The fable of the Finance Minister who cried wolf

Do you remember the story of the boy who cried wolf? He kept telling those around him that a wolf was about to eat his flock of sheep, but when they went to check, there was nothing there. Eventually they stopped paying attention, assuming that he was having them on, until one day the wolf actually showed up, but no-one was listening.

Finance Minister Allen Roach has been promising, literally EVERY year since he took on the position, that we will reach balance, and have a surplus …… next year. For a while, people may have believed him, but consistent annual disappointment at budget time has led many folks to roll their eyes and think - as those repeatedly misled by the boy who cried wolf – that he’s deluded.

This year was no different, as PEI’s annual deficit is now estimated to be over $16 Million, almost double what the projection was just a few months ago. Minister Roach offers explanations for his failure to reach balance this year, and once again, we are told that we only have to wait until next year, when all will be well. (Except of course, for the 2, or 3 billion accumulated debt which hangs as a hefty millstone around the necks of young Islanders and those yet-to-be-born, amounting to almost $15 thousand for each and every one of us.)

We can analyse why things went sideways this year, and pick apart the plausibility of the Minister’s excuses, but I think we must also look at the underlying structure of our provincial economy and to what extent that is causing our chronic inability to thrive and prosper.

The main contributor to the higher than expected deficit is an increase in health costs of $16.2 million for in-province and out-of-province medical services, and the high-cost of drugs. While health care costs are rising across the country, this exceptional provincial increase is more likely a result of reactive care, and poor management and forecasting. We know that the administrative costs of Health PEI are ballooning and reviewing these expenses should be a top priority for this government. But until we address health care in a coordinated and patient-focused manner, and shift our focus to preventative health care, well-managed drug formularies, generic drug purchases, and community-based medical services, we will not be able to change this story.  

The press release admits that the deficit is in part the result of “increases in tax rebates of $3.9 million, reflecting higher taxes paid by businesses in the aerospace and manufacturing sectors”. We must ask how much longer are we going to keep pursuing this policy approach, and are we getting the return to justify the expenditure? Perhaps it is time to completely review government’s involvement in handing out subsidies, loans and grants to industry, and to take stock of the costs and benefits of current policy and structures to Islanders.

Finance Minister Allen Roach goes on to say: “While our third-quarter forecasts show a higher-than-projected deficit, we are confident the sound financial management practices we have in place will enable us to stay on track for a balanced budget in the coming year.” Sound financial management practices do not usually include secret contracts, conflict of interest, inappropriate and high-risk expenditures of taxpayer funds, and investments made without evidence-based decisions. This government has consistently demonstrated that it does not understand what sound financial management practices are, nor that it employs them.

There is much else in the Minister’s statements that deserve close scrutiny, among them the fact that the Immigration investment fund boosted government coffers this year by $10 million. What that really means is that a lot of newcomer deposits have been retained or held back, underlining the fact that PEI has the poorest record of all provinces when it comes to retaining immigrants through the PNP program.

More details will become known in the weeks ahead, but once more we have a government that has missed the mark, and failed to deliver yet another promise. What PEI needs is a long-term fiscal approach that will stimulate a more vibrant local and regional economy, create predictable prosperity, reduce our dependence on federal handouts, and create improved fiscal resiliency in an ever more volatile global economy.

With our increasingly perilous fiscal situation, the proverbial wolf is howling at our door. There is time to ward it off, but let’s stop pretending all is well, or that we are on the right path. After a decade of failed fiscal policy, it is time for a new perspective.