Insolvent within 10 years: Dire warnings continue for N.L.'s fragile economy - Action News
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Insolvent within 10 years: Dire warnings continue for N.L.'s fragile economy

A business professor predicts Newfoundland and Labrador will require a bailout from Ottawa within 10 years.
Ian Lee is a professor at Carleton University's Sprott School of Business in Ottawa. (CBC)

A professor at Ottawa's Carleton University is again predicting a tsunami offinancial calamity will push Newfoundland and Labrador into insolvency within the next decade.

Ian Lee recently brought his message to the federal Standing Committee on Human Resources, Skills and Social Development, saying the province is going to be increasingly squeezed to the breaking point.

"I can't see this ending (in) anything but an urgent request at some point by the government of the day of Newfoundland and Labrador to the federal governmentsaying, 'Look, you've got to step inand help us,'" Lee told CBC News.

It's not the first time Lee has forecastfinancial Armageddon, and it's not the only eastern province that he is painting with such a dim-colouredbrush.

"I'm predicting within 10 years a couple of provinces will have to be bailed out. And I'm referring to New Brunswick. And I'm referring to Newfoundland and Labrador." he said.

A business professor based in Ottawa is predicting that the government of Newfoundland and Labrador could be looking to Ottawa for a financial bailout in the coming years. (Eddy Kennedy/CBC)

An aging and shrinking population, a financial picture that would stagger even much larger provinces, and a "disaster" hydroelectricmegaprojectin Labrador will push the province over the fiscal cliff, said Lee, an associate professor at theSprottSchool ofBusiness.

It's yet another prediction of economic doom for a province strugglingto escape from a financial quicksand stirred up by a succession of big-spending governments and a risky reliance on oil revenue.

"In the near future we could be having a debate in Parliament over this very issue," said Lee, who teaches strategic management at the Ottawa university.

The population of Newfoundland and Labrador is not only shrinking. It's getting older. And at a faster rate than any other province. (Sherry Vivian/CBC)

He said one option might be for the federal government to nationalize Newfoundland and Labrador's immense debt, but added that would be a risk because of the precedent it might set for other struggling provinces.

Lee has studied budgets and the economic impacts of aging for many years. Calling himself an "evidence-based guy," he said the situation for Newfoundland and Labrador is simply not sustainable.

It's a warning similar to those made by the Parliamentary Budget Office in Ottawa, and Terry Paddon, Newfoundland and Labrador's former auditor general.

'The tipping point'

The province with just over half a million citizens is aging faster than any other province, with many young people looking elsewhere for opportunities.

It has also postedrecord deficits with no plans to return to a balanced budget for nearly four years, and has a crushing net debt that's now more than $15.5 billion.

Lee believes the province could have chosen a cheaper option than Muskrat Falls to meet energy needs. (Andrew Vaughan/Canadian Press)

As bad as that all sounds, Lee says it's Muskrat Falls that will be the tipping point. The massive construction project on the Churchill River has now reached an estimated price tag of $12.7 billion, almost double the original estimate.

And footing much of the bill? RatepayersinNewfoundland and Labrador, who have been told to brace for a doubling of their energy bills.

Lee has long been a critic of the project, saying that instead of going it alone, theprovince should have built a transmission line from Quebec to meet its energy needs.

"I think it's going to constrain Newfoundland literally for generations to come," he said of Muskrat Falls.

I'm saying you just don't have the resource base to sustain the huge increase that's going to come with heath care, as well as absorbing the full cost that's going to come with Muskrat Falls.- Ian Lee

"I'm saying you just don't have the resource base to sustain the huge increase that's going to come with heath care, as well as absorbing the full cost that's going to come with Muskrat Falls."

The one factor that could help the province avoid this bottomless pit, Lee explained, is the offshore oil and gas industry.

He saysthe long-term demand for oil will be strong, but cautions that energy development is now "extremely political."

The oil industry could save Newfoundland and Labrador from financial disaster, but that sector is now 'extremely political' because of concerns about climate change, says a business professor. (Darren Hodge)

He said the Liberal government of Prime Minister Justin Trudeau is strongly committedto environmental protection and to dramatically reduce greenhouse gas emissions in order to combat climate change.

Lee said there are strong signs that environmental approval for energy projects will only get more difficult, and this could dissuade some oil companies from investing inthe offshore.

"It just depends on which government is in power," he said.