Take a different path, and cut costs

The output of the task force on self-sufficiency has provided a sensory overload due to the incredibly rapid completion of its work and the scope of its mandate. In three months, a total of three reports, a consultation schedule and final report have been completed. The chairmen as the authors of the report, provided a ready-made solution. A large number of ideas have been suggested that will dramatically impact this province with very little proof that the end result will be positive. Donald Savoie, an economic guru to the Provincial government indicated “we will never know until we try” and ” the alternative is not attractive”. I find this an underwhelming endorsement. Although the wordsmanship on this report is gorgeous, we are being asked to buy a pig in a poke.

My previous column suggested the mathematical folly of expecting large increases in employment after investing only a billion dollars. Government revenue comes from taxes, which are based on a small percentage of sales or income. Therefore, reducing government spending by a dollar is the equivalent to creating between $4 to $7 in new job income. It seems apparent that achieving the task force goal by reducing expenses of government is more effective than spending money to create jobs. If you were consistently spending 22% more than your budget or borrowing from a rich uncle, the banker would insist that you cut expenses. The following three ideas tackle the expense side of the question, which is virtually ignored in the report.

First – Get rid of the provincial debt right now! The Premier could eliminate a $365 million interest charge annually by the following means: the debt of New Brunswick is roughly $6.6 billion dollars. An agreement with the government of Canada to pay off the provincial debt immediately in return for an annual reduction of the equalization payment by $1 billion for the next seven years coming would remove interest payments on the debt. This would be a sign of confidence from the Premier that he believes his plan will work and it puts a fire to the feet of the government. We can only expect real change when we have a burning platform and we have to jump.

Secondly, Canada’s federal and provincial government structure was designed in an era when mail took weeks to deliver and telephones did not exist. Over time what we expect government to do has grown and although efficiency has improved, the basic structure prevents large savings by total re-engineering. Let’s use an example – your driver’s license. You can legally drive across Canada with it. Every province issues them with 10 different departments of motor vehicles, office buildings, computer systems, IT people, managers and so on. If we were building a country today would we do it the same way? Do we really care if it is issued by a particular province? Or perhaps the driving license becomes just an attribute associated with a national identity card. And we can find hundreds of examples and departments where large savings could be made. Canadians are saddled with inefficient government and it costs us dearly.

Imagine a virtual government where all back office functions (accounting, planning, research, management, etc) are centralized in various provinces and increase efficiency. The major banks implemented this type of consolidation to compete globally and they now make billions. The use of technology can permit almost equivalent service with many fewer people. The banks are not a perfect example as the central locations in this case would be in different provinces, not Toronto. Each province would retain the necessary frontline healthcare workers, teachers and others groups close to their citizens. The participation in this consolidation would be voluntary and the benefits would flow to the provinces, in the degree that they participate. There is a real possibility that New Brunswick could serve as the catalyst for total Canadian governmental re-engineering.

New Brunswick has an annual government payroll with benefits of $2.2 billion and over 31,000 jobs. If 20% of these jobs could be eliminated as a result of re-engineering, then perhaps $335 million ($440 million savings annually minus lost government tax revenue) could be eliminated. A portion of the retained back office jobs would be situated in New Brunswick. The massive retirement of baby boomers is imminent and this consolidation could provide a partial solution.

Thirdly, if the province were to review and reduce operating expenditures by only 5% ($300 M), then a total reduction of these three steps would be $1 billion which equals the cut in equalization and the province would have no debt as a bonus.

As a fourth step for growing the economy, NBIMC (the NB provincial pension fund manager) could increase its investments in new and growing New Brunswick companies, perhaps through the provinces economic development agencies, with a reasonable return to NBIMC. This is not a tax increase or a debt funded government spending initiative. It is simply the use of some pension fund money in New Brunswick instead of elsewhere in the world. With $8 billion dollars under its wing, a transfer of $1 billion should be feasible without jeopardy to the fund’s integrity. The alternative to this method would be to use the liquor store bond idea and increase debt. Need I say more?

New Brunswick has a high population density for Canada – 10.5 people per square km versus Canada’s average of 3 but a small total population base. Provinces with larger populations can support a provincial government structure better and a good natural resource base helps as well. The consolidation of provincial back office functions seems to be an excellent way to reduce the cost of government. These concepts would permit Shawn Graham and Steven Harper to cooperate on a grand scale, working above politics and providing them with the opportunity to define statesmanship.

Premier Graham should be commended for opening the debate on the governance and direction of this province. Unfortunately, a limiting question and abbreviated timetable has sabotaged the effort.

We would have been better served by asking – How can New Brunswick foster a culture of entrepreneurs and build a sustainable economy for the future that we are likely to face? – A future that will be vastly different from the past 25 years. And how can we repay the environmental deficit that we have created in a credible way?

The Task force asks us to believe that New Brunswick is the best and most dynamic place to work. “Branding” and dramatic change is necessary. Our confidence might be increased if the Premier thinks a little further outside the box and endorses a program that is designed to work. Let’s check the road map and put the car into drive before stepping on the gas? Otherwise we may end up in reverse on a dead end road.


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