03/25/2013 12:39 EDT | Updated 05/25/2013 05:12 EDT

Newfoundland Throne Speech: Government Vows Not To Run Up Debt, Hike Taxes

ST. JOHN'S, N.L. - High debt and taxes are not the answer for a drastic cash shortfall, the Newfoundland and Labrador government said in a throne speech on the eve of an anxiously awaited budget.

The speech read Monday by Lt.-Gov. Frank Fagan says the majority Progressive Conservative government will instead set sustainable priorities as it streamlines the public sector.

About 200 government jobs have already been trimmed, and Tuesday's cost-cutting provincial budget will include more layoffs.

The province is at a critical crossroads because of over-reliance on volatile oil prices, Fagan read, adding that its public spending per capita is the highest of any province. This, as the government has forecast deficits that could total almost $4 billion over the next three years.

"There are only two ways to pay for that level of public spending — taxes and borrowing," the government says in the speech.

"We cannot borrow for our day-to-day spending and send the bill to our children down the line.

"We have to live within our means and continue to set clear and responsible priorities."

Premier Kathy Dunderdale said after the throne speech that Tuesday's budget will lay out a 10-year plan to rein in spending and keep it sustainable.

"Look, we know that we're going to lose public sector employees tomorrow," she said outside the legislature. "And I can tell you that is always extremely difficult."

Dunderdale defended record spending hikes in recent years as the government racked up surpluses over six of the last eight budgets on the strength of oil revenues. A big problem is that it anchored its budget last spring using expert advice that predicted an average oil price of US$124 a barrel.

Instead, the price has recently hovered closer to US$109 a barrel. It costs the provincial treasury about $25 million for each dollar the price is below the budgeted amount, Dunderdale said Monday.

Still, she said a forecast deficit of $1.6 billion this fiscal year will be less than feared but she declined to offer details.

Liberal Opposition Leader Dwight Ball said the government's newfound commitment to sustainability comes too late after years of what he called unfettered spending. He accused the Tories of squandering the most wealth the province has ever seen.

"People indeed will be looking for jobs again outside of this province and other provinces like Alberta," he said in the legislature. "Mr. Speaker, like a spendthrift who wins the lottery, the party opposite did not spend wisely or carefully. They simply spent and spent and spent."

Both Ball and NDP Leader Lorraine Michael questioned the government's commitment to the $7.7-billion Muskrat Falls hydro project in Labrador when finances are so tight.

Dunderdale shot back that the development is the province's chance to break away from fossil fuels and diversify the economy.

The government's first bill in the new legislative session, introduced Monday, includes changes to the Atlantic Accord Acts to enhance and clarify regulations for offshore oil safety.

"The amendments will provide a clear and enforceable regime and provide regulatory-making powers in offshore petroleum occupational health and safety," says the throne speech.

Dunderdale said related work has been ongoing for several years but has been delayed by various provincial and federal approvals.

A new three-year program will also be introduced to explore opportunities for the province to become a "gateway to the Arctic" and its oil and gas reserves, says the speech.

The document highlights the government's past spending on construction, roads, schools and services when the province was awash in offshore oil cash.

But the global economic slowdown hit oil and mineral earnings hard at a time when offshore oil production was temporarily down because of scheduled maintenance work.

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