Newfoundland and Labrador has entered into a dire economic crisis as oil prices have plunged over the past two years. This has led to a massive 30 per cent gap in government revenues in the province and created the deepest fiscal crisis of any province in Canada. The provincial Liberal government of Premier Dwight Ball has reacted to the revenue gap by instituting a 30 per cent cut in every government agency and department, including health and education.
The 2016-2017 budget unveiled by NL Finance Minister Cathy Bennet includes cuts to almost every social service, a host of tax increases and government-fee hikes. These are likely the deepest government spending cuts in the history of Newfoundland and Labrador.
Every Department Slashed
The slashing of the health budget by 30 per cent has resulted in medical clinics closing in Gander Bay, Carmanville, Hare Bay and Hermitage. Eastern and western health agencies in the province have announced 120 layoffs in total, mostly affecting the province’s nurses. Breast cancer screening is being reduced, mental health services are being eliminated and a nursing student residence is being closed, with hours slashed for employees and cafeteria food at hospitals set to climb by 20 per cent.
Over 50 beds in long-term health facilities will be closed, including the Masonic Park long-term care facility in St. John’s. The Newfoundland & Labrador New Democratic Party (NL NDP) has responded by raising concerns over an apparent conflict of interest. The premier is a partial- owner of Sundara, which is a private alternative long-term care provider that is a competitor with publicly owned care facilities. While Ball tells working class Newfoundlanders to tighten their belts, he stands to personally gain from his austerity measures.
The education cuts have resulted in the closure of five schools – so far. In 2016 alone, 77 teaching positions were cut from the provincial education system. Over the last four years a total of 200 teachers have been fired. The decline of the provincial education system, which began under the previous Progressive Conservative government, is rapidly worsening under the Liberal government’s 2016-2017 budget.
The provincial NL Federation of School Councils has explained that “[t]he impacts of the draconian provincial budget imposed on our children’s education has rolled back progressive gains made over the last twenty years”. Funding for public housing has also been slashed by $21.8 million.
In addition, over half of the libraries in the province (about 54 branches) are set to close in the next two years, with 64 layoffs already announced. It is important to note that the Liberals ran a campaign on the promise of protecting public sector jobs during the 2015 provincial election.
The cuts to post-secondary education have been amongst the most dramatic. $8 million has been cut from this budget, with a projection of $10 million cut per year for the next three years. The government has thus far insisted that tuition fees should not be increased, as they feared the impact of a potential student strike. As a result, the rollbacks have been mostly made to maintenance, travel and the implementation of an attrition policy where new hiring will be reduced. Therefore while the tuition freeze continues to be maintained for the time being, students will quickly find that the quality of their education has suffered major blows.
Who Pays for the Crisis?
On top of cuts to public services, the Ball government has plans for significant new taxes as well as government-fees that will hit working class Newfoundlanders the hardest. These taxes are mostly regressive affecting the price of goods upon which most people depend on to survive, while the province’s elite are largely left off the hook.
The Harmonized Sales Tax has been increased from 13 to 15 per cent. A gas tax totalling 18.65 cents a litre has been added, which doubled the existing gas tax and has contributed to a nearly 30 per cent rise in the cost of gasoline in the province. A provincial tax of 15 per cent has also been introduced to insurance premiums. Fees have risen for a total of 300 licences, permits, inspections and fines, while 50 new fees having being introduced. The province is also the first in Canada to introduce a tax on books!
A “Deficit Reduction Levee” was originally going to be introduced in the budget, which would have been placed on anyone earning more than $20,000, and which would start at $300 and increase with income. Under popular pressure, the levee was significantly reduced and would only begin with those with incomes of $55,000, who would now pay $100 (instead of the original $600 at that income level).
Statistics Canada has highlighted that the inflation rate has soared in Newfoundland and Labrador as compared to other provinces, primarily due to these new taxes. The Consumer Price Index found that the price for a selected basket of goods, used to determine the cost of living, went up by 4.1 per cent. This is compared to a 1.5 per cent rise in the rest of the country.
While the working class is forced to carry the burden of the government’s budgetary crisis, the province’s elite are largely given a pass. The province’s wealthy oil barons will see the corporate tax rate rise by a miniscule 1 per cent. The bankers will likewise see their taxes go up by a single percent. In terms of the manufacturing, the government has decided that their contribution will be that they will no longer receive subsidies or “corporate welfare”.
The provincial Liberals are doing everything they can to ensure that their corporate friends are exempt from paying for a crisis that was created by them. Indeed, many of the provincial Liberal politicians are themselves part of the corporate elite. To highlight the hypocrisy, when considering additional taxes for the budget, Finance Minister Bennett opted not to create a fast food or sugar tax. As the owner of nine McDonalds restaurants in the province, her profits would have been hit by the introduction of these taxes!
What is clear is that the government policy is aimed at putting the burden of the crisis almost entirely on the backs of the working class, who had no part in creating the crisis. Meanwhile the capitalists who do business in the province have made massive profits in the past period, especially based on the oil boom. The bosses will now quietly retreat unaffected, carrying with them their accumulated wealth while leaving the province devastated.
Unfortunately, these painful austerity cuts are only just the beginning. Despite all the tax increases and cuts to government spending, there is still a nearly $2 billion deficit expected for the 2016-2017 year (on a budget of $8.5 billion). Total debt is expected to reach nearly $15 billion, which is approximately 50 per cent of Newfoundland and Labrador’s GDP. The government is already spending $1 billion on debt servicing (which is more than all education spending combined).
According to the premier, this represents $54,000 for every person in the province. It is therefore clear that the announced cuts are only the beginning, and the working class will be expected to pay even more in the future.
To add insult to injury, a scandal has erupted around the cost over-runs at Muskrat Falls where a hydroelectric power station and dam are being built. This public-private partnership between the Nalcor crown corporation and the privately-owned Emera was originally quoted at $6 billion in 2012, but so far it has cost $11.7 billion.
This project started by the previous PC government and continued by the current Liberals was billed as providing much-needed clean energy, jobs and economic development. What residents of Newfoundland and Labrador have seen is increasing costs and smaller returns.
Furthermore, Labradoreans, especially those in Happy Valley-Goose Bay, have seen their drinking water contaminated. This has sparked a new round of mass protests in communities around the project. The government’s deafness to the concerns of local residents, in addition to the project representing a significant hole in the budget, has led to become a major scandal in the province.
Capitalist Crisis and Overproduction in Oil
The budgetary crisis cannot be separated from the global context of overproduction in oil, which has led to a historic drop in oil prices. Falling prices have simply made Canadian oil extraction uncompetitive on world markets. This has led to sporadic closures on the Hibernia, Terra Nova and White Rose offshore oil projects.
From 2014 to 2015, oil production dropped by 20.5 per cent, and the value of oil production dropped by 50 per cent to $4.1 billion. The provincial budget has for years been dependent on the royalties gained on the extraction and sale of oil.
These royalty agreements are an unfair compromise between the government and companies like ExxonMobil, Suncor Energy and Husky Energy. Shareholders sit comfortable in Calgary and New York making billions while a small fraction of these profits go to Newfoundlanders.
However, oil royalties have made up huge part of the province’s budget in the past ten years. To put things into perspective, oil royalties made the government $2.8 billion in 2011. This accounted for 31 per cent of the budget. In 2015 oil royalties brought in only $551 million.
The crisis in oil also affects employment in the private sector. While the international price of oil remains low, profits in the sector remain squeezed. The North Atlantic oil company, which owns the three refineries in the province, has laid-off more than 100 workers. At the same time, the owners are increasing production by increasing the pace or intensity of work. There have also been notable workplace accidents including explosions and fires since the workforce has been cut down.
As of December, the provincial unemployment rate sat at 15.2 per cent, more than twice the national average. In the past, many unemployed workers in Newfoundland and Labrador would go to work in the Alberta oil patch, but as those jobs have dried up these workers have nowhere to go.
In a very concrete manner, Newfoundland and Labrador is being devastated by the global crisis of capitalism. The historic dependency of the province on natural resources, first with cod, and then with oil, makes the economy very sensitive to global price changes and overproduction.
The inability to diversify the economy or to provide adequate support during times of lower demand for the province’s natural resources arises from the capitalist free market system, which prevents the development of a nation-wide plan of production. Production under capitalism is not organized for social need or to protect the interests of the vast majority.
Production is organized based on the profit-motive and in the interests of the capitalist owners of industry, resource extraction, finance and other key sectors of the economy. The nationalization of the strategic sectors of the economy – and particularly the energy sector – would be vital to protecting the living standards of workers in Newfoundland and would allow the economy to be re-organized in the interests of the majority.
Newfoundland Rising (#NLRising)
The drastic nature of the austerity measures has sparked a wave of anti-government protests and action. The budget release in the spring of 2016 was quickly followed by a summer of mass protests. Many unions and community organizations began their protests with a letter writing campaign. Even organizations such as the Boys and Girls Club in St John’s wrote open letters explaining how they couldn’t cope with the 30 per cent cut to their budget.
One change.org petition calling for the immediate resignation of the government received nearly 13,000 signatures. Thousands of posters went up in St. John’s calling on Premier Ball to resign. Online reactions against the budget were reflected in the popularizing of the hashtag #NLRising.
The anger in society was manifested in demonstrations. Many protests occurred at constituency offices of Members of the House Assembly (MHA). Demonstrations occurred outside of the McDonald’s restaurants owned by Finance Minister Bennett. Students demonstrated against a potential tuition hike. Even pro-life groups came out against Ball. Protests voicing discontent at the budget spread to small communities, with significant protests in at least 15 towns across the province.
The climax of the protests was the massive demonstration in front of the Confederation building on May 7 in St. John’s, where the House Assembly is based. Most of these demonstrations were family affairs, which included children. During the summer months there was clearly a sense of mass rejection of the government from both unionized and non- unionized workers, youth, students, children, urban as well as small town communities.
What is to be done
Although the movement has recently subsided, the burning anger of many in the province has not declined during the winter. The next round of austerity from the Ball government will be in public service sector negotiations in the spring of 2017. Ball has said that the previous budget with its cuts "are drops in the bucket" with regards to the remaining cuts that need to be made. They will likely aim to implement wage and benefit cuts as well as two-tier contracts which discriminate against younger workers and new hires.
Jerry Earle, the president of NAPE, the provincial public sector union, and the largest union in the province, said in December that he will not accept concessions in the negotiations. This sets the stage for a new wave of struggle in the coming year.
First steps have been made in this regard by various unions. The provincial teachers’ association (NLTA) started a mass letter writing campaign last spring. The leadership of this union has since met with the government. The NLTA received nothing but contempt and are now openly calling upon the education minister to resign.
The Canadian Federation of Students – NL, which represents post-secondary students, openly came out against the cuts last summer. After the tuition freeze concessions made by the government, serious organizing activity has declined. However as the cuts are felt it is likely that the movement will re-erupt on the campuses. The student movement must make every effort to connect to the struggle of the broader working class, especially with the trade unions.
The trade unions must put themselves at the head of the struggle against layoffs, concessions and austerity by uniting with community and student groups. This would allow the enormous social anger in the province to be channelled behind the labour movement. Union halls need to be the focal point in organizing mass rallies and strikes to bring down the government.
To win the coming struggles, trade unions must unite the broadest layer of the working class and those affected by the crisis in struggle against the Liberal government and the corporate interests that stand behind them. Given that the Liberals will not back down from the austerity measures, the logic of the mass movement is towards escalation. If the struggle is to be successful, it would have to use tactics leading to a one-day general strike to bring down the government.
The Liberals are falling in the polls due to the backlash against the cuts. Meanwhile the NL NDP’s popularity has increased from 8 to 23 per cent as it has come out in opposition to the austerity budget, while also supporting an increase in the minimum wage. The NDP also led a 74-hour filibuster on the deficit reduction levy. The NL NDP must act as the provincial parliamentary voice for the social and trade union movements.
It must be understood that given the parlous state of the province’s finances, on the basis of capitalism austerity is inevitable. In the context of a crash in oil prices and the global capitalist crisis, even a provincial NDP government could do nothing stop austerity or to prevent rising unemployment. Unlike the Alberta NDP, the NL NDP would not even be able to delay austerity measures through borrowing as the province is in massive debt and already pays large amounts of interest to the lenders.
Only the struggle for socialism, including ending the anarchy of the free market and instituting a democratic plan of production based on social need and not profit, can end the crisis and the drop in living standards. Until then, the province’s economy will be tied to the instability of the world market and dominated by the oil, banking, and industrial bosses.
The working class and youth of Newfoundland and Labrador have initiated an inspiring struggle over the past year. This struggle is only the beginning and it must be seen in the context of broader struggles across Canada, from Nova Scotia to Quebec to Alberta, against the attempt of the capitalist elite to place the burden of a crisis they have caused on the backs of the working class, unemployed and youth.