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Premier Dwight Ball paints dire picture of Newfoundland’s economic future

Newfoundland and Labrador Premier Dwight Ball says that wealth and opportunity was squandered in the province.


It wasn't long ago that Newfoundland and Labrador seemed to be swimming in oil dollars. But Premier Dwight Ball says that wealth and opportunity was squandered, and now a province known for enduring tough financial times sits on the precipice of economic shambles.

The list of Newfoundland's woes is extensive, starting with an unemployment rate hovering near 14 per cent – twice the national average – that is expected to climb to nearly 20 per cent in the next few years. Debt, meantime, is piling up at a record rate; Mr. Ball's Liberal government is expecting to finish this fiscal year with a deficit of $1.4-billion, according to a recent economic update.

The government doesn't anticipate the province's books being balanced for seven years – that is, if a number of things go right. By then, the mountain of red ink will exceed $17-billion by the government's estimate – and much, much higher in the view of others. Debt-servicing costs, meantime, are set to rise by 55 per cent by 2022. With a population that is aging and shrinking at the same time, some analysts have raised the spectre of bankruptcy.

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Complicating matters is the fact that three major infrastructure projects – including the Muskrat Falls hydroelectric facility – are winding down or will soon be doing so. They represent 10,000 jobs. Muskrat has been a financial disaster and will come in at about $11-billion, or almost twice the projected amount.

"There is a sense of urgency in terms of where we are as a province and where we need to go," Mr. Ball told The Globe and Mail in an interview at his legislative office.

"All the drop in oil did was expose a problem that has been perpetuating for the last 12 years and that is spending levels in this province that have just grown and grown with no one preparing for the day oil would not be around, or would not have much impact. Well, that day has arrived."

While the impact that the oil crash has had on Alberta has received most of the country's attention, it has hit Newfoundland's treasury much harder. Five years ago, revenue from the oil industry was nearly $3-billion annually. In fiscal 2015-16, royalties are expected to be in the neighbourhood of $550-million.

Today, Mr. Ball says the province derives more money from fees and fines than it does from offshore royalties. The oil collapse has also meant there are far fewer jobs in Fort McMurray, Alta., where Newfoundlanders have commuted back and forth for decades, making a handsome living in the oil sands.

And the worst is yet to come. The Unemployment Insurance that thousands of these workers went on late last year when they lost their jobs in Fort Mac and in Newfoundland is about to run out. From May, 2015, to May, 2016, there was a 52.9-per-cent increase in personal insolvencies in the province, according to the federal Office of the Superintendent of Bankruptcy.

During the height of oil's boom years in the late 2000s, Newfoundland became a "have" province after decades of being a regular recipient of federal handouts. But at a time when the province could use transfer dollars more than ever, it is obligated to live with an arrangement that prevents it from renegotiating the terms of equalization until 2018.

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This mess is now Mr. Ball's to handle. It has not been an easy first 10 months in office, with a spring budget that dramatically raised taxes and fees, making him one of the most unpopular premiers in the country. There would appear to be few decisions in his future that will help turn his dismal approval ratings around. What angers him, he says, is utter disregard that successive Conservative administrations – including Danny Williams's – showed for the future of the province.

During a 12-year stretch of Tory rule, Mr. Ball said, the province brought in nearly $20-billion from money provided by oil royalties and federal contributions.

"We had more money than at any point in our history, but we were also borrowing more money than we ever did before," said Mr. Ball. "How does this happen? So, yeah, I get upset when people had a lot of money, especially when it's connected to a commodity, and you don't have the foresight to plan for a dropoff in prices, because you know it's going to happen."

Instead of paying down debt during the good years, billions were spent on infrastructure and tax cuts.

"Today, oil would have to be at $148 [U.S.] a barrel to fix our budget problems," the Premier said. "I don't believe it's going there any time soon so every dollar below $148 a barrel is my challenge to deal with."

In a recent brainstorming session with 150 invited guests from across sectors of Newfoundland's economy, Mr. Ball laid out some of the grim decisions that await the province, including dramatically slashing the costs of delivering services – costs that are, on a per-capita basis, more than anywhere else in the country.

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There are, however, some glimmers of hope. The price of oil has begun inching upward and now sits regularly above $50 a barrel. Tourism is up, thanks to an especially captivating national ad campaign that plays up the beauty and charm of the province. The groundfish fishery is on the verge of a rebound. The Bank of Montreal is calling for 0.7-per-cent growth next year – which is better than earlier forecasts.

Mr. Ball says that while all of the options he has to remedy the province's dire financial situation are difficult, he's determined to take them.

"People may not like my choices," Mr. Ball said. "But people can't argue about me not making them. We really have no alternative at this point. None at all."

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About the Author
National affairs columnist

Gary Mason began his journalism career in British Columbia in 1981, working as a summer intern for Canadian Press. More


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