ST. JOHN’S, N.L. – Newfoundland and Labrador’s fiscal forecast took a dramatic turn for the worse Tuesday amid slumping oil prices and declining offshore production.
Premier Dwight Ball told a decidedly downbeat news conference his resource-dependent province will be taking immediate steps to deal with a ballooning deficit, which is expected to grow to $1.96 billion in 2015-16 — an increase of 79 per cent from the original budget prediction.
“We are not providing this outlook to cause upset and fear,” he said. “We are laying it out publicly because we want to be honest with you, and we believe that Newfoundlanders and Labradorians have a right to know.”
Finance Minister Cathy Bennett said the province’s previous government had predicted in the spring that it would receive about $1.2 billion in oil and gas royalties in 2015-16, but the latest forecast budgets for less than half that figure. As well, total offshore oil production was expected to decrease by 15 million barrels, she said.
“We will get this under control,” Bennett said. “The situation is difficult, but not impossible.”
Ball said the provincial government is restricting all hiring to critical operations, suspending all non-discretionary spending, restricting the use of consultants and discontinuing all non-essential travel.
As well, the government announced Monday it had hired a consultant to conduct an independent review of the rising costs associated with the Muskrat Falls hydroelectric project in Labrador.
However, Ball stressed that his Liberal government — elected with a majority Nov. 30 — would not lay off any public servants or offer early retirement packages, though a plan to cut costs through attrition would continue.
The premier said his government will consult the province’s residents ahead of next spring’s budget to get more ideas about how to cut costs and generate revenue.
Bennett said the latest deficit numbers are unprecedented.
“This is a pivotal time for our province,” she said. “If left unchecked, the extremely difficult fiscal reality facing our province will only worsen.”
Revenue from corporate income tax is expected to drop, as is sales tax revenue and mining taxes and royalties, she said.
The previous Progressive Conservative government had planned to raise the province’s 13 per cent Harmonized Sales Tax to 15 per cent as of Jan. 1, but that plan was rejected by Ball’s Liberals during the election campaign in November.
For the 2015-16 budget, the Tories predicted an average oil price of US$62 per barrel. The price this week was hovering around US$36 per barrel.
Meanwhile, Bennett said the province’s net debt was expected to grow to $12.4 billion as of March 31, 2016.
— By Michael MacDonald in Halifax