Province	  Législature	Session	Type de discours	Date du discours Locuteur		Fonction du locuteur	Parti politique
Nouveau-Brunswick 48e 		2e 	Discours sur le Budget	15 mars 1976	 M. Allen Edison Stairs Ministre des Finances	PC

Mr. Speaker, it is once again a considerable honour for me to present to this Legislature the 
traditional motion of supply and the budget speech.

    First, may I congratulate you for having been chosen again as Speaker of this Assembly. I know 
I express the sentiments of all members when I say that your presence gives us' renewed confidence 
that the affairs of this House will continue to be conducted expeditiously, with the patience and 
fairness characterizing your leadership in the past.

Mr. Speaker, this government, like everyone, has been the victim of the inflation of recent years. It 
is true that revenues have expanded, but it is also true that expenditures have grown far too rapidly. 
The result is that we are faced with perhaps the most difficult set of policy choices in 30 years.

It was clear, early in the budget process, which a number of major concerns were before us. There 
was the concern that New Brunswickers should receive better services, achieving levels closer to 
those received by citizens of wealthier provinces. There was the concern that the government 
should continue its major efforts at lasting job creation. There was the concern that the government 
should do what it could for our citizens to alleviate the effects of short-term adverse economic 
conditions. There was the concern that the province's strong financial position should be 
maintained.

    Mr. Speaker, it was clear that we could not fully satisfy all these concerns effectively at the same 
time. For example, we could have expanded programs and services or introduced new ones, but 
only at the risk of seriously threatening the province's financial position. We chose not to do so. We 
could have sacrificed long-term development effort, in favour of a major effort to deal with the 
short-term unemployment problems facing the province. We chose not to do so. Our limited 
resources would have little impact on what is, after all, a world-wide situation; further, it is 
apparent that the national and international economy is already in the process of recovering from 
the recession.

    We concluded that the most favourable path to follow was to do what was best for the long-term 
development of the province. Therefore, we decided to support long-term job creation and 
development efforts, and we decided to ensure the continuing soundness of the finances of the 
province.

    Mr. Speaker, from what I have already said, it should be clear that the budget for the forthcoming 
year has been developed under difficult circumstances. Added to these difficulties is the fact that 
the budget is the first that will be administered in an economy fully under the umbrella of federal 
price and income controls and guidelines, and the first which must adhere to federally imposed 
income restraints. Under the provisions of the agreement recently signed with the federal 
government, incomes in the provincial and municipal public sectors will be subject to the 
enforcement provisions of the federal anti-inflation program. Though pricing in the public sector 
will not be subject to review by federal bodies, I want to emphasize that the provincial Prices and 
Incomes Bureau will review carefully any proposed revenue increases in fees, licenses and permits, 
where these are recommended to recover increased costs.

After carefully reviewing these many concerns, the government made some very specific decisions 
about the general shape of the budget for 1976-77.

First, the budget limits ordinary and capital expenditure growth to 15 per cent, thereby 
complementing and supporting federal anti-inflation efforts. Specific program restraints will be in 
effect, some of which have already been announced, as part of what we believe are necessary 
reductions in the rate of growth of our most expensive programs. No new programs are being 
introduced. Despite relatively severe expenditure restraint in some areas, the budget provides for 
significant development expenditures aimed at stimulating long-term economic growth. It also 
emphasizes continuing high levels of capital investment to generate job-creating activity during a 
period of relatively slow economic recovery, high unemployment, and levels of inflation that 
continue to be far too excessive by any standard. Finally, the budget reflects this government's 
continued concern for sound fiscal management.

Mr. Speaker, I am pleased to announce that for the sixth successive year, and despite all the 
pressures facing the government during the current year, no tax increases are being introduced by 
this government. Indeed, 1976 has already seen the implementation of the two per cent reduction in 
the personal income tax, and the continued phasing out of the real property tax on owner-occupied 
residential properties.

Mr. Speaker, I will return to each one of these points later in my remarks, but first I would like to 
draw the attention of members to the budget papers which are incorporated in this year's budget.

The first paper presents a more comprehensive and complete economic outlook than has 
traditionally been made available in past budgets, removing the necessity of a lengthy review in the 
budget speech, but at the same time providing members with more technical information than has 
traditionally been available.

The second technical paper presents a report to members on the first phase of the conversion of our 
budgetary revenue accounts to a revised source classification system, based on the Canadian 
System of Financial Management Statistics, and developed by Statistics Canada. Such a system 
will enable better reporting to the Legislature on the shape and structure of our revenues, and 
facilitate better interprovincial comparability in future years.

The third paper reviews the current status of the federal-provincial Fiscal Arrangements Act, now 
in the process of being renegotiated by the provinces and the federal government.

These papers are for the information of members of the House, and for their study and examination.
	
I am sorry, Mr. Speaker, but the Clerk's office was furnished with copies for every member, and I 
asked that at the moment I stood they be released. I apologize, Mr. Speaker, and with your 
permission, I will pause briefly until that is checked. Besides, I need to get my breath. I am sorry 
that happened. I understand from the Clerk that other copies will be made available right away, but 
perhaps with the ones we have at hand, we might continue.

Mr. Speaker, I believe there is some value in placing the current budgetary problem in historical 
perspective. The following table, in two parts, identifies expenditure growth rates between the years 
1970-71 and the current year.

First of all, yearly ordinary expenditure growth remained below 14 per cent during the first full 
three years of this government's administration. It was only with the onset of inflationary pressures 
that substantial annual growth began, reaching 18.4 per cent in 1974-75 and an estimated 26.6 per 
cent in 1975-76. Capital expenditures jumped sharply during 1974-75 and have remained at a high 
level ever since, partly as a result of rapidly rising construction costs, and partly because the 
government has made an extra effort to create jobs during a time when unemployment has 
remained unacceptably high.
    
Mr. Speaker, there are a number of reasons why ordinary expenditures rose rather quickly in the 
last two years. I am sure it is apparent to everyone that the government has to pay more for goods 
and services, just like everyone else in these inflationary times, but the government also actively 
assisted many groups in coping with inflation. We are all well aware of the higher wage settlements 
which occurred in the public sector, as well as the higher subsidies to low income groups.
    
During this period we recognized that a small province could have little or no impact on inflation 
even if it wished to take corrective action, and so we called for controls long before they were 
introduced, realizing, among other things, that governments could not continue indefinitely on the 
expenditure growth paths they were on. We knew one effect of inflation would be to push our 
expenditures and our cash requirements sharply upwards.
    
Now that the federal anti-inflation controls are in place, it is our duty to continue to cooperate fully 
with the federal government in the restraint of government expenditures as part of a broad 
Canadian effort to restrain inflation. This means reducing rates of expenditure growth in many 
program areas. In turn, this will reduce growing pressure on cash requirements and contribute to 
relieving rapidly rising demands on capital markets across the nation.
    
Mr. Speaker, cash requirements jumped by over $80 million between 1973-74 and 1974-75, as we 
moved into a recession combined with high levels of inflation. Without significant expenditure 
reductions in 1976-77, cash requirements could easily have reached $200 million, or almost $160 
million above cash requirements of three years ago. New Brunswick's situation is not unique. Other 
provincial governments have experienced precisely the same patterns, and have also decided to 
exercise significant restraint over expenditure growth.
    
The following table illustrates the rapid change in financial requirements that has occurred with the 
advent of inflation, and illustrates the insidious effect which inflation has had on public sector 
financing.

   
Mr. Speaker, we cannot allow the rate of growth of ordinary expenditures to continue to 
substantially exceed the rate of growth in ordinary revenues. Following such a course of action will 
eventually yield a deficit on Ordinary Accounts. Such a situation would be very difficult, if not 
impossible, to live with over a prolonged period of time, although it may be feasible for one or two 
years.

The consequences of allowing a continuing deficit on Ordinary Account are clear. The government 
would have to borrow funds to finance expenditures which provide little, if any, future benefits to 
the citizens of New Brunswick. Investors would be understandably reluctant to lend money to a 
government that is borrowing to pay typical Ordinary Account expenditures, such as salaries. Our 
recently improved credit rating would, in time, be subject to critical review, our borrowing would 
escalate dramatically from present levels. For instance, an Ordinary Account deficit of $25 million 
in 1976-77 combined with a modest 15 per cent increase in capital expenditures would mean over 
$200 million in cash requirements, compared to the $159 million estimated for this year and the 
$123 million required in 1974-75. This is because the government would have departed from the 
usual practice of financing a portion of capital expenditures by generating an ordinary surplus. 
Instead, the government would be faced with borrowing for 100 per cent of its net capital needs, 
plus additional borrowing to finance the Ordinary Account deficit. In turn, the net debt increase for 
1976-77 would rise to well over $120 million.

The cost of servicing the debt in 1976-77, and especially in subsequent years, would escalate 
dramatically, taking an increasing portion of Ordinary Account expenditures. Correspondingly, less 
would be left in future budgets for services to people.

Mr. Speaker, I think it is quite clear from what I have said that we cannot allow an ordinary deficit 
to emerge. But it will emerge just as surely as I stand here if we do not control the rate of growth of 
ordinary expenditures. Ordinary revenues grew at the historic rate of 15.7 per cent between 1970-
71 and 1974-75. This is below historic rates of growth of ordinary expenditures. The revenue 
growth forecast for 1976-77, as you will note, is below the revised growth forecast for the current 
year. It is not surprising that this should be the case, given the anticipated slower rate of growth in 
the economy and the expected diminishing rate of inflation. Indeed, the very presence of an anti-
inflation program, combined with restraint on federal expenditures, means that revenues should not 
be expected to grow as quickly in the future as they have in the past. Tax revenues should grow 
more slowly precisely because of the presence of an anti-inflation program. Further, we do not 
expect revenues from the federal government to grow as rapidly as they have in the past.

First, shared-cost program ceilings will begin having an effect. We now have a 15 per cent ceiling 
on the rate of growth of federal contributions to post-secondary education, which is already having 
a negative effect on revenue growth. A 13 per cent ceiling to federal contributions for medicare will 
be imposed on April 1, and a further lowering of the ceiling to 10.5 per cent on April 1, 1977. The 
federal government has also served notice that it wishes to renegotiate the Hospital and Diagnostic 
Services Act with the clear intention of reducing the rate of growth of federal contributions.

The federal government has made it clear to the public that it will restrict sharply the rate of growth 
in federal expenditures in conformity with the anti-inflation program. It seems highly unlikely that 
the federal government will allow total contributions to New Brunswick to grow at an historic rate 
in excess of 18 per cent annually, when it has imposed a lower ceiling on its own expenditures. The 
most recent evidence of this is the federal position concerning federal contributions to the cost of 
the administration of justice. The revenue guarantee, an integral part of the Federal-Provincial 
Fiscal Arrangements Act, will apparently be terminated at the end of March 1977. This additional 
source of revenue, which will yield the province some $18 million in 1975-76, will not be available 
to the province after April 1, 1977.

Finally, it is quite apparent that the federal government is seriously concerned about the rate of 
growth of equalization payments. An arbitrary decision has been made to exclude two-thirds of oil 
price increases from the equalization formula. Since that time it has also been made clear to us that 
the federal government is seeking to further limit the rate of growth in equalization payments. It 
claims these payments are excessive, especially when per capita income gaps among the provinces, 
in percentage terms, are narrowing.

In summary, anticipated slower growth rates in the economy and in federal payments to New 
Brunswick make expenditure restraint absolutely essential. This is not a one-year problem. 
Ordinary revenues that grow at an average rate of 14 to 16 per cent per year cannot finance 
ordinary expenditures that grow at an average rate in excess of 18 to 20 per cent per year. The 
average rate of growth in ordinary expenditures must come down and stay down. The alternative-
regular and periodic tax increases to finance the shortfalls-is completely unacceptable. The effect of 
such a course of action would be to increase the burden of taxation on citizens and businesses, to 
make the province less attractive to prospective investors, and to reduce the levels of available 
private sector funds for economic development purposes. We will not follow such a policy, and we 
believe that the people of New Brunswick would not want us to follow such a policy. On the 
contrary, we believe that the citizens of the province are prepared to cut back on the rate of 
improvement in public services in order to ensure future growth and prosperity. We believe they 
will be more than willing to do this, provided they are told the facts. The facts are that if we want to 
restrict the high cost of government we must restrict our collective demand for public goods.

Mr. Speaker, in concluding this brief historical review I want to point out that expenditure growth 
at all levels of government, in my view, has been far too high in recent years, in relation to yearly 
growth in the economy and to yearly increases in personal income per capita. For example, 
although the Gross Provincial Product and personal income per capita in New Brunswick grew 
respectively by 15.3 per cent and 15.2 per cent from 1973 to 1975, ordinary expenditure growth 
exceeded both, registering an average growth rate in excess of 20 per cent. Continuation of such a 
trend should not be allowed. Eventually, through the device of higher taxes, the government would 
absorb a larger and larger share of the total resources available for distribution to the citizens of 
New Brunswick. We do not think this would be acceptable to the people of this province.

Mr. Speaker, I would now like to present the revised financial position of the government for the 
year ending March 31, 1976.

Budgetary Accounts

Gross Ordinary revenues in 1975-76 are now forecast to be $883.8 million. This level exceeds the 
original budget estimate, including Supplementary Estimates, by $20.6 million or 2.4 per cent, and 
represents an estimated year-over-year increase of 19.5 per cent.

The revision in the estimates of gross ordinary revenues is the net result of a $12.9 million increase 
in own source ordinary revenues, a $17.7 million increase in Ordinary Account shared-cost 
recoveries and a $10 million decline in revenues from Canada under the Fiscal Arrangements Act.

Own source ordinary revenues are higher chiefly because of upward revisions in the revenue 
estimates from two taxes. A $16.3 million increase in the personal income tax is expected, and a $6 
million increase in the sales tax is anticipated. The $5.5 million drop in the estimate of the 
corporate income tax is due to the decline in corporate profits in 1975 and a lower prior year 
adjustment than was budgeted.

Revenue from Canada is now estimated at $227.7 million, a 4.2 per cent decline from the original 
budget estimate of $237.8 million. This decrease is due to a reduction in equalization revenues 
from $221.5 million to $202.7 million, the recovery by the federal government of a $602,000 
payment of the 1970-71 estate tax, and an offsetting $8 million increase in the estimate of the 
revenue guarantee.

It is important to note that half of the forecast $17.7 million increase in shared-cost recoveries 
above the budget estimate reflects increased expenditures by the province in the last two months of 
the fiscal year. The agreement by the federal government to fund part of the spruce budworm 
spraying program under the forestry sub-agreement of the General Development Agreement is 
expected to result in a $5.6 million increase in revenue, while the recovery from the federal 
government for storm damages during the year is anticipated to yield an additional $3 million in 
revenue.

Capital recoveries are now estimated at $40.3 million for 1975-76, $3.6 million lower than the 
original estimate of $43.9 million, due mainly to a decline in the estimate of recoveries under the 
General Development Agreement.

Following are the changes in budgetary revenues, by source, from the original budget estimates.

During the course of the session, the House will be presented with a bill setting out special warrants 
issued during the 1975-76 fiscal year in respect to the budgetary accounts. Of the total of $67.7 
million, $53.8 million will be applied to the Ordinary Account budget and $13.9 million to the 
Capital Account budget. Hon. members should note that most are for quite small amounts and are 
required because of circumstances unforeseen at the time that the budget was presented. Of the 
amount required for the Ordinary Account budget, $44.9 million is needed for nine special 
warrants. These include: $1.7 million to cover over-expenditures by local school boards during the 
year; $5.5 million for flood compensation; $1.7 million for maintenance on roads as a result of 
flood damage; $2.5 million for snow control; $3.5 million for increased expenditures under the 
General Development Agreement to purchase chemicals for the spruce budworm spraying 
program; $6.8 million to cover additional costs of collective agreements signed in 1975-76; $8.9 
million for increased social assistance payments; $4.6 million for increased costs of servicing the 
debt, and $9.7 million for general provision against losses.

Of the $13.9 million in special warrants that members will be asked to vote to the Capital Account 
budget, $4.8 million will be applied to the Department of Transportation for additional 
expenditures on highways; $5 million to the Department of Municipal Affairs to provide for a 
change in the method of accounting for stimulation grants to municipalities, and $2.4 million for 
additional grants to the Maritime Provinces Higher Education Commission. Approval will also be 
requested for a number of smaller warrants.

Non-budgetary Accounts

Mr. Speaker, before commenting on the revised estimates for the non-budgetary financial accounts 
for the 1975-76 fiscal year, I must take this opportunity to comment on the upgrading of the credit 
rating of the province and of the New Brunswick Electric Power Commission from A to A-I by the 
world's leading credit rating agency of government and corporate bonds. This is the first time in 15 
years that the province's rating has been improved. It was last upgraded to A in 1960. This 
improvement in the province's rating not only reflects the sound financial status of the province, but 
is a tribute to the strength and potential of our economy.

The improvement in the rating has important consequences for future bond market participation by 
the province and the New Brunswick Electric Power Commission. It will have the effect of 
broadening the market for the sale of our bonds, and can be expected to lead to a slight reduction in 
the cost of borrowing below what it would have been with an A rating. During fiscal 1975-76, the 
pattern of interest rates in North American bond markets was similar to that of the previous year. In 
Canada, long-term provincial bond yields which averaged 9.67 per cent as of April I, 1975 
increased to 10.81 per cent by October 1975 and then commenced a gradual decline which 
continued into 1976. Interest rates in the United States market showed a similar trend, but the 
decline from their high point in September 1975 has been more pronounced than in Canada, thus 
introducing an historically wide spread in bond yields between the two markets. The past year has 
also seen the further development of a market in Europe for Canadian dollar denominated bond 
issues. Canadian governments and corporations have made extensive use of this market as well as 
relying on established markets in Canada and United States.

The province came to the public bond market once during the past year with an issue of $75 million 
sold in United States funds in May 1975. In addition, $43,184,000 of 20-year debentures have been 
issued to the Canada Pension Plan Investment Fund.

Debenture issues of the New Brunswick Electric Power Commission in the total amount of $155 
million were also guaranteed as follows: $40 million issued in May 1975 in Canadian funds; $75 
million issued in October 1975 in United States funds, and $40 million issued in January 1976 in 
United States funds. The last named issue was the first overseas bond issue for the New Brunswick 
Electric Power Commission. It was originally planned for $30 million, but was so well received on 
the market that it was increased to $40 million. It was priced at the same level as a province of 
Quebec issue which came to the market a week earlier and these notes have traded strongly on the 
secondary market, testifying to the success of the issue. The success of this issue will reflect 
positively on any future borrowing.

Gross loans and advances are now expected to be $38.3 million for the 1975-76 fiscal year. The 
$8.1 million in-year increase reflects, in large part, attempts by this government to offset the impact 
on New Brunswick industries of the slackness in the economy. Net loans and advances are forecast 
to increase above the original estimate by $7.9 million.

Members will be asked to vote special warrants of $10.1 million in the Loans and Advances 
Account. Of the total, $9.5 million are for advances under the Industrial Development and 
Expansion Act and represent continued development efforts by the provincial government to 
sustain current employment and generate future employment growth in the province. Major 
warrants include $5 million for Cirtex Knitting Inc.; direct loans of $1.5 million to McCain Foods 
Ltd.; $565,000 to L. E. Shaw Ltd., and $650,000 in loan guarantees to Ganong Bros. Ltd. Several 
smaller warrants on the Loans and Advances Account will also be presented.

The changes in the non budgetary accounts and their effect on anticipated financial requirements 
for the 1975-76 fiscal year are summarized below.

The net effect of the revised estimate of loans and advances, combined with the increased 
budgetary deficit, is an increase in gross financial requirements for the 1975-76 fiscal year to 
$159.1 million.

Mr. Speaker, because this budget contains an extensive technical paper on the economic outlook, I 
propose to be brief in reviewing expected economic developments for 1976.

This year is forecast to be a year of readjustment and growth as all major world economies move 
out of the longest and most severe recession in recent times. An important feature of the current 
economic recovery is the slow pace with which it is taking place. The recovery of the Canadian 
economy is expected to parallel those in other countries and to have many of the same 
characteristics. While inflation is expected to moderate as the year progresses, the national 
unemployment situation is expected to deteriorate somewhat further before it improves.

The provincial economy is expected to experience a slightly lower rate of growth than that forecast 
for the nation. In the early part of the year the economic strength of the province is expected to be 
in consumer spending and housing, while improvements in other sectors are expected after mid-
year.

Mr. Speaker, as I indicated earlier in my remarks, the government was faced with difficult policy 
choices in preparing the budget plan. All the evidence pointed to unacceptably high and continuing 
rates of expenditure growth throughout 1976-77, unless decisive steps were taken.

The expected reduction in the rate of growth of revenues compounded the problem. The 
alternatives were clear: raise taxes or reduce expenditure growth.

Mr. Speaker, we concluded that expenditure growth had to be arrested. With the advent of a 
national anti-inflation program, both the public and private sectors have been encouraged to restrain 
spending. Further, it is increasingly being recognized that stable growth cannot be achieved when 
government spending is too high. I believe that our citizens are willing to accept a lower rate of 
growth in public services, provided the delivery of basic services is not jeopardized. I believe they 
do not want higher taxes now to finance a too rapid expansion of public services. Rather, I believe 
they want slower rates of growth in government expenditure, but with the emphasis on those 
expenditures which create long-term growth opportunities and lasting employment.

Let me be clear about one thing, Mr. Speaker. Continuing current rates of growth of public service 
means higher taxes, not in a year or two, but now. Mr. Speaker, we concluded that the people of 
this province did not want higher taxes now. We concluded they did not want the government to 
take a larger share of total provincial resources in a time of restraint. We concluded they did want 
to slow the rate of growth of government, and did want a government that was financially sound. 
And so the government decided not to raise taxes, and not to go deeply into debt for operating 
expenditures. Instead, we decided to reduce the rate of expenditure growth of some programs which 
are simply growing too fast, and to give strong support to the national anti-inflation program. 
Doing so will conserve our financial strength which has improved so significantly in the last few 
years. 

All of this translates into a budget plan which:

-restricts budgetary expenditure growth to 15 per cent;

-significantly reduces the rates of growth in certain programs;

-introduces no new programs;

-provides for expenditures which focus on long-term job creation, and reinforces the continuing 
financial stability of the province.

Mr. Speaker, despite all of the pressure of expenditure growth, I want to repeat that this is also a 
budget which contains no tax increases. The following table presents the budget plan for 1976-77, 
and contrasts it with the budget plan presented to the Legislature a year ago.

An examination of the plan for the forthcoming fiscal year indicates that ordinary and capital 
budgetary expenditures, taken together, have been restrained to a 15 per cent rate of growth over 
the budget estimates for 1975-76, and to a 9.6 per cent rate of growth over the revised forecast for 
the current year.

Despite this rather severe expenditure restraint, the Ordinary Account surplus is lower than that 
budgeted for a year ago, because the rate of growth of revenues is expected to be slower than that 
of expenditures. Capital expenditures are being maintained at a high level, exceeding $160 million 
for the second year in a row, to ensure continuing emphasis on long-term development priorities.

Planned cash requirements of $135.7 million for 1976-77 are well within the borrowing plan which 
the province has submitted to investors and rating agencies, and are well below the level reached 
during the current year. This ensures that the ratio of debt service charges, sinking fund instalments 
and serial redemptions to net revenue remains at approximately 13 per cent.

It is also worth noting that the planned rate of increase in the net debt is well below the expected 
rate of growth of the Gross Provincial Product, continuing to be well within the province's financial 
capabilities. For example, in 1971-72 the net debt as a percentage of total Ordinary Account 
revenue was 76 per cent. The estimate for 1976-77 is 61 per cent, a substantial improvement. 
Further, the net debt as a percentage of the Gross Provincial Product has also decreased and is 
estimated to be in the order of 16 per cent in 1976-77, in comparison to a figure of 18.9 per cent in 
1971-72. This is a significant achievement.

Indeed, this enviable financial record was recently attested to when the rating agency, which 
improved our rating, stated that the provincial government's management was pragmatic and 
prudent.

Mr. Speaker, an important feature of the budget plan is the conscious restraint being exercised in 
the growth of the public service. The Main Estimates for 1976-77 reveal a planned reduction in 
total positions and no increase in total man years. Such a step is essential if restraint is to be 
effective, for the public service wage bill now amounts to about 40 per cent of the total budget. In 
addition to this restraint, wage guidelines will be strictly applied. There is no alternative.

This is a good budget plan. It is financially sound, and provides for a perfectly acceptable rate of 
growth in expenditures of 15 per cent overall, and in  excess of 17 per cent on Ordinary Account. It 
is indeed a sad commentary on the times we live in that such a rate of growth is considered by some 
as unacceptably low, even though it is quite clear the taxpayer could not afford higher rates of 
growth without paying higher taxes. I am convinced every reasonable person will agree that the rate 
of growth which has been allowed in this budget plan is the highest we should permit.

Mr. Speaker, allow me to present some facts which illustrate beyond the shadow of a doubt the 
need to contain the rising growth rate of ordinary expenditures. When the budget process first 
began, considerable effort was spent on projecting the expenditures required to maintain current 
service levels throughout the next fiscal year. These projections took into account the revised costs 
of operating government programs, and anticipated price and volume increases. No new programs 
were considered. No expanded services, or extensions of existing services were considered. We 
were simply looking for the projected cost of providing existing services.

The figure that was finally determined, for Ordinary Account expenditures only, was $1,023.6 
million. This represented an almost 25 per cent increase in expenditures over the budgeted figure 
for the current year. Accepting such a figure would have resulted in an Ordinary Account deficit 
exceeding $25 million. This was considered completely unacceptable. For example, the amount 
required for social programs alone was more than $140 million over the original budget for 1975-
76. This total was in excess of the entire additional ordinary revenue expected to be received during 
1976-77. The programs I am referring to are those found in the Departments of Health, Social 
Services, Education, including Community Colleges and the Maritime Provinces Higher Education 
Commission, and some smaller departments.

Despite the very obvious importance of the many social programs found in these major spending 
areas, it became quite clear that the anticipated rate of growth was far too high. The consequences 
of allowing rates of growth in the order of 25 per cent would have been an Ordinary Account 
deficit, absolutely no additional funds for economic development, a drastic reduction in funds for 
capital investment, and excessively high cash requirements.

In recent years, Mr. Speaker, the rate of escalation of expenditures on some social programs has 
been substantially greater than the increase in the rate of growth in revenues. This kind of spending 
pattern has been justified, in some measure, in order that New Brunswick citizens could enjoy 
services similar to those available to Canadians in other provinces. However, in order to ensure that 
the province continues to have the ability to deliver the kinds and levels of services of value to all 
our citizens, a moderation in the rate of expenditure growth is essential during the next few years.

For example, the funds required in 1976-77,just to maintain existing levels of service in health, 
education and social services, represented growth rates of 27.4 per cent for health, 34.5 per cent for 
education, and 35.3 per cent for social services. I am sure everyone will agree that such rates of 
growth could not be continued for any significant length of time, no matter how desirable a given 
level of service might appear to anyone person or group of persons. The rate of growth had to be 
arrested or taxes would have to be increased. We chose the option of restraint, recognizing that a 
tax increase would only mask the problem of rising expenditures, which would then have to be 
faced in another year. The following table illustrates requirements by these three functional areas 
and indicates the magnitude of the increases.

All restraint measures have been carefully planned, within the context of the overall policy for 
delivery of services. For example, in the health field we are attempting to consolidate hospital 
services by providing more efficient hospital facilities in conjunction with a network of health care 
centres. This approach allows for a reduction in the total number of hospital beds without affecting 
the quality of care. In addition, a number of regulation changes will encourage New Brunswick 
citizens to make use of our own medical facilities rather than seek service outside the province. In 
the field of education, a more moderate rate of expansion is considered desirable under present 
circumstances. This will ensure a more systematic development of educational service components, 
and remove some of the inequities which have existed in the past in the method of allocating 
monies to school boards.

Significant reductions in the rate of growth have also been achieved in higher education, where 
substantial expansion has occurred in recent years. Let me emphasize that this government has 
given very high priority to higher education in New Brunswick. Total expenditures for this purpose 
over the three-year period 1973-74 to 1975-76 are expected to exceed $125 million. The average 
rate of growth in those expenditures for this three-year period will exceed 26 per cent, compared to 
an average rate of growth for the total budgetary expenditures of this government of less than 21 
per cent. Much as some might like, we cannot maintain this rate of expansion. It is our judgment 
that the overall restraint we are introducing in this budget must apply equally to institutions of 
higher learning. Accordingly, the rate of ordinary expenditure growth allowed for the Maritime 
Provinces Higher Education Commission for 1976-77 compared to the revised budget estimate for 
the current year is 10 per cent, comparing favourably to the 11 per cent applying to the government 
as a whole.

During the past two years, the rate of increase in benefits in social services has been far in excess of 
the increase in the cost of living. This was necessary in order to provide those who are unable to be 
self-supporting with an adequate standard of living. This catch-up phase has now been completed 
and future increases will have to be more in line with rises in the Consumer Price Index. Tax 
increases, in the face of rapidly rising expenditures, do not solve any financial problem. They 
merely postpone it. As long as expenditure growth rates outstrip revenue growth rates, periodic tax 
increases are inevitable, or expenditure reductions are inevitable. One or the other must be faced 
eventually. Those are the facts, and that's all there is to it. We chose not to raise taxes. We chose to 
face the real problem now rather than later. We believe the people of New Brunswick will support 
us in this decision.

Tax increases were also rejected because under present circumstances there is no doubt a tax 
increase would be inflationary. Normally, a tax increase is not inflationary; in fact, it is usually 
considered to be a method of dampening the economy. However, under present circumstances there 
is little doubt, given expenditure pressures, that tax increases would be spent as rapidly as the 
revenue was received. In turn, this would stimulate further expenditure demands which would 
exceed the additional yield from the tax. Further, citizens faced with lower take-home income as a 
result of the tax increase would undoubtedly seek higher wage settlements in these inflationary 
times in order to compensate for higher taxes. Such pressures would also be inflationary and 
completely at odds with our commitment to fight inflation. In summary, we decided that a tax 
increase would be economically undesirable and fiscally irresponsible.

Finally, this government regards tax increases as not being a viable option, given the necessity of 
encouraging economic development through the private sector. We believe it is the government's 
job not to inhibit development by raising taxes, but to encourage development by providing the 
climate in which the economic base can be broadened. In turn, future revenues will be generated for 
better social programs, without the need to increase the burden of taxation.

Mr. Speaker, throughout the expenditure reduction exercise, one principal objective of this budget 
was kept very much in mind-the provision of job opportunities. The level of expenditures on 
development projects under federal-provincial cost-shared agreements, which are intended to create 
more and better employment opportunities for the people of New Brunswick, will be increased in 
the coming year, All o} these agreements, with the exception of FRED, come under the umbrella of 
the General Development Agreement. The major activities fall into four categories: resource based 
development, establishment of secondary and tertiary industry, infrastructure, and special regional 
initiatives.

In the field of resource based development, the most significant area of activity is forestry, with a 
planned expenditure of $10.9 million under the forestry sub-agreement. This agreement will fund 
programs that will assist not only with the utilization of the forest today, but also with the 
development of a better forest for the future through silviculture and other activities on both Crown 
and private lands.

Expenditures of over $3.5 million are anticipated under the agriculture sub agreement, including 
programs to strengthen the existing agricultural base of the province, and to encourage farmers to 
develop new areas of high potential.

New sub agreements are under development for both mining and fisheries, which it is hoped will 
permit us expenditure of nearly $3 million in the course of the year. The proposed agreements are 
directed towards new fields of development in these sectors as well as the strengthening of existing 
economic activity in the province.

In the secondary and tertiary sectors, the principal effort will be through the industrial development 
subsidiary agreement, under which expenditures of more than $8 million are planned. This 
agreement provides support to local initiatives through industrial commissions, as well as providing 
for direct assistance to industrial parks and to the development of new industrial opportunities. The 
tourism and Kings Landing agreements will commit more than $4 million on developing the 
tourism sector within the province through improvements to existing facilities, the development of 
new sites, and the identification of new opportunities within th0 industry.

Some $20 million will be spent on highway construction through the Arterial Highways Agreement 
and through a new highway agreement now under development. In addition, significant 
infrastructure improvements will be financed under the Northeast FRED Agreement and the 
industrial development sub-agreement.

A special effort is again being planned for those parts of the province with special development 
problems, as a supplement to the work carried out in these areas under regular programs and under 
the sectoral agreements. The Kent County pilot sub agreement will commit $1.4 million to 
supplementary programs, including assistance to industry, municipalities, and other development 
initiatives. Eleven million dollars will be spent this year under the FRED Northeast Agreement. 
This will exhaust most of the remaining funds in this agreement through programs such as 
municipal infrastructure, small industry incentives, housing assistance, and the construction of the 
Acadian Village. As honourable members are undoubtedly aware, the development of a new 
agreement for the northeast is currently under way. In anticipation of an early conclusion to these 
negotiations, $6 million has been allocated to this new agreement for the coming fiscal year. The 
new agreements for mining and fisheries will have more effect on the northern part of the province 
than elsewhere, so it is anticipated that an even greater effort will be made than in previous years in 
tackling the persistent problems of unemployment and underemployment in this region. In 
summary, the sectoral and regional agreements are expected to account for more than $50 million 
in expenditures this fiscal year, while an additional $20 million will be devoted to highways.

Mr. Speaker, it should be clear from this brief summary of our proposed development efforts that 
the government regards as its top priority the development of a solid economic base upon which 
high levels of public services and economic well-being depend. This budget continues in the 
tradition of previous budgets by devoting substantial sums to this purpose throughout the province. 
We believe the investment of these monies is an investment in the future of every person in this 
province. I believe it would be short-sighted to sacrifice these funds simply to allow current public 
services to grow at an unacceptably high rate. There are some who may not agree with the choice 
we have made. That is their right. The choice of this government is to invest in the future, not 
mortgage it.

Mr. Speaker, the budget for 1976-77 emphasizes expenditure restraint, financial stability, and long-
term economic development. The budget contains no new programs, and no tax increases will be 
implemented.

My purpose today was to make expressly clear the reasoning behind the difficult policy choices 
which this government has made, and which has led us to conclude that reductions in the rate of 
growth of expenditures is our first priority.

I am sure that hon. members opposite are especially interested in the specifics of the expenditure 
restraint measures which are contained in this budget. I can assure them that my colleagues will be 
announcing shortly the details of all program changes, modifications and other steps which were 
required to reduce the rate of growth in expenditures for the coming fiscal year.

Mr. Speaker, this budget reflects this government's commitment to work to beat inflation, to work 
to keep government from growing too large and too bureaucratic, and to work to keep the province 
financially strong. Only by doing so will we focus the energies of our government on what is 
absolutely essential: first, to create a favorable climate for development and growth of our 
economy; secondly, to provide badly needed jobs; thirdly, to foster opportunities for individual 
growth and achievement, and finally, to provide essential social programs, and I underline the word 
"essential".

Mr. Speaker, a climate of progress, opportunity, development, and protection of the weak can only 
be provided by a government that emphasizes stable economic growth and remains financially 
strong. This budget is dedicated to the attainment of these vital objectives.