over the coming years, and I thank you for
On October 21, the people of Newfoundland and Labrador elected a new government because you wanted a new approach, that will see the true potential of our province fully realized in a meaningful way.
I am sure you all
recognize that we face significant challenges and you also know that it
will take a new approach to deal with these issues.
Good government is about
partnership, and together we will face these challenges head on with
courage and strength.
Though the obstacles are
great, I know that the opportunities are even greater.
The time has come to turn the tide in Newfoundland and Labrador and
chart a new course to prosperity and self reliance.
As we move forward to
achieve this, it is important for government to keep the people fully
informed - openly, honestly and promptly.
We are in this together and you have a right to know all the
information so that you can understand why certain decisions have to be
made. That is the purpose of
my address this evening.
When our government was
formed two months ago, we felt that the first priority was to determine
the financial condition of our province. We hired an independent external
firm, PricewaterhouseCoopers, to conduct a thorough review of the
province’s finances and to assess the financial challenges for this year
and the years ahead.
Earlier today, the
Minister of Finance released the results of this review and the news is
not good. The report,
entitled Directions, Choices and Tough Choices, indicates that we
have an evolving financial crisis - a situation that if ignored or
unresolved will threaten the future sustainability of the province and
seriously compromise our social programs and way of life.
The consultants reported
that the total deficit is 827.5 million dollars - 161 million dollars over
budget. A component of the total deficit is the cash deficit and that
deficit for this fiscal year is 507 million dollars, some 220 million
dollars over what was budgeted. Clearly,
targets outlined in the 2003-04 budget are not realistic or attainable.
The predictions for
future budgets are even more disturbing.
Unless we significantly adjust our course, we are facing total
deficits of 1 billion dollars or greater for the next four years at least.
This would increase our current debt, the money we owe our lenders,
by approximately 4 billion dollars to 15.8 billion dollars.
That will be nearly three times what our debt was in 1992-1993.
the last number of years the maintenance of our schools, hospitals and
roads has been largely deferred and the cost of these capital works is in
the hundreds of millions of dollars.
We are also facing a
number of legal matters before the courts that may or may not have
significant cost implications for government.
These potential costs have not been factored into governments
financial planning but may very well have to be addressed at some point
down the road.
The numbers are
staggering to the point where it is difficult for many of us to fully
appreciate just how serious the situation really is.
Out of our annual 4.2 billion dollar budget, we now spend more than
a billion dollars a year – that’s 25 cents of every dollar - to pay
for the interest on our debt.
This province should be
no different than all of us in running our own households.
But the province’s situation is comparable to any of us taking
out a second mortgage just to buy groceries and running up our credit card
to pay for electricity and telephone bills.
If this continues, we are
in very real danger of drowning in our own debt.
I am sure you have seen in your own regions the consequences of crippling government debt - wait lists for health services, cuts to school programs, and a lack of funding for economic development and job incentives.
heavy debt load limits the government’s ability to deal effectively with
unemployment, child poverty and out-migration, which are at the highest
levels in the country.
We must address this
situation now. We are digging
ourselves deeper into a hole and that’s been our problem for far too
long. We must start turning
things around in Newfoundland and Labrador.
The advice from
PricewaterhouseCoopers on how to deal with this problem is straightforward
I quote, “Government needs to develop and implement clear and decisive action plans to address the fiscal imbalance and to avert those forecast record levels of deficit for each and every year over the next four years.
Clearly the Government,
its employees and everyone in Newfoundland and Labrador will have to focus
on dealing with this situation.”
They go on to say that,
and I quote: “...the financial health of the Province is not the
government’s problem [alone, but] it should be the concern of every one
of its 519,000 residents.”
I believe that one of the
most significant changes that the people of the province voted for on
October 21st, was an accountable and strategically minded government.
A government that will make the responsible choices that will
result in this province finally becoming masters of our own destiny.
This will require hard
work and sacrifice by everyone.
We cannot expect to
improve our lives without first enduring some short-term pain in return
for long-term and meaningful benefits.
I have stated repeatedly that the problems facing this province
were not created overnight and they cannot be fixed overnight.
But make no mistake about it – together we can and we will fix
We have a plan that
focuses on achieving a balance. It’s
about making decisions for the right reasons – not for political
reasons. That irresponsible
practice has gotten us where we are today, and let me assure the people of
this province – those days are over.
We have a serious problem
but we are going to work our way out of it.
You elected leaders to
make responsible decisions but we must also protect those who are most
vulnerable. Our government may have inherited this serious fiscal
situation but we have absolutely no intention of letting our children and
grandchildren inherit it from us.
So, you may ask, where do
we go from here?
Our approach will be two
pronged. First, we must regain control of our expenditures over a
reasonable time frame. Second,
even as we attempt to grapple with the deficit, government will also have
an unwavering commitment to growing our economy, creating new jobs and
expanding our revenue base.
I will now discuss both
in greater detail, starting with the expenditure control measures.
Before we ask others to accept the impacts of fiscal restraint, government must demonstrate that it is prepared to lead by example.
I can assure you, since
we have taken office, we have tightened our fiscal belts.
One of my first decisions
was to reduce the size of cabinet by more than twenty five per cent.
What’s more, in time we will attempt to reduce the number of
seats in the House of Assembly to better reflect a province the size of
Newfoundland and Labrador.
Many perks have been
either reduced or eliminated, starting with the Premier’s office where
the two government owned vehicles previously assigned to the Premier have
been eliminated. We have
significantly curtailed discretionary expenditures and non-essential out
of province travel for elected members and senior officials.
We also cut 44 political
positions that existed under the previous administration and converted
many other positions from political appointments to public service
These staffing decisions
have saved taxpayers more than one and a half million dollars.
We believe that a strengthened public service will ensure that
individuals are being hired on their merits as opposed to who they know in
addition to the decisions we have already taken, all departments have been
asked to bring forward expenditure reduction proposals which can be
implemented in the short term to make an early start towards our new
fiscal goals. I
can assure you that everything is under review, from cell phones to
well, we have deferred all non-essential capital expenditure items.
term spending reductions, however, will not be sufficient to address the
size of the deficit problem. On a go-forward basis, we will implement our election blueprint
commitment to review every government program and eliminate any that are
considered ineffective and inefficient. This commitment will be delivered through a comprehensive program review
will use criteria to evaluate programs, similar to those now being
employed by the federal government as they attempt to free up funds for
their priority programs. These
criteria will include the public interest, efficiency, affordability,
value for money, and the role
of government. The review
will also look at overhead and
capital costs in government.
comprehensive review will use the expertise of the civil service, and we
will also use external resources to consider the systems and structural
issues from a purely independent perspective.
We must ensure that the changes we make to government are the best
and most efficient changes possible.
The results of this review will be forwarded to cabinet for action.
I do not want to
underestimate the impact that some of these decisions will have over the
coming years. We have
structural problems with our budget that will require changes to the
structure and function of government.
We must focus government’s expenditures on our priorities. Not
everyone will get what they want from government.
We must accept that government cannot be all things to all people.
The structural changes in
government will involve a change in the programs that are offered and a
change in the size of government. We
will continue with a hiring freeze that was implemented by Minister
Sullivan soon after he was sworn in to ensure that every vacant position
is thoroughly examined before being filled.
Some six thousand people are due to retire over the next few years.
While not every position
can be eliminated, this represents a good and rational opportunity to
In a few days, we will
begin negotiating new collective agreements with most of our public
The external review
indicated that public sector wages, benefits and pensions represent
approximately 52 per cent of the entire provincial budget.
They went onto say that the last round of negotiations added
approximately 350 million dollars to the annual salary bill of government,
representing a huge component of government’s expenditures.
Throughout the election,
I committed that there would be no massive lay-offs in the public service
as I firmly believe that our province cannot sustain the types of mass
lay-offs that were experienced in the early 1990's.
The new government will continue to do everything in our power to
honour that commitment.
to our unprecedented fiscal problems and the recommendations of our Royal
Commission, our lenders, and the consultants, our public servants must
understand that we have a very serious financial situation which must be
remedied to preserve our way of life.
Therefore, one of the
messages we will be bringing to the unions is that there is no money
available for salary increases at this time.
We have already conveyed this message to the union leaders earlier
today, and I am giving to all of our public service the benefit of knowing
this situation at the earliest available opportunity rather than in the
last stages of an extended negotiation.
I appreciate that this
will be a difficult message for our valued public sector employees to
However, no one in this
province was told that the debt would increase by more than one billion
dollars in each of the next four years.
We can only conduct
collective bargaining based upon the fiscal realities that we all face,
and we should only reach agreements that we can afford.
Otherwise we merely postpone the inevitable.
Though clearly this
province is facing a very serious fiscal situation, I do not want to leave
you with the impression that it cannot be fixed.
I would not be here if I believed that!
Our administration is not
completely surprised by what we have inherited.
The recent Royal Commission made clear that the province’s
budgetary deficit trend was unsustainable.
did several reputable independent financial analysts, which is why we
presented the people with an eight-year plan for economic development.
I can assure you that I
am not interested in managing our province’s decline.
My government and I were elected to help turn this situation
around, and together we can do it.
It is not about shifting
around the chairs on the deck of a sinking ship.
It is about restoring the seaworthiness of the vessel so we can
launch out into the deep with confidence and success.
Our plan is to eliminate
the cash component of the deficit over time.
While it will be
difficult to accomplish this task over our four-year mandate, as we stated
during the election, it is our responsibility to try.
But let me make it clear
that if the cost of eliminating the cash deficit in four years involves
crippling our economy and halting economic growth, then this time frame
will be adjusted to ensure the province’s best interests are served.
The fiscal challenge is
tremendous. But the greater
challenge – and frankly, the one that motivates me – is turning the
economy around so we generate new industries, small business growth, new
investment and new jobs.
We are looking to our
partners, the Government of Canada and our new Prime Minister, for
The ability to invest 100
per cent of our oil revenues in economic infrastructure would go a long
way to helping us stand on our own feet in the long term.
have had very positive meetings with both the Prime Minister and Minister
Efford, and I have told them that we are facing an extremely difficult
fiscal situation in this province. We
are prepared to take action and make the difficult but responsible
decisions to address our problems, but this will not be enough.
Newfoundland and Labrador not only needs, but is entitled to its
fair share immediately, before it is too late.
achieve this we will work together with Ottawa in a spirit of cooperation
and collaboration as we are relying upon our partners in confederation to
be a meaningful part of the solution.
In the meantime, we are
prepared to take initiatives on our own to create new investment, new
opportunities and new jobs in Newfoundland and Labrador.
Our plan is to
aggressively grow our economy over the next four to eight years.
In fact, we will be investing in economic development and job
creation, despite our fiscal circumstances, because we see such programs
as investments which yield a positive return.
I firmly believe we have
a strong base upon which we can grow our economy.
Low interest rates have helped boost consumer confidence with
excellent years reported for retail sales and new housing starts.
And our tourism and oil and gas industries continue to perform
All these activities hold
promise for a brighter future.
We also intend to
diversify our economy away from the mega-projects into sectors that have
longer reaching impacts for all areas of the province, and our rural
communities in particular. And
we certainly intend to stop the giveaway of our resources.
We will focus on small
and medium size business developments.
We will have a renewed focus on the fishery.
And we will pursue opportunities that have not been tried before.
Job growth means revenue
growth, and that in turn means more money for health care and education.
Though we must not and
will not underestimate the significance of the immediate financial
challenges that grip our government and our province, neither will we
underestimate the opportunities to revitalize our economy.
We must effectively
address our fiscal challenges together. The
decisions that need to be made will not be easy, but with your
participation, support and understanding, your government will lead you
through it in a planned and progressive manner.
That is the promise we
made during the election; that is the new approach; and that is exactly
what we intend to deliver.
There is reason for
optimism. There is reason for hope.
Thank you for your patience and cooperation, God guard thee Newfoundland and Labrador.
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