Liberal spending increase is smaller than recent PC hikes
Opposition slams ‘unrestrained’ expenses in budget, but Holt actually plans to slow spending growth
The accusation that Premier Susan Holt's Liberal government is driving up the budget deficit by spending tax dollars recklessly is turning into a complicated math exercise for both the Liberals and the Progressive Conservative opposition.
Holt's first budget projects a deficit of $549 million — the largest shortfall in more than a decade, and one that PC finance critic Don Monahan blamed on "unrestrained spending."
But the increase in spending that the Liberals plan in the coming year would actually be smaller than in the last three full years covered by PC budgets.
"The spending trend is exactly the same as what it was," Finance Minister René Legacy declared in question period last Friday, arguing the Liberals were no more profligate than the Tories had been.In fact, in their four-year plan, the Liberals are being more frugal — "out-Higgs-ing" the record of former PC premier Blaine Higgs.
Higgs's government increased spending by about $900 million in 2022-23 and by $1 billion in 2023-24.
And in the current 2024-25 fiscal year, which began with Higgs in power, spending is projected to rise another $1.2 billion.
Some of that is due to Liberal spending decisions after Holt took power. But some of it can be credited to the PCs, who set the budget last March and were in office — with the government spending money they had allocated – until early November.
Ernie Steeves, the finance minister at the time, even bragged about the spending growth in his final budget speech in March 2024.
Health-care spending had ramped up by $1 billion between the final Gallant Liberal budget in 2018 and the one Steeves tabled a year ago, he said.
"Overall spending has increased by 27 per cent, a rate greater than the combined impact of population and inflation," Steeves crowed at the time.
By comparison, Legacy's first budget tabled last week projects a $676 million spending increase in 2025-26 — still a lot, but the lowest increase in five years.
Economist Richard Saillant says the big PC hikes locked in a spending level that would be hard for any new government to rein in quickly.
"This government was a bit boxed in by what you could call a structural deficit," he said.
"The Holt government, it's a bit ironic to say, inherited a deficit from the previous government, and now it's having to contain its ambitions spending-wise in order to have a deficit that's not too high."
Opposition PC Leader Glen Savoie acknowledged in question period last Friday that the Liberal spending spree wasn't as lavish as it seemed.
The Liberals claimed health-care spending was up 7.7 per cent in their 2025-26 budget, but that figure is from a comparison with the initial 2024-25 estimate Steeves made a year ago.
Savoie noted that when measured against actual health spending in 2024-25, the Liberal increase was only 1.8 per cent.
With Liberal spending relatively restrained, it's the slowing growth in government revenue from taxes and federal transfer payments driving up the deficit, Saillant said.
Revenue grew by $1 billion in 2022-23, fuelled by unexpected population growth and the income and sales tax revenue that resulted.
But it grew by a smaller amount in 2023-24 and again in 2024-55. Revenue growth is expected to remain similarly low this next fiscal year.
That's partly because population growth is levelling off.
New Brunswick added more than 20,000 people in each of 2022 and 2023, but Statistics Canada figures released last week show growth dropped to 14,530 in 2024.
"As long as revenue — the spectacular revenue from demographic growth and federal transfers — was there, you could spend your way the way the previous two governments did," Saillant said.
"I would say the previous government set the stage for the structural deficit we find ourselves in, at a time where our population growth is due to nosedive."
The PCs warned during the election last fall that revenue would slow down and that reality, combined with Liberal election promises, would lead to deficits.
The Liberals at the time responded that the PCs themselves were making a costly promise, a reduction to the harmonized sales tax rate, that would also be unaffordable, meaning, they said, the PCs were also banking on a lot of revenue.
Savoie told CBC News a re-elected Higgs government could have cancelled the HST cut when confronted with declining revenue.
"We were always prepared to delay or push back if the province's financial situation changed and we couldn't do it," he said. "That's what you call fiscal management."
Holt said last week that "in an ideal world," her government would be balancing the budget, but the drop-off in revenue made that impossible without painful cuts.
"So we were picking the level of deficit that we thought was the most fiscally responsible," she said.
that we could manage and reduce over time."
The Liberal spending plan is for modest increases to spending over the next three years, below the expected growth in revenue, which should lower the deficit each year.
Legacy said if things go well, he could beat those targets and get the budget balanced by 2028, but he acknowledged that things can change and it's important not to raise expectations.
"We are hoping to get to that, but I know that if we had put 'balanced' in for year four, which other governments have done, it might have been questioned: Is it credible enough? Is it too much of a lift?"
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