Progressive Conservative Leader Blaine Higgs has made some headway in the seven years his party has been in power in Fredericton.Stephen MacGillivray/The Canadian Press
New Brunswick is already among the weakest of the provinces, dependent on federal transfers to keep its budget and economy afloat.
Changing that unfortunate fact should be the focus of the province’s election campaign, which kicked off Thursday.
New Brunswick is poorer than most of the rest of the country – and almost every part of the continent. A recent analysis by University of Calgary economics professor Trevor Tombe found that New Brunswick is close to the bottom of the rankings for gross domestic product per capita in North America. Mississippi, Alabama, West Virginia: All of the economic backwaters of the United States outperform New Brunswick. Only Nova Scotia does worse.
As bad as things are today, the province’s relative economic prosperity is projected to decline through to the end of the century, according to the Parliamentary Budget Officer. Last year, New Brunswick’s GDP per capita was just under 78 per cent of the national average, again slightly ahead of Nova Scotia.
But the PBO forecasts that New Brunswick’s economy will lag the rest of the country in coming decades. By 2098 – an admittedly long-term forecast – the province’s GDP per capita will be just 67 per cent of the national average. That is a story of economic decline, and of a growing reliance on the federal government.
Already, New Brunswick is the province most dependent on Ottawa’s equalization largesse: The payments will account for 6.1 per cent of provincial GDP this year, according to the PBO. That dependency will grow, with equalization payments equalling 8.3 per cent of GDP by the 2070s, far higher than any other province.
A relatively older population will ratchet up the pressure on health care expenditures, and the provincial budget. The PBO says the province’s finances are not sustainable in the long haul, an estimate that if anything may be understated.
The province’s economic decay is slow-moving, and it will take decades for the rot to fully materialize. But it also represents the culmination of decades of policy failure in New Brunswick, which has for too long accepted a second-rate economy.
In fairness, Progressive Conservative Leader Blaine Higgs has made some headway in the seven years his party has been in power in Fredericton. Persistent budget deficits have given way to a string of surpluses (although a deficit is forecast for the current fiscal year). Income-tax rates have declined slightly; no longer does New Brunswick have the dubious honour of having Canada’s highest marginal rate for personal income taxes.
And after years of young New Brunswickers heading west for a better life, the province is seeing a net migration from the rest of the country.
But those changes can at best be seen as an overdue first step in revitalizing New Brunswick. Absent in the election campaign so far is ambition and the kind of big idea that would change the long-term trajectory of the province.
Mr. Higgs, for instance, proposes to reduce the province’s portion of the harmonized sales tax by two percentage points, reversing the 2016 hike by his Liberal predecessor, Brian Gallant. That will save the average New Brunswick household hundreds of dollars, but cost the provincial treasury an estimated $450-million. Liberal Leader Susan Holt has countered with a proposal to eliminate the provincial portion of the HST on electricity bills, costing $90-million a year.
The political calculus is as obvious as it is short-sighted.
What might a bolder agenda look like? First, it would start with an audacious goal: narrowing the economic gap with the rest of Canada.
Achieving that goal would mean a break with not just the high-tax and low-growth history of New Brunswick, but also with Mr. Higgs’s incrementalism. How about a move to galvanize investment, and to bring back expatriate New Brunswickers, by creating a nation-leading tax advantage, perhaps by allowing companies to deduct capital spending immediately from income?
In a province habitually suspicious of big business, that would be a tough sell. But the pitch could be this: more jobs, better schools, better hospitals – not to mention the chance to see your grandchildren grow up at home, in New Brunswick, instead of another time zone.