Savoie Speaks

You know I have the utmost respect for Donald Savoie. He has thought about the issues related to regional develpment and the intersection with government more than – most likely – any other person in Canada.

So, I tend to take his comments in the TJ this AM as coming from a voice of reason – and he is not happy with the new Equalization formula saying “How the (heck) did they rejig this payment so that the great majority, almost all, of this money flows to Quebec?” Referring to the politics of the thing, Savoie says “I think it’s probably the first government in the history of the country since equalization came about in 1957 to be so blatant about it.”

But I was even more interested in his comments about the ‘self sufficiency’ objective in New Brunswick.

Weaning the province off equalization means replacing nearly one-quarter of the government’s revenue with other sources. “It’s not going to happen just with the energy projects or the growth in Moncton,” said Savoie. “It’s going to take a major wrench of the wheel. “It’s a massive, massive effort – and it’s not just dollars. It’s psychological. It’s a shared goal. It means New Brunswickers changing what’s between their ears. “It requires an even bigger commitment than Louis Robichaud’s Equal Opportunity.”

Savoie is leery of the province seeking more equalization now in order to need less later. Doing that is a recipe for increasing dependence, not lessening it, he said.

He argues that Ottawa must be a full partner if New Brunswick is to reach Graham’s goal, but there is a better way to do it than equalization. Savoie said for Graham to succeed with self-sufficiency, “it’s got to be his all-consuming goal. “He’s got to be driven by it. Obsessed. It’s got to be his passion. “He’s got to sell this concept to Ottawa, to Toronto. “If it doesn’t take 80 per cent of his working time, it’s not going to happen.”

Now, it would be tempting to say that Savoie is a reader of this blog and is just stating more or less what I have said. However, it is more likely – indeed probable – that I have crafted much of my vision from listening to Savoie.

But you know that we are quite aligned:

We both believe that the Feds need to be a ‘full partner’ but that the initiative must be driven by the province.

We both believe that more Equalization now to help us reach self sufficiency later is a problematic construct and that a real Fed/Prov partnership should be structured outside the framework of Equalization.

We both believe that it will take more than just ‘growth in Moncton’ or Energy to solve this issue.

We both believe this is a bigger idea than Louis Robichaud’s Equal Opportunity.

We both believe that this must be the Premier’s relentless passion for the next 4-8-10 years that the people give him.

And implied in Savoie’s comments is my belief that the Province needs to massively ramp up economic development spending and effort.

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0 Responses to Savoie Speaks

  1. Anonymous says:

    Your talking about two different issues though. From this reasoning Savoie and you should be quite ecstatic that equalization is barely increasing at the level of inflation.

    More equalization or less isn’t necessarily going to have ANY affect on ‘dependance’. It MIGHT, but not necessarily. The issue, as I think you correctly maintain, is how much INDUSTRY are they fostering? If equalization means equal industry incentives, then that’s something that will decrease dependance-maybe.

    But then again, how ‘dependant’ on the auto sector and insurance is ontario? Doesn’t it just replace one dependance with another? NB is already ‘dependant’ on the feds and Irving, out of those two I think I’d choose the feds every time.

    IF some new industries come along that would be different, but so far it hasn’t happened yet.

  2. David Campbell says:

    I can’t speak for Savoie but my thinking has always been that any ‘incentives’ or government funding to kick start sectors or to build infrastructure or support training should only be ‘one time’ and tied to a growth strategy. I have never liked the idea of governments subsidizing bad business models. I know there is some nuance to this. But the truth is that $200 million to Chrysler won’t underwrite a bad business model. It may delay the problem for a couple of years (like former Premier Lord’s grant to the Miramichi pulp mill) but in the medium term, it does nothing. Now, governments still give out this cash on ‘compassionate’ grounds or even on a cost substition basis (i.e if the plant closes, we will have to spend $5 million a year on EI, social assistance, finding these people replacement jobs, etc.) but ultimately all you are doing is delaying the problem to the next group of politicians. I think we need to have at least a 10 year and maybe a 20 year time horizon in mind when we look at sector development – not just let’s push it to the next guy.

    But to the first point, if more Equalization is used to fund health care, that will just make us more ‘dependent’. The province must use whatever resources it can to support growth-oriented development. Think of the Ireland example (again I know). They track -ever year- all taxes paid by the companies they support and are showing a massive payback on government investment (in the billions every year). That must be our focus. If we, through the attraction of investment, the fostering of real entrepreneurship and fostering ‘stickiness’ of corporate taxes (forget the ‘rates’) can generate hundreds of millions in new tax revenues and offset, over time, the need for Equalization, we will have the formula.

    But don’t forget, eliminating Equalization has never been my focus. Stopping population decline, renewing our communities and having growth industries that keep our kids here for their career (if they so choose) has been my focus. Reducing Equalization has longer term benefits because you are less reliant on national politics (remember Ralph Klien mused openly about opting out of Federal health transfers altogether) but just about every industrialized country has some form of income redistribution between rich and poor regions and I see no reason to change that. Imagine a country like Brazil which has average income levels in the richest state (Sao Paulo) of 5-6 times that in the poorest state. Imagine that. It would mean New Brunswick would have an average income of $10k or so per year versus Ontario’s $50k (or whatever). So don’t think that I want to jettison Equalization. I just want New Brunswick to be moving in the right direction.