As witnessed on Thursday by the Finance Minister Diana Whalen’s fiscal update, the government’s financial picture is troubling. The deficit is at $680 million for 2013-14, the net debt sits at an all-time high nudging 15 billion, total revenue down $340 million from last year and department spending has grown by $70 million.
A declining, aging workforce is a rock; a tax regime imposing punishingly high rates on the population to maintain service levels is a hard place. Premier Stephen McNeil and his Finance Minister clearly are in-between with some tough choices ahead, but it’s time to make them.
Two weeks ago, Michel Samson, the Minister of Economic and Rural Development and Tourism quietly announced a realignment of responsibilities in the distribution of public money to the private sector.
Nova Scotia Business Inc. will now be handling business development and delivering assistance programs including the Capital Investment Rebate and the Small Business Development Program taking crucial decision making power off the cabinet table.
Eligibility requirement will be more stringent to ensure there are adequate levels of private sector money out of the gate and funding will be tied to economic principle such as productivity improvements, competitiveness and innovation. These are all commendable and sensible moves by this government.
The positive news in this is the apparent de-politicization of decision making when public money is handed over to private business as investment. This should be welcomed as an important step in the right direction.
But there is a glaring irony. The headline stated “the private sector would lead economic growth” and subsequently announced the arms-length government agencies that would now be responsible for doling out public money in the form of loans, grants, payroll rebates and subsidies.
While this new structure under the guidance of NSBI is immeasurably more sensible than elected officials picking winners and losers at the cabinet table, it does not address the underlying problem of luring business growth through artificial, government subsidized competitive advantages.
Year after year, in CFIB pre-budget surveys, Nova Scotia small and medium size businesses have stated emphatically that assistance to business should be broad-based tax relief and elimination of unnecessary regulatory burden or red tape.
While this new direction is encouraging, it is treating a symptom, not the disease. Reliance on government hand-outs has grown not because business can’t survive on their own but because when one business is given an artificial, temporary, competitive advantage other businesses are naturally going to look to government for similar treatment.
If this government truly wants to address this addiction it must start the process of weaning businesses off government assistance programs and create a truly level playing field with incentives for the investment of more private capital, broad based tax relief and sensible, clear regulation.
The tax and regulatory review being conducted now is a tremendous opportunity to effect meaningful change to the tax code to achieve these goals and set the province in a better direction. It will take courage and vision. The same courage and vision demonstrated by every entrepreneur starting up a small business.