Province
Législ
ature/
Legisl
ature
Session
Type de 
discours/  
Type of 
speech
Date du 
discours
/ Date
Locuteur/
Speaker
Fonction 
du 
locuteur/ 
Function 
Parti 
politique
/ 
Political 
party
Nouvelle-
Écosse / 
Nova-
Scotia
54
1
Discours du 
Budget/ 
Budget 
Speech 
19-04-
1985
John 
Gregory 
Kerr
Minister of 
Finance 
PC


Nova Scotia: Budget speech, April 19, 1985.

    HON. GREG KERR: Thank you, Mr. Speaker. That enthusiasm is wonderful. Pursuant to 
notice of motion given by me on April 15, 1985, and Rule 62 of the Rules and Forms of 
Procedure of the House of Assembly, I have the honour, by command, to present a message 
from the Administrator of the Government of the Province of Nova Scotia, relating to the 
Estimates of sums required for the service of the province for the fiscal year ending March 31, 
1986, which is:
    
    The Administrator of the Government of the Province of Nova Scotia transmits Estimates of 
Sums required for the Public Service of the province, for the year ending March 31st, 1986, and 
in accordance with the provisions of the Constitution Acts, 1967 to 1982, he recommends them 
to the House of Assembly.
 
    At this time, Mr. Speaker, I wish to table the message from the Administrator of the 
Government of the Province of Nova Scotia transmitting the Estimates for the consideration of 
the House, table the Estimate Books, table the Estimate Resolutions, deliver my Budget Speech, 
and move that the Estimates of sums required for the service of the province for the fiscal year 
ending March 31, 1986, being Supply to be granted to Her Majesty be referred to the 
Committee of the Whole on Supply.
   
    Mr. Speaker, I am pleased to present the provincial budget for the 1985-86 fiscal year. It is a 
budget that recognizes the successful policies established by this government. It is a budget that 
takes note of the strong economic performance of Nova Scotia. It is a budget stressing that there 
must now be greater continuing emphasis on deficit reduction without abandoning our 
commitments to people. It is a budget that goes beyond the present fiscal year. It is a budget 
that calls for determination and resolve as we work together to build an even stronger Nova 
Scotia.
   
    Before embarking on details, it is imperative that certain points be made that set the 
environment for the decisions inherent in this document. First, some years ago Nova Scotia 
found it necessary to incur deficits in order to protect its citizens from the worst effects of a 
worldwide recession. The government's commitment has been to maintain essential human 
services and to initiate policies and programs that would lead to the economic resurgence 
necessary for new long-term jobs in our economy.

    That commitment has been honoured. During the worst of times, our economy stood up very 
well; better, in fact, than most other provinces. We assumed the lead in the overall economic 
recovery and today our economy continues to expand at a very gratifying rate. But we have had 
to pay a price, Mr. Speaker. Job initiatives, essential services and assistance to those in need 
cost a lot of money. The decision had to be made, and we made it.
    
    Deficit financing was necessary and essential for the times. Considering the enormity of the 
task we faced, we have managed to control our fmancial requirements remarkably well. 
However, the challenge of the deficit remains and will be addressed throughout the budget.
   
    First, let me briefly outline the economic climate in the province today, and highlight the 
financial environment within which the government is operating. This will emphasize why now 
is an opportune time to implement the measures I am presenting.
    
    The economic performance displayed by Nova Scotia during 1984 was clearly outstanding - 
a definite sign that the economic policies of this government have been sound and positive. Mr. 
Speaker, for the second year in a row, 1984 saw Nova Scotia lead all provinces in terms of 
economic growth, with an impressive real gain in output of 6.7 per cent - a level of growth 
unequalled in this province in the past decade. (Applause)
    
    The strength displayed by the Nova Scotia economy was fuelled by real gains achieved in 
almost every sector, the most notable being in the manufacturing, retail trade and service 
sectors. And Nova Scotia once again outpaced the national average on a number of economic 
fronts last year, including real growth in the economy, in employment and in personal     
income.
   
    The prospects for 1985 are equally encouraging. Real domestic product is forecast to grow 
by 2.3 per cent, on a par with that predicted for all of Canada. Employment is expected to grow 
by a further 1.5 per cent in both Nova Scotia and Canada. Personal income per capita is 
expected to grow by 5.1 per cent, compared to 4.4 per cent for Canada as a whole. Real gains 
are expected in almost all sectors of the provincial economy this year, with notable advances 
anticipated in the wholesale and retail trade sector. This type of commendable performance is 
the catalyst for long-term job opportunities in the province.
    
    Employment growth in recent years has exceeded national average trends. We have     
witnessed for the first time in recent history, net in-migration to Nova Scotia. Also, many of     
our citizens who had given up looking for jobs now feel that prospects are positive and are re-
entering the labour market. These positive trends signal a confidence on the part of Nova 
Scotians and, indeed, of Canadians in the opportunities developing in our province.
     
    Mr. Speaker, in my budget last year I presented a fiscal plan for 1984-85. At $192.3     
million, the operating deficit is now forecast to be lower than last year's estimate. (Applause)     
Furthermore, total financial requirements are expected to be $70.5 million less than anticipated 
last year. (Applause) Forecasted revenues, including prior years' adjustments and expenditures 
for 1984-85, virtually matched last year's budget expectations. It is important to note that 
annual revenue growth exceeded expenditure growth by 1.8 percentage points.

    (Applause)
     
    Mr. Speaker, the past fiscal year was the first in which projects and programs were     
initiated under the Development Fund, pursuant to the Canada-Nova Scotia Offshore Agree 
ment, in order to help provide the services and infrastructure necessary to encourage offshore 
development. These positive signs reflect well on the government's budgeting and financial 
management policies, but we must recognize that the exceptional economic performance I 
outlined earlier is, in large part, due to the recent spending priorities of this government. We 
have incurred deficits during difficult times to maintain levels of human services and to 
encourage economic activity.

    Having established the climate for strong economic growth and having seen that growth 
manifest itself, now is the time to put more effort into deficit reduction. Mr. Speaker, many do 
not understand why it is imperative that governments deal with their deficit situations. With the 
advent of high and continuing deficit levels, all governments have seen their fiscal 
manoeuverability restricted by the corresponding rise in debt service costs. As governments 
continue to borrow for their operations, these costs escalate and absorb an ever-increasing share 
of the revenue base. This restricts the ability of governments to fund services and to generate 
jobs. If left unchecked, the inevitable result is substantially higher taxes, dramatic reductions in 
service programs and substantial reductions in employment levels. We are not prepared to let 
this happen.
    
    Government policies have resulted in solid, long-term employment prospects and have 
preserved the service requirements of our citizens. However, if we do not accelerate action now 
to eliminate the operating deficit, the measures required several years from today will be far 
more severe. Accordingly, this budget outlines the parameters for an equitable, orderly and 
significant reduction in the deficit.
    
    Deficit reduction in 1985-86 has proven to be very difficult given the net loss of $32 million 
in equalization payments. For over 20 years, Mr. Speaker, Nova Scotia has always received a 
year over year increase in equalization payments. The present equalization formula put in place 
unilaterally by the Government of Canada in 1982 anticipated that every recipient province 
would receive an annual increase in equalization payments over the five year term of the fiscal 
arrangements. This did not happen.
    
For 1985-86, the federal government advised Nova Scotia that:

(1) for the first time in more than two decades there would be no increase in equalization; and
(2) more seriously, we would experience an actual decline of $52 million from last year.

    Mr. Speaker, the combination of these factors meant that the actual decline in revenue 
available to the province to fund programs in 1985-86 was far greater than $52 million. While 
the present Government of Canada has provided additional assistance totalling $20 million, it 
cannot be denied that the shortfall in revenues we might otherwise have expected posed some 
extremely difficult problems during our budget deliberations.
    
    Mr. Speaker, in spite of these difficulties, further improvements in both the operating deficit 
and total financial requirements are scheduled for 1985-86. The operating deficit for this fiscal 
year is estimated at $184.6 million, down by $7.7 million from the 1984-85 level. Total 
financial requirements are estimated at $480.7 million, a reduction of almost $8 million from 
last year's requirements.
    
    We have reviewed departmental spending estimates very closely for the coming year. The 
growth rate in ordinary expenditures for 1985-86 is substantially less than that experienced last 
year. As well, revenue growth will once again outpace the rate of increase in expenditures and 
this is a necessary criterion for deficit reduction.

    In addition, there is a $23.8 million decrease in capital expenditures, a deliberate approach 
which I will touch on later. This further illustrates our success in efficiently and effectively 
managing the government's finances under some particularly difficult circumstances.
    
    Mr. Speaker, despite the complex challenges ahead, we remain committed to the preservation 
of essential service levels in this province. We will continue to devote approximately half of 
our expenditures to the maintenance of Nova Scotia's excellent health and education programs. 
In 1985-86, the investment in these two areas alone will exceed $1.5 billion. As an indicator of 
our ongoing commitment, since 1979-80, this government has devoted more than $8.5 billion to 
providing health and education services to Nova Scotians.
    
    Last year, I pointed out how overall government spending in the province generated 
considerable economic activity. Another factor, the Offshore Development Fund, has added to 
this activity. Expenditures through this fund will approximate $100 million by the end of fiscal 
1985-86, a further affirmation of this government's commitment to training, employment and 
development.
    
    The implementation of our manpower and vocational training policies announced in the 
White Paper on Economic Development and highlighted in last year's budget is now underway. 
We have successfully completed our reorganization of the Education and Labour and 
Manpower Departments to provide for a greater coordination of training and manpower needs 
in the province. A Youth Initiatives Office has been established and a Youth Entrepreneurial 
Skills Program has been introduced.
    
    We are continuing to devote substantial amounts of funding towards resource and industrial 
development in the province. As an example, we are initiating, in conjunction with the federal 
government, a comprehensive forest renewal program which will provide for 1,000 new jobs in 
the forest industry. It will also ensure that there will be long-term development potential in this 
important resource sector. There can be no doubt, the longterm policies and programs aimed at 
stimulating permanent and productive jobs in our economy are taking hold.
   
    But economy is more than statistics, Mr. Speaker. It is people, and it is people who require 
and deserve services. Each year, the financial pressures related to those services become more 
and more pronounced. Nowhere is this more evident than in the field of health care delivery. 
Nova Scotia has one of the most generous and comprehensive health delivery systems in 
Canada. (Applause)
   
    The annual costs required to maintain this excellent system exceed the revenues received 
each year for this purpose. For example, during the past four years health expenditures have 
exceeded federal and provincial health service revenues by more than $100 million annually.
    
,
    Since comprehensive federal and provincial sharing of these costs began, the deficiency has 
accumulated to more than $1 billion. Mr. Speaker, the gap must be narrowed. There are two 
choices, reduce the services or broaden the revenue base. Accordingly, we decided to take 
careful and appropriate steps to broaden the revenue base. At the same time, we must protect 
services such as the following:
            
Medical Services Insurance Hospitalization and hospital services Pharmacare for senior citizens
The children's dental plan

Dental screening and referral programs in our schools
Special dental surgery services in hospitals
The province-wide cancer chemotherapy program
The cystic fibrosis drug provision program
Home services by public health nurses
Optometric services
Subsidized ambulance services; and
Regular and special in-patient and out-patient mental health services.

    This budget does that by changing certain exemptions under the existing Health Services Tax 
Act, through the introduction of one administrative limitation, and by adjusting only one tax 
rate, the tobacco tax as it applies to cigarettes alone. No new type of tax is being introduced.
    
    Effective midnight tonight, the tax rate on cigarettes will be increased by four-tenths of one 
cent per cigarette, bringing the total provincial tax to 48 cents per pack of 20 cigarettes. 
(Applause)
    
    With respect to the health services tax, the base will be broadened by removing certain 
exemptions, effective midnight tonight. The following will now be subject to tax:
    
individual articles of clothing costing in excess of $300, excepting essential items individual 
articles of footwear costing in excess of $150, excepting essential items the labour component 
of repair and maintenance charges for tangible personal property.

    The threshold at and under which purchases are exempt from tax is also being reduced from 
50 cents to 25 cents.
    
    In addition to these exemption changes, commissions paid to vendors for collecting the 
health services tax will be limited to $1,000 per year commencing June 1, 1985. All of these 
changes to the health services tax are consistent with current practices in many other provinces.
    
    Let me re-emphasize that these measures do not involve the introduction of any new type of 
tax. Furthermore, only the tax rate on cigarettes has been increased. There will be no increase in 
the individual income tax rate. There will be no increase in the corporate income tax rates. 
There will be no increase in the health services tax rate. There will be no increase in the 
gasoline and diesel oil tax rates. (Applause)
    
    Mr. Speaker, earlier I referred to looking beyond this fiscal year as an essential element in the 
financial planning process of government and all Canadians. This budget takes a major step in 
this regard by outlining commitments to be implemented beyond 1985-86. These measures are 
fundamental to the government's deficit reduction plan and by announcing these major changes 
now, sufficient time will be afforded all of us to properly plan for the adjustments that will be 
required.
    
    In accordance with this planning and in accordance with this government's stated intention of 
1983, the power rate subsidy will continue until April 1, 1986, at which time it will be 
terminated. Rate stabilization through the reduction of Nova Scotia's dependence on imported 
oil for power generation has been achieved. The principle of security of supply has been largely 
accomplished through the increased use of Nova Scotia's own native fossil fuels.

    Municipalities, school boards and other grant recipients have faced budgeting difficulties and 
delays in the past because their fiscal years do not coincide with the government's fiscal year. 
Accordingly, to ease this particular strain, the government will work with them to bring their 
fiscal years in line with ours. This necessary streamlining approach will allow for longer term 
and more realistic common planning within a tightened grant structure.
    
    Earlier I referred to a reduction in the government's own capital expenditures. This trend 
must and will continue with a view to achieving a similar annual rate of reduction in years 
ahead. Capital grant expenditures, particularly for hospitals and schools, will be controlled 
through a system of scheduled annual allotments over a number of years. Applicants and 
recipients will know by the end of this year how they fit into a long-term timetable of maximum 
annually available funds. Government will meet this year with the affected parties for schedule 
implementation in the fiscal year 1986-87.
    
    The Public Service wages represent a V((ry large part of the cost of government. All of us 
paid from the provincial Treasury will have to lower our expectations. As well, the whole range 
of grants the government provides places a great financial strain on the province. Recipients of 
these grants must also reduce their expectations and understand that future increases will be 
limited.
    
    Finally, in order to assist in controlling the size of the Public Service, the government will 
proceed to design and put into place a voluntary retirement program with appropriate pension 
and associated benefits for those wishing to take advantage of it. (Applause) Well, Guy and the 
Premier appreciated it.
    
    Mr. Speaker, I must now take very special note of the advice offered by Nova Scotians over 
the past year. I have heeded that advice in many, many instances and very much appreciate the 
spirit in which it has been put forward. I know, too, that this sentiment is shared by my 
colleagues.
   
    The measures I have announced will require substantial adjustments by all of us. The keys to 
the success of the strategy I have just outlined are equity and stability. A fair analysis of the 
budget's intent will reveal that it does not target any specific group or sector. It does, however, 
call upon all of us to think before we initiate increased or new demands on the public purse and 
it most certainly does require a sense of fair-minded resolution from government itself. 
Together, we have strengthened the provincial economy. Our goal is to continue in this 
direction. Together, we will achieve it. Thank you very much. (Applause)