A little smoke, a couple of mirrors

A little smoke, a couple of mirrors — that’s the way to sell a so-so budget to a hungry population.

Nunavut Finance Minister Kelvin Ng’s 2002-3 operating budget is not deceptive — strictly speaking. For those willing to take the time to pore through it, its strengths and weaknesses are all there to be found. But when the shine wears off, the show-piece items the government is using this week to dazzle the eyes of the public, its weaknesses will become easier for the public to find.

The brightest show-piece items are measures that will bring real benefits to wage-earners, especially middle-income workers who earn between $30,000 and $100,000 a year. This relatively small group contributes 70 per cent of the territory’s personal income tax revenue, even though they only make up about 30 per cent of all Nunavut taxpapers.

There’s no doubt that the government’s reduction in personal income tax rates will put real dollars into the hands of working people in Nunavut. Not only will this provide some modest relief from our punishing cost of living, it will make Nunavut a slightly more attractive place to live for skilled professionals and trades-people, which Ng says should help the government in its recruitment efforts. The higher personal tax credits may also help some lower-income people, reducing taxable income to a level where they will pay no tax. It may not be much, but it today’s conditions, every dollar counts.

The reductions in corporate income tax will do no harm either. Ng says that, together with lower personal tax rates, these measures will make Nunavut more competitive with other provinces and territories. The government hopes that this will encourage investment by providing businesses with an incentive to locate in Nunavut.

Perhaps Ng is right — it’s a strategy that has worked for business in other jurisdictions. But Ng must also know, surely, that businesses face many other disincentives in Nunavut: high fuel and power costs, rising transportation costs, severe shortages of affordable office space and staff housing, and a shortage of skilled labour.

Still, cutting income tax rates is a fairly easy thing for the Nunavut government to do. The lost revenue is minor concern — because it represents only a tiny proportion of Nunavut’s revenue.

The government’s total tax package is expected to cost the government only $6.7 million in lost cash. Compared with the $745.5 million that the government expects to receive in 2002-3, and the $681.8 million that Ottawa will contribute to that, it’s a pittance.

So the government is paying a rummage-sale price for a high-class piece of political goodwill, and they’re sure to exploit it now to help us forget the fat new pension plan that MLAs voted for themselves not so long ago. But they also deserve some moderate praise for using the tax system as a social and economic policy tool.

Another glittering bauble is the increased budget for the department of health and social services, which is now projected at $156.9 million for 2002-3, compared with the $123.4 million projected for 2001-2. But almost all of that increase merely reflects what it actually costs to run Nunavut’s health-care system — not what the cabinet would like it to cost. That perennially under-funded department actually spent $151.6 million last year.

The extra money for mental health services and alcohol and drug treatment are welcome, of course. But the systemic health-care problems in Nunavut that were recently revealed at the Romanow Commission’s recent hearing in Iqaluit are likely to plague us for some time to come.

Soon enough, Nunavummiut will notice the budget’s weaknesses. They’ll notice that the department of education’s budget has actually shrunk a little. It’s projected at $172 million, down from the $174 million projected last year.

The education department’s capital budget is almost $15 million lower than last year’s, and there’s no new money for curriculum development, the production of teaching resources, or student and teacher evaluation. In a year when Education Minister Peter Kilabuk and his officials will want public to support for their new Education Act, this won’t help their credibility. And their credibility with teachers will sink even lower than it is now.

The government is also making a lot of noise about the extra money going to the tiny culture, language, elders and youth department. The increase, somewhere between $1.5 million and $2 million, is small in real terms, and looks large only in comparison with its minuscule budget.

The Nunavut government got lucky this year, taking advantage of a surplus produced by last year’s one-time bump in federal transfers to produce a feel-good budget 18 months before the next election. Nunavut’s financial stability over the long term is still uncertain.

JB