New Brunswick Finance Minister Blaine Higgs.David Smith-MDS Photography/The Canadian Press
The New Brunswick government cut spending and cancelled a tax rate cut for high-income earners in its budget Tuesday, but it also hiked taxes on cigarettes and gas in a bid to brighten a dire financial picture.
Finance Minister Blaine Higgs introduced an $8-billion budget that includes a nearly $449-million deficit, but that's less than half the $1-billion deficit that the provincial government said was possible last November.
Late last year, the government ordered departments to cut spending by 1 per cent in the current fiscal year and 2 per cent in each of the next three years. Mr. Higgs said that, and other efficiencies, have resulted in $220-million in savings for 2011-12.
"I want to make it clear that we are very serious about spending restraint," said Mr. Higgs, who presented his first budget since the Progressive Conservatives defeated the Liberals last September.
Spending is expected to decrease by 1.6 per cent in 2011-12, while revenues are projected to increase by 2.1 per cent.
Starting Wednesday, the tax on cigarettes is up by $1.31 a pack, which is expected to generate an extra $25-million in revenue.
Motorists see a 2.9 cents a litre increase in the tax on gasoline, and 2.3 cents a litre in the tax on diesel. That's expected to increase revenue by $44-million.
The New Brunswick Liquor Corporation has been told to increase its profit by $10-million in the coming year.
The net debt is projected to increase by $630.3-million to hit $10.2-billion by next March or about $13,545 for every man, woman and child in the province.
Income taxes will remain the same and a tax rate cut for high income earners that was promised by the previous government has been cancelled.
Mr. Higgs says there will be ongoing studies of such things as highway tolls and reducing the size of the civil service.
"Through attrition, retraining and reassignments, we will look to right-size the public sector in a collaborative, responsible and compassionate manner," Mr. Higgs said.
Other restraints include a third year of wage freezes for members of the legislature and a hiring freeze in the civil service.
The government is eliminating funding for the Provincial Capital Commission and the New Brunswick Film Tax Credit.
Health care remains the biggest cost for the province at $2.5-billion, up $42-million from last year.
The operating grant for public universities is being increased by 2 per cent and the government is increasing targeted bursaries to help students from low-income families.
Tuition fees, which have been frozen for the last three years for universities and the last five years for colleges, will be allowed to increase by up to $200 per full-time student.
There are a number of new initiatives in the budget, including a pair of funds that will see more than $37-million dedicated to job creation in the province's north.
There will also be funding this year for a mental health plan, a diabetes strategy, and help for people with multiple sclerosis. The details and exact amounts won't be announced until ministers present their department estimates in the weeks ahead.
Mr. Higgs said with the changes being made, the government is on track to balance the budget by 2014-15.
"This budget is only the beginning," he said. "Together we are partners for change in the way New Brunswick, both as a government and as a province, will operate in the future."
Liberal finance critic Donald Arseneault said the budget leaves too many unanswered questions.
Many of the Tory campaign promises are not mentioned, he said, while the government is talking about possible cuts in health and education.
"What does [Higgs]mean when he talks about hospitals and schools? He's saying there are too many schools and too many hospitals."
The New Brunswick spokeswoman for the Canadian Federation of Independent Business is giving the budget a passing grade but said the government could have cut deeper.
"The province is past the point of simply trimming the fat," Andreea Bourgeois said.
She said the cuts in the corporate and small business tax rates are welcome, but worries increases in other areas will hurt.
"Other tax increases - such as the gas tax - will take some of the competitive advantage away," she said.
Kevin Lacey of the Canadian Taxpayers Federation said the increase in the gas tax will cost the average New Brunswicker another $85 a year per vehicle.
Mr. Lacey said while he's pleased the government didn't increase the HST, he doesn't think the government did enough to cut spending.
"The budget fails to deliver on the promise of a balanced approach. The cuts in spending are simply cuts to the extra spending that occurred over and above last year's budget," Mr. Lacey said.
NDP Leader Dominic Cardy, whose party doesn't have a seat in the legislature, called the budget a "halfway measure," adding that he doesn't see what the Tory vision is for the future of the province.