Nova Scotia's ruling Progressive Conservatives tabled a voter-friendly budget Tuesday loaded with tax cuts and generous spending as the province gears up for an election call - expected within days.
Rookie Premier Rodney MacDonald is borrowing a pre-campaign pledge from the New Democrats, promising to give consumers a rebate equivalent to the 8-per-cent provincial sales tax on soaring home heating bills.
The $75-million program will save the average household using heating oil about $200 a year. Most homes in Nova Scotia use oil, but those using electricity will save about $180.
"Clearly, we can afford the program - we budgeted for it," Finance Minister Michael Baker said. "It's the right thing to do. It puts us in the right competitive place with other provinces in our region and our country."
With oil prices hitting record highs recently, the promise of a home-heating rebate is sure to figure prominently in Mr. MacDonald's campaign.
The $6.9-billion budget, Mr. MacDonald's first, is the province's fifth consecutive balanced fiscal plan.
The government is also forecasting, however, a massive $12.3-billion accumulated debt, which stands in stark contrast to its healthy $72-million surplus.
Recent polls suggest that Mr. MacDonald's Conservatives have the support of about 39 per cent of the electorate - enough to win a majority.
The minority government holds 25 seats in the 52-seat legislature, while the New Democrats hold 15 and the Liberals have 10. There is one Independent member and one vacancy.
After their majority win in 1999, the Conservatives were punished by votes in 2003 amid widespread complaints about soaring auto-insurance rates. Since then, the Tories have led a stable minority government with the support of the Opposition NDP.
Meanwhile, the Tories will be quick to trumpet a series of other tax cuts, including a pledge to increase the personal tax exemption, allowing the average individual taxpayer to save about $22 in 2007.
As well, the province will offer a $1,000 income tax credit for new post-secondary graduates, to be used for the first three years after they graduate.
For businesses, the province plans to reduce the capital tax for large corporations to zero by 2012, and increase the threshold for small-business tax payments from $350,000 to $400,000.
Other tax breaks include: removing the motive fuel tax from biodiesel, eliminating the 3.5-per-cent levy on alcohol in 2007 and introducing a 25-per-cent energy-efficiency tax credit.
The province's decision to cut taxes and increase spending reflects a trend that started earlier this year as the provinces took advantage of a strong economy, buoyed by low interest rates and low inflation.
Every province but Ontario and Newfoundland has offered some form of tax cut to businesses or individuals in their recent budgets. Every province, except Ontario and PEI, recorded a surplus or a balanced budget.
Many of Nova Scotia's budget measures were announced, leaked or hinted at over the past month, as the 34-year-old Premier tried to raise his profile by going on a multimillion-dollar, pre-election spending spree.
On Tuesday, the Finance Minister said the budget will help stem the flow of the province's young talent to Western Canada and will attract new immigrants.
"Government knows that lower taxes not only help struggling families, they make our province more attractive to business investment, more attractive to new immigrants, more attractive to skilled workers," Mr. Baker said in his budget speech.
On the spending side, the budget boosts program spending by 7 per cent, and capital spending by 16 per cent. More than half of the capital investments are aimed at fixing the province's crumbling bridges and roads.
As usual, spending will increase for the province's most expensive departments - health and education.
Among the other spending measures, the government has committed to:
- Establishing 1,300 new long-term care beds over the next 10 years, another measure borrowed from the NDP playbook.
- Offering more assistance for low-income families, including a new pharmacare program for ill children that will cost $1 million a year.
- Spending $1.9-million to increase the shelter allowance for welfare recipients.
The government's ability to cut taxes and boost spending largely stems from higher-than-expected income tax revenue, as well as $114 million in additional cash from offshore natural-gas production.
As well, equalization and transfer payments from Ottawa are up $98-million over last year. And the province is saving $50-million annually on debt servicing, thanks to the $800-million debt payment made last year in the wake of a revamped deal with Ottawa concerning offshore-energy revenue.