CANADA

Budgeting for a heavy deficit

PETER CARLYLE-GORDGE March 7 1983
CANADA

Budgeting for a heavy deficit

PETER CARLYLE-GORDGE March 7 1983

Budgeting for a heavy deficit

When Manitoba NDP Finance Minister Victor Schroeder brought down his provincial budget last week, Conservative Opposition Leader Sterling Lyon sported a lapel button that read: DON’T BLAME ME—I VOTED CONSERVATIVE. One reason was that Schroeder revealed that last May’s estimated deficit of $334 million had uaccountably swollen to $495 million. And Canada’s only NDP government had to admit that this year’s deficit will jump to $579 million.

Manitoba now has one of the heaviest per capita debts in Canada—almost $6,000 per person. Schroeder’s budget tried to ease the problem by raising corporate income tax from 15 per cent to 16 per cent. At the same time, he boosted sales taxes, which have not been raised since they were introduced in 1967, by one point to six per cent. Tax increases will also raise the price of a package of cigarettes. Despite pleas from the business community—already angered by a recent 13-per-cent civil service pay increase in one year—the government also maintained a 1.5-per-cent payroll tax introduced last year as well as a two-per-cent surtax on banks.

Schroeder’s budget was of necessity a harsh one for consumers. But University of Manitoba economist John McCallum believes that his figures disguise an even more desperate situation. Said McCallum: “I can easily foresee a real deficit this year of more than $700 million.”

For the work force, however, the budget held some promise. Much of the $74 million raised from sales and corporate tax will be pumped into a $200-million job creation fund. With 54,000 Manitobans out of work (10.8 per cent) and business closures increasing daily, the government is under strong pressure.

But Schroeder admitted that many of his job schemes are dependent on joint financing by Ottawa and municipal governments. If the other levels of government do not respond, he warned, Manitoba would have to abandon the projects. If that happens, the finance minister will consider taking $70 million from the job fund to help trim the deficit. Standard and Poor’s Corp., the New York City bond rating agency, is watching Schroeder’s moves with interest. In fact, the firm could reduce Manitoba’s AA credit rating if it concludes that spending is out of control.

For the business community the budget may well be a watershed. Ever since the Pawley government came to power, it has stressed the need for consultation and co-operation between business, labor and government. But the budget changed all that. Said an angry Lloyd McGinnis, president of the Winnipeg Chamber of Commerce: “In an era of Six-and-Five the government comes out with a spending increase of 17 per cent and expects business to pay for it. The government is out of tune with the times. ”

PETER CARLYLE-GORDGE