The pandemic has thrown the budgets of governments across Canada into the red as they increased spending to protect their populations from COVID-19 and expand the social safety net, while the economy slowed and revenues declined.
But not every province was in the same situation heading into the pandemic, and for Newfoundland and Labrador, despite successfully managing the spread of COVID-19 for much of the past year, it appears the time of reckoning has arrived.
Last October, just two months after taking over the leadership of the governing Liberal Party, Andrew Furey appointed the Premier’s Economic Recovery Team (PERT), chaired by Moya Greene, and tasked it with crafting a plan to “respond to the Province’s immediate fiscal challenges and plot a new course forward.”
On May 6, the PERT delivered its report, and recommended a harsh austerity plan that includes deep cuts to provincial spending and the handing of more power to the private sector.
If implemented, Greene’s plan will forever alter life in the province. It draws from long-discredited ideas about public spending and the role of government that make it feel like it belongs in the ’80s or ’90s. There is no positive future if Furey chooses to go down this path.
I don’t expect many Canadians to be familiar with the politics of Newfoundland and Labrador, nor the context surrounding this report. In this article, I’ll lay out how the province reached this point, the ideology that underpins this report, the flaws with many of its key proposals and why the public will need to fight for a better vision for the province.
In this moment, it’s important not only for Newfoundlanders and Labradorians to be united against this attack on their futures, but for Canadians across the country to support them. If such a deep austerity plan can be implemented in Newfoundland and Labrador, it will be attempted in other provinces in the years to come.
When The Boom Went Bust
As viewers of CBC NL’s election special were waiting for the results to be announced on March 27, the broadcaster aired a segment that briefly condensed the history of austerity in the province. While the framing left something to be desired, the network outlined how virtually every government since the ’80s has claimed budgetary crises required them to carry out spending cuts and attacks on public sector workers, including the public service, teachers, and nurses.
However, in the first decade of the 2000s, it appeared as though the province’s luck was finally turning around. While Progressive Conservative Premier Danny Williams had his own austerity push after taking power in 2003, oil prices soared in the years that followed, leaving provincial coffers flush with cash.
For the first time ever, Newfoundland and Labrador was a “have” province, generating pride among its residents. With the new oil wealth, Williams oversaw much needed improvements to provincial infrastructure and public services, but his tax cuts increased inequality in the years that followed. Yet even as spending increased, Williams’ government did not plan for the day the oil boom would eventually go bust.
On Nov. 18, 2010, Williams signed a deal with Nova Scotia to facilitate the construction of the Muskrat Falls hydroelectric project on the Churchill River in Labrador, and a week later announced his resignation at the peak of his popularity with oil prices around $80 USD per barrel. The deal proved to be one of the worst Newfoundland and Labrador has ever made.
In 2014, oil prices collapsed, leaving a massive hole in the provincial budget right as construction was starting at Muskrat Falls. In the following years, the project that was once hailed as key to the province’s economic future brought it to the edge of bankruptcy after the cost soared from an estimated $6.2 billion in 2010 to more than $13 billion in 2021.
A public inquiry’s report released in 2020 found that while elected officials made bad decisions, executives at Nalcor, the provincial energy company created to oversee the project, had held back details about cost increases and was plagued by bad management, among a range of other issues.
On Mar. 20, 2020, as the country was in lockdown, Furey’s predecessor, Dwight Ball, sent a letter to Prime Minister Justin Trudeau laying out the state of the province’s finances. Ball wrote, “We have no other recourse to raise the necessary funds to maintain the operations of government, including our health-care system, especially at this critical time.”
It was in that context that Furey tasked Greene, and a panel dominated by local businesspeople, to develop a technocratic plan for the province’s future.
Moya Greene’s History
Moya Greene, or Dame Moya Greene, as the provincial government insists on calling her, will likely be unknown to most Canadians, and is even a mystery to many Newfoundlanders and Labradorians. Yet, she has been at the centre of implementing neoliberal policy in Canada and the United Kingdom for decades.
Greene is from St. John’s and grew up in the province before moving to Toronto for law school in the ’70s. In 1991, Greene became assistant deputy minister at Transport Canada and was part of the team that fundamentally altered Canada’s transport networks during Liberal Prime Minister Jean Chrétien’s neoliberal transformation. In that role, Greene was involved in the deregulation of the airline industry, the commercialization of Canadian ports and the privatization of CN Rail, which involved mass layoffs and abandoning rail lines to prepare it for sale.
After leaving Transport Canada in 1996, Greene joined TD Securities as a managing director focusing on infrastructure finance and public-private partnerships. P3s, as they’re known in Canada, were gaining popularity at the time as a means to save governments money in the short-term by availing of private finance, but it has become clear that many of those projects ended up costing far more over time as private financiers extracted ongoing revenue from public assets.
After a stint at Bombardier, Greene became CEO of Canada Post in 2005 and set out to “modernize” the postal service. While she pushed for privatization, not even Conservative Prime Minister Stephen Harper would endorse it.
Instead, Greene increased the company’s profits by cutting costs, bolstering automation and attacking labour. In her last year in the job, the head of the Canadian Union of Postal Workers said, “If you compare the four years before Greene with the four years under Greene’s management the numbers show that injuries have gone up 15.4 per cent and grievances have gone up 59.3 per cent.”
Having taken on Canada Post, she was hired by the Conservative-led British government in 2010 to oversee the privatization of the Royal Mail, which was floated on the stock market in 2013. Greene laid off workers, cut costs and increased automation ahead of the sale, while taking a massive pay package that amounted to £1.9 million in 2017 alone.
She was at the centre of a scandal where postmasters were charged and even jailed for allegedly stealing money, but it was later found to be the result of a faulty IT system. Even after company directors were told the computer system could be to blame, Greene continued prosecuting them. The postmasters’ names were finally cleared this April.
Meanwhile, more jobs have been lost since privatization, delivery centres have been closed, prices have increased and rural mail delivery has gotten worse. The company has also been selling off its valuable land for shareholder benefit, even as 69 per cent of the public want it to be renationalized. The outcomes of these policies should be considered before Newfoundland and Labrador rushes into any kind of similar plan.
The Questionable Pandemic Election
In February, Newfoundlanders and Labradorians went to the polls in an election many believe was scheduled so the Liberals could win a majority government before Greene’s report was released.
Despite being a doctor by training, Furey claimed February was the best time to hold an election, even though it was the peak time of year for the spread of viruses like the common cold, influenza and COVID-19. In the last week of the campaign, the United Kingdom variant of COVID-19 began spreading in the St. John’s metro area, resulting in a lockdown that threw the election into chaos.
Furey largely refused to comment on the fate of the election, leaving it up to Chief Electoral Officer Bruce Chaulk to extend the voting date and switch to mail-in voting, despite having no authority to do so under the province’s election legislation. When the results were finally announced on March 27, the Liberals won a slim majority of 22 seats in the 40-seat legislature, but voter turnout had dropped to 48.2 per cent — the lowest in the province’s history.
Two court challenges have already been launched, but it’s likely that after reports of people not receiving their special ballots and turnout in some ridings plummeting by more than 20 per cent, a broader challenge could be coming.
Furey rushed the province to the polls with full knowledge that Greene’s report would tank the support the Liberals had built up through the pandemic, but as he sets out to fundamentally restructure the province, his government’s legitimacy is in question.
The Big Reset
The PERT’s report, entitled The Big Reset, is presented with the image of a sunrise off the coast of Newfoundland, signalling a new dawn for the province. But it would have been better accompanied by a photo of a funeral, since if the proposals in its pages are implemented in full, it will put the final nail in the coffin of Newfoundland and Labrador’s future.
In an interview on CBC Here and Now, Greene denied that she had laid out a plan for austerity, but it’s impossible to see it as anything else. The report proposes a 5 per cent cut in core government spending, with 20 per cent cuts for many government agencies, and “a negotiated settlement” with public sector workers to freeze their wages, move to a defined contribution pension plan, and “reduce the payroll base.” If unions refuse, the report says the terms should be legislated.
It also asserts the need for balanced budget legislation (BBL) to limit future governments’ ability to run a deficit, but such legislation is an outdated right-wing policy tool designed to limit the public sector. As author Seth Klein explained when British Columbia proposed its own BBL, “Good government and budgets are about more than balancing the books.”
Imagine, for example, that we had entered the pandemic with BBL tying governments’ hands. How would we have paid for the needs of the health system, laid off workers and shuttered businesses? Shackling the government at the very moment we need it to fund new sectors for a green transition is terrible policy.
But the report goes far beyond those measures to propose a complete reimagining of the provincial government’s role and whose needs it should serve, while positioning technology as a magical solution to various problems and ignoring important context about Newfoundland and Labrador that makes delivering services more expensive.
Cutting Health And Education
The most significant proposed cuts in the report are to healthcare and postsecondary institutions. The report proposes gutting the public healthcare system with a 25 per cent cut over six years, while merging the province’s four health authorities. It claims this is necessary because the province spends the most per capita on healthcare, but that ignores key reasons why health spending is structurally higher there than other provinces.
As Russell Williams, a professor at Memorial University, pointed out on Twitter, per capita health spending is slightly higher than other provinces, but remains below the combined provincial and territorial average. The higher spending is driven by several factors, including that the province’s population is the oldest in the country and is spread across a vast area. Recently, the provincial government has been emphasizing how outside the St. John’s metro area, the province is more like a territory.
Newfoundland and Labrador also has among the worst health outcomes in the country. When asked whether slashing the health system would negatively affect outcomes, Greene answered that “money is not the answer,” and that by making service delivery more efficient and using new technology, there was no guarantee outcomes would get worse. There are undoubtedly ways that service delivery could be improved and there are efficiencies to be found, but slashing a quarter of its budget will hamper the public healthcare system.
Meanwhile, the report proposes a restructuring of the education system that would include a 30 per cent cut to the operating grants of postsecondary institutions. Provincial politicians have been trying to raise tuition at Memorial University for years, but face consistent opposition from students and the broader public. Even the university’s president, who recently said it shouldn’t be so reliant on public funding, was surprised at the size of the cut.
If implemented, it would require tuition to jump from $2,550 per year to around $7,000, placing a greater debt burden on young people who are already entering a tough labour market. It also ignores the significant economic and social benefits produced by the university, its faculty and its students.
The report also proposes abolishing the French school district, the Conseil Scolaire Francophone Provincial. When asked by Radio-Canada journalist Patrick Butler whether the constitutionality of the proposal had been assessed, Greene admitted it had not.
Privatizing Key Public Assets
In addition to slashing health and social spending, the report also lays out a plan to privatize and sell off public assets, which is in line with Greene’s professional history. Yet, some of the proposals don’t seem to have been properly thought through.
The report proposes the abolition of Nalcor and merging what remains of it back into NL Hydro, the Crown corporation that provides most of the province’s power. Given that Nalcor was only founded in 2007 and significant problems with its management and competency were identified in the Muskrat Falls inquiry, this is a good proposal that would be supported by the public. But it doesn’t stop there.
The PERT also wants NL Hydro to be prepared for privatization. It recommends installing a new board “with relevant experience in organizational restructuring” to lead “the transition of [NL] Hydro to a private entity.”
After the Muskrat Falls boondoggle, residents of the province are already facing unprecedented rate increases. As lawyer Michael Collins pointed out on Twitter, privatizing NL Hydro would not only require rate increases to cover corporate profit, but also the taxes that the Crown corporation is currently exempt from paying. In short, it would make a bad situation much worse and further increase power bills to the benefit of private investors.
On top of that, the report also proposes selling off the NL Liquor Corporation (NLC) and provincial shares in oil and gas projects. In 2019, the Crown liquor corporation produced $184 million in profit for the government, and in June 2020 the finance minister said it wouldn’t be privatized. When asked whether her team had done a cost-benefit analysis on the sale of the NLC and the province’s stake in the Hebron offshore oil project, Greene admitted it had not.
Filling Holes In The Tax System
The Big Reset is not all about spending cuts and privatization of assets, though they make up a significant portion of the recommendations. The report also proposes a raft of tax increases, and some of them should be seriously considered.
If fully implemented, sales tax would rise by one point to 16 per cent, income tax by 1 per cent for everyone and corporate tax by 2 per cent. There would also be increases on gasoline, cigarettes and payroll taxes, and a 15 per cent increase to fees and fines. The latter proposal could be particularly regressive, and linking fines to income should instead be considered. The income tax increase should also be more progressive with higher increases and new brackets for those that earn more, but Greene doesn’t let them off the hook.
The report proposes a $50,000 probate fee on $1 million inheritances, and pushes the provincial government to work with its federal, provincial, and territorial partners to establish a 1 per cent wealth tax above $10 million and an inheritance tax. It also proposes a luxury tax on high-end vehicles, a tax on second residences, a gift tax on asset transfers above $10,000, a tax on properties in unincorporated areas, and a progressive tax on land transfers.
When speaking to journalists, Greene argued that the decades of racing to the bottom on tax rates are over, and governments need to start raising them once again. While the tax proposals aren’t perfect, they are a bright spot in the report. But the federal government should also step back in to increase its support for provinces, as today’s provincial debt problems are in part the product of Chrétien’s cuts in the ’90s.
A Green Future Of Extraction
The PERT was also tasked with thinking about the future, but their report makes the very predictable — and entirely false — claim that climate change is “a technology challenge”: we don’t need to consider whether we live in a sustainable way or whether we have a sustainable economic system; all we have to do is develop and use new technologies to reduce emissions.
To set Newfoundland and Labrador up for a green transition, the report proposes an “Industrial Revolution 5.0” that emphasizes STEM education, expanding the technology sector and doubling down on resource extraction.
Despite Nalcor’s CEO having admitted in 2016 that Muskrat Falls was “a boondoggle” and later saying it should never have been built, the report claims it will ultimately “be an asset” and Greene called the entire Churchill River “a beautiful asset.” It thus proposes moving forward with the Gull Island hydroelectric project, which could produce 2,250 MW of energy.
But Greene and her team ignore how even Muskrat Falls, an 824 MW project, threw the province into financial ruin and had terrible environmental impacts, including methylmercury contamination and its impacts on Inuit communities. There are growing concerns about the sustainability of large-scale hydro projects.
Unfortunately, this is indicative of how the report sees Labrador: not as an equal part of the province, but as a colonial possession from which the island can extract wealth. The report not only calls for the province to develop “an inventory” of hydro opportunities and to open them up to the private sector, it also demands a significant expansion of mining activities in Labrador to supply electric vehicles and other green tech.
Even though the federal and provincial governments are on board to increase extraction, these projects come with significant environmental consequences that are often downplayed because they’re located in remote areas where only rural or Indigenous communities will be affected. In Quebec, people are already dealing with environmental accidents and attempts to fast track environmental reviews for lithium mines.
But the PERT’s plans for resource extraction don’t end there. As if words have no meaning, the report calls for the government to “encourage green investment in low emission oil and gas,” while “streamlin[ing] regulatory processes” to make projects easier to develop. Angela Carter, a professor at the University of Waterloo, called the idea of low emissions oil “a complete contradiction in terms. It’s comparable to calling cigarettes ‘healthy smokes.’”
The report also calls for more lumber production, while placing an emphasis on promoting the creation of technology startups.
There are some bright spots in the future section, in particular the proposals to increase support for the arts, cut subsidies to aquaculture and to support a community-led development initiative. But it’s no surprise that after the report’s release, some people in Labrador were talking about separation from Newfoundland and their ongoing unequal treatment.
What Comes Next?
Now that the Big Reset is in the public domain, the government has announced that consultations will be held through virtual town halls, online portals, toll-free numbers and postal submissions. Not only does it not sound like a very transparent process, but Furey said after the report’s release, “You can hate on me all you want, but someone has to deal with this.”
Furey comes from a political family and spent years before going into politics sitting on the boards of mining and biotech companies to make connections with the province’s economic elite. As such, he seems determined to move forward with Greene’s proposals.
Despite the report’s calls for transparency, Furey released a video statement yesterday to respond to the report instead of holding a news conference. Local media refused to run the address in full because he wouldn’t take questions until the following day and had previously reduced the number of questions at weekly public health briefings.
Between the platitudes, Furey repeated the dire warnings of the report and declared it to be “the pivotal moment in our collective history.” He promised the burden of cuts wouldn’t fall on the shoulders of the vulnerable and seniors on fixed incomes, while emphasizing many of the PERT’s key points and calling for public officials to “reflect on core competencies and decide what government needs to be” — a call to reduce the role of the public sector.
There is no denying that things need to change in Newfoundland and Labrador, but the Liberals chose a specific path by farming out their restructuring plan to a person who has spent her life privatizing assets, fighting unions, and focusing on dollars and cents instead of human impacts.
The government could have laid out the facts and engaged Newfoundlanders and Labradorians in a real consultation, or even put together a citizens’ assembly. But instead, a technocratic plan has been effectively imposed on the province from London — a bad look, given the province’s colonial history.
This fundamentally neoliberal plan is now the starting point for discussion, and after years of pushing messaging on the public that the province is living beyond its means and that a government’s budget is like a household’s, many people have been primed to believe that deep austerity is the only path forward. But that is not true.
A Brighter Future For NL
In early March, anticipating a draft of the PERT report that never arrived, a coalition of 60 local groups and individuals released a plan of their own called the People’s Recovery. It gave a very different picture of the province’s problems, and potential solutions to them.
The report explained that Newfoundland and Labrador already spends less on programs as a percentage of GDP than other Atlantic provinces and collects less tax revenue, in part because of tax cuts under Williams and the Progressive Conservatives. Closing that gap would address the province’s structural deficit.
The coalition has a much deeper connection to the reality of the province and contains a much wider range of perspectives — especially from the groups that would be most impacted by the PERT’s proposed cuts. Yet, there has been little effort by the government to engage the People’s Recovery or ideas outside those proposed by Greene and her team.
The truth of the matter is this: The Big Reset would be a disaster for most Newfoundlanders and Labradorians. Cost of living in the province is already high and increased further during the pandemic, but the proposed tax increases, cuts to public services and privatizations would drive it even higher.
Rather than attracting people, a high cost of living paired with a declining quality of life would cause even more outmigration — especially if attacks on the public service result in even fewer good jobs. It would, however, present new opportunities for corporate interests to profit from the retreat of the public sector, and those gains wouldn’t be shared with the public.
In 2010, the same British government that hired Greene to privatize the Royal Mail set off on a deep austerity campaign, arguing it was necessary to balance the budget to avoid economic ruin. Ten years later, the Conservatives are still in power and the budget was never balanced, but real wages have been in decline for the longest period of time since the late 18th-early 19th century, income inequality has increased, poverty has soared, suicide rates have reached a 20-year high, as of 2019 more than 130,000 preventable deaths since 2012 were attributed to the cuts, and for all that pain, the measures they took have actually slowed economic growth.
Newfoundland and Labrador’s choice is not between a Big Reset or inevitable bankruptcy, as Furey, the Liberals, Greene, and the PERT would have us believe. Changes are necessary in the province, but they don’t require gutting public services and attacking public sector workers in a repeat of the past four decades of provincial austerity.
People’s Recovery has shown us that there is an alternative path, and that residents of the province can come together to build their own future. The question now is whether the public will force the provincial government to listen.