Budget 2016

Don’t let the name of Manitoba’s latest budget “Correcting the Course” fool you: this budget stays the course, at least in the immediate term. It is a status quo budget that continues with many of the initiatives of the previous government and does little new to address income inequality and poverty issues. If one is to glean any information as to how they plan to really change course, one needs to unpack some of the messaging incubating in the background information. We’ll get to that in a moment, but first let’s examine what hasn’t changed much, and why.

The Progressive Conservatives ran on a platform of eliminating the deficit which they now claim sits at $1.1 billion. They now plan to do this in eight years. Part of the reason they will take so long to balance the budget is that they have not identified any new revenue streams to pay down the deficit while maintaining spending increases.

The other reason the new government is not yet acting aggressively to bring down the deficit is that there is no pressing need to do so. The debt to GDP ratio forecast is 33.8%, still lower than Ontario, Quebec, Nova Scotia, New Brunswick and Newfoundland and amongst the lowest in the developed economies.

The tax changes presented, inconsequential as they are, will decrease revenues. They have increased the cutoff point after which small businesses pay tax, and tweaked the personal income tax exemption and indexed tax rates to inflation. These measures will do little to help low-income earners.

The PCs promised to “put more money on the kitchen table” however there is no new money to address poverty. As noted, the main plank in the PCs poverty platform is increasing the basic personal exemption from $9,134, indexing it to inflation up to $9,292. This takes 2,770 Manitobans off the tax rolls. These Manitobans will save only $16 per year from this change, not even enough for a box of diapers. The other change is indexing tax brackets to inflation. The government estimates this will result in a saving for those who earn between $31,001 – $67,000 of $10 per year.

There is no increase to the basic needs budget for those on social assistance; with the high rate of food inflation, more low income people will be forced to rely on food banks. Manitoba won’t be “most improved” for the 140,000 people who live in poverty, including the working poor.

For the first time in 17 years, there is no mention of the minimum wage in a provincial budget . Currently minimum wage is $11/ hour and a full time wage earner earns only $22,880 per year. If we go by the new government’s own projections of inflationary cost increases of 1.73%, the minimum wage should be increased to at least $11.20/ hour or $400 more per year. By not increasing the minimum wage by the rate of inflation, low-income wages will actually decrease by this amount.

Anti-poverty advocates asked for much higher increases to the minimum wage to lift workers above poverty line. Setting the minimum wage at $15.53/ hour in 2014 dollars was a recommendation in the View from Here: Manitobans Call for a Renewed Poverty Reduction Plan. This is what is required to bring a single parent up to the poverty line.

 

So far it’s hard to see how Manitoba is going to be ‘most improved’, especially for low-income people. But it will likely get worse in several areas that are not specifically costed out in this budget. Clues are peppered throughout the Budget Papers.

Social Impact Bonds

This new government is moving swiftly to bring in Social Impact Bonds (SIB), which are not a bond per say but a way of financing a specific social program for a fixed term of time and a guarantee of interest return for private investors. This is a form of public-private partnership in which financing, service delivery and ostensibly risks are transferred from the public to the private sector according to a CCPA MB Report by Dr. John Loxley.

The budget speech explains that the province will begin consultations to set up Social Impact Bonds (SIB) this year. This will most likely take place related to justice, child welfare and childcare programming, as SIBs were specifically highlighted in the mandate letters to the Ministers of Justice and Families .

SIBs are a new approach and the evidence of their success is mixed. Programs with the most profitable return on investment are selected to be financed by SIBs, leaving other programs to compete for limited public dollars. If the initiative fails legal agreements require governments to give investors a guaranteed return and still government has to pick up the pieces.

Not only is creating a profit motive when working with vulnerable people morally questionable, SIBs add an expensive and inefficient layer of administration that funnels tax payers’ money into the private sector. Hopefully the finance minister will apply a Value for Money analysis on SIBs before implementing them. He will likely learn that existing funding mechanisms are much more economical.

Other concerns such as the cancellation of the East Side Authority, cancellation of Project Labour Agreements and lack of information about how infrastructure money will be spent do not bode well for equity-seeking groups who are trying to get decent jobs.

A commitment to “modernize the governance of Crown Agencies to eliminate political interference in their business operations” signals a move away using Crowns as regional development tools and allowing private-sector interference (also known as privatization). These are areas that must be monitored.

A final note

The messaging around this first Conservative budget is confusing – and clever. They accuse the previous government of fiscal mismanagement while speaking in favourable terms of the strong economic fundamentals they inherited. They criticise the last government for reckless spending, then emphasize how much they are increasing spending themselves.

The mixed messaging at the moment keeps critics at bay. But there are plenty of clues that the course will indeed change.

When they do, we’ll be there.

Molly McCracken is the director of CCPA MB and Lynne Fernandez holds the Errol Black Chair in Labour Issues at CCPA MB

 

 

 

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