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With Premier Darrell Dexter looking ong, Nova Scotia Finance Minister Graham delivers the budget speech in the Legislature on April 6, 2010 in Halifax. (Mike Dembeck)
With Premier Darrell Dexter looking ong, Nova Scotia Finance Minister Graham delivers the budget speech in the Legislature on April 6, 2010 in Halifax. (Mike Dembeck)

Andrew Steele

The tax-and-cut NDP Add to ...

The Nova Scotia NDP under Darrell Dexter are that rarest of political birds: the tax-and-cut party. They are increasing consumption taxes while cutting civil servants and their perquisites.

Take their budget issued this week, which raises the harmonized sales tax two points to 15 per cent from 13 per cent, while cutting income taxes - particularly for those with very low incomes and in the $93,000 to $150,000 range - and laying off 10 per cent of the civil service.

Like many other provinces, Nova Scotia is moving away from income taxes and toward consumption taxes to stimulate the economy and create jobs.

Two provinces are moving to an HST this year, while others consider such a move. Now Nova Scotia is moving to the highest HST is the country.

For HST opponents in the NDP, like federal leader Jack Layton, Ontario leader Andrea Horwath and B.C. leader Carole James, this is a real challenge. One of the two provincial NDP governments are not only in favour of the HST, they are actually increasing it.

But the big news in the Nova Scotia budget was far from the headlines.

Defined benefit pension plans - those that pay a guaranteed income for the rest of the pensioners life - are a dying breed. Most private sector companies are moving away from these huge liabilities and instead putting in place defined contribution plans, where the company matches employee contributions into an RRSP.

The only entities with huge pension plans left are government and broader government like school boards, energy utilities and municipal employees. These institutions are huge pools of investment capital, but they are racing to stand still against the aging baby boomers who will deplete these funds.

Pension reform is under way federally and in Ontario, but Nova Scotia is taking an even more aggressive approach.

The Halifax government is freezing indexing in the Public Service Pension Plan to just 1.25 per cent a year, and eliminating indexing if the plan is not 100% funded after five years. That would mean the pension plan would be decreasingly generous in time, dramatically less so as the years go on.

For a typically pro-labour, pro-social program party to make a move this dramatic speaks both to the dangers of defined benefit pension plans for employers and the state, and to the tough medicine others in the public service across Canada may encounter in the coming years. (Considering almost no one in the private sector can rely on a defined benefit pension anymore, some would call that tough medicine a "reality dose.")

For those believing that the worst of the recession is behind us, I can only offer this example as one of the earliest moves in this area. Combined with Stockwell Day musing about ending defined benefit pension for new federal employees, the era of guaranteed comfort in a state-subsidized retirement is likely beginning to end.

Institutions like OAS and CPP will likely continue to prevent the worst of abject poverty for seniors. But if you are not putting away 12 per cent of your annual income a year or more, this should be a major wake-up call that the retirement safety net is getting a lot lower.

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