N.B. deficit could hit $1B in 2010-11: Higgs

Finance Minister Blaine Higgs is warning that New Brunswick's deficit is poised to reach $1 billion next year unless there is an urgent course correction by the provincial government.

Higgs offered his views on the state of the province's finances in front of the Saint John Board of Trade on Monday.

The finance minister told the business crowd that he will table the province's 2010-11 fiscal update later this week, showing the deficit is now wider than $800 million, compared with the $749 million projected by the Liberals before the election.

"The simple truth is, as a government, we are spending more money than we receive," Higgs said.

"In fact, the gap between spending and revenue could hit a billion dollars a year as early as next year's budget if it is left unchecked. We must and we will take decisive action. Our fiscal circumstances are unprecedented and simply unsustainable."

David Alward's Progressive Conservative government will unveil its first throne speech on Tuesday.

The Tories were greeted with a spate of gloomy economic news shortly after winning the Sept. 27 election. The province's unemployment rate is hovering close to 10 per cent, and Standard and Poor's downgraded the provincial outlook from stable to negative.

The finance minister is also warning that there could be problems handed down from the federal government. Federal transfers account for 41 per cent of New Brunswick's revenue and Higgs points out that several deals — including equalization, Canada health transfer, and Canada social transfer — are all facing renewal in 2014.

And Higgs said the federal government is starting to wrestle down its own sizeable deficit.

Finance Minister Jim Flaherty said over the weekend that Ottawa is staring at some tough fiscal choices.

'Setting the stage'

Liberal MLA Donald Arseneault, the opposition's finance critic, said Higgs appears to be preparing the public for a tough throne speech Tuesday.

Arseneault said the finance minister's speech proves the Tories made too many costly promises during the election campaign and they are now having problems finding the cash to fund them.

"They are setting the stage. That is easy to see. It sets the stage to say that [the Tories] made too many promises and we can't do them in the timely manner that we thought. I can see that contract that [Alward] talked about broken again," Arseneault said.

"I think this sets the stage that these major promises, he is going to have backtrack on or at least postpone."

The Liberal finance critic said he would like to see the Tories adopt some of the policy ideas his party pushed during the election, which Arseneault said would be less costly.

Pre-budget meetings

Higgs is preparing to launch his first round of pre-budget consultations as minister of finance.

In addition to holding public meetings across the province, the finance minister is encouraging people to participate in an online questionnaire that will be posted on the Department of Finance's website.

Higgs said he will be asking New Brunswickers themselves what the upcoming budget priorities should be, whether the government should raise revenue, such as taxes, to address the fiscal problems.

And if they want the government to collect more money, then what measures should be taken.

Premier David Alward has already ruled out raising the Harmonized Sales Tax. A one per cent increase in the HST would raise $125 million in new revenue.

Raising the HST by two per cent, which would bring it to the same level that existed before the federal government reduced the Goods and Services Tax, would slice $250 million out of the deficit.

Higgs said he also wants people to identify areas of wasteful spending and target possible areas for budget cuts.

The finance minister said citizens have to ask "tough questions" and must expect "honest answers."

Health is one area of government that could be facing changes, according to Higgs.

"It is time for politicians to be brave enough to admit that we've been building bigger but not necessarily better for decades. Mostly what we've bought ourselves is a bigger problem and bigger debt," Higgs said.

"The 'me-too' philosophy must change. Rationalization of services will be forced upon us through our inability to pay unless we begin the process of doing what is right and allowing common sense to prevail."