New Saskatchewan NDP
John W. Warnock
MacKinnon has recently published her political memoirs: Minding the Public
Purse; the Fiscal Crisis, Political Trade-offs, and Canada's Future. In
case you don't remember her, she was elected Member of the Legislative
Assembly from Saskatoon Westmount in the NDP sweep in 1991, immediately
became part of Roy Romanow's "war cabinet," and served for five
years as the Minister of Finance.
Her story is a partisan defence of the Romanow government and the changes
it made to the New Democratic Party. This is the first insider report
of those years and should be required reading for those interested in
Saskatchewan politics and the politics of the political left in Canada.
She documents the shift in ideology of the Saskatchewan NDP from the social
democratic Keynesian welfare state orientation of the T. C. Douglas and
Woodrow Lloyd governments (1944-64) and the Alan Blakeney government (1971-82)
to the neoliberal pro-business approach of the Roy Romanow and Lorne Calvert
The heart of her book is a defence of the fiscal policies of the Romanow
The battle she describes is never with the political right and its allies
in the business community.
The struggle of the Romanow government was always with the "left"
and "leftists," who include the trade union leadership, particularly
those in the public service unions, social justice organizations, writers
like Linda McQuaig and Murray Dobbin, Briarpatch Magazine, the Canadian
Centre for Policy Alternatives, the Saskatchewan Alternative Budget, and
social democratic professors. In government, the new group of NDP leaders
is constantly in conflict with the "old NDP," those who had
ties to the Blakeney government and wanted to continue to pursue an active,
progressive government. They also have to do battle with the membership
of the NDP, who are still foolishly tied to Keynesian social democracy.
MacKinnon praises the Blakeney government for balancing the budget on
a regular basis,
but she is critical of it for "raising the expectations" of
the people of Saskatchewan, leading
them to believe that they could afford extensive social programs like
subsidized drugs for the elderly and dental care for children. She insists
that the province does not have the resources to support such programs.
the new direction of the party
does agree with Briarpatch Magazine and other leftists on one key issue.
We argued (June 1992 issue) that the direction of the Romanow government
was basically set at the April 1992 three-day meeting in Saskatoon between
the inner circle of cabinet ministers and 35 important business leaders.
At this meeting the NDP government assured business leaders, as Mackinnon
puts it, "that we would not return to the 1970s, with its high royalties
and big government, but would create the right climate for investment."
economic development policy was formally set forth in Partnership for
Progress, released in November 1992. It pledged that the NDP government
would create a "competitive tax regime" [with Alberta], reduce
government red tape, train the workforce, and build required infrastructure
and research facilities. Emphasis was to be put on creating "a regulatory
and taxation environment in which it is easier for business to operate."
The new NDP policy ruled out regaining control over the privatized Crown
corporations in the natural resource sector or creating new ones to aid
economic development. At best the NDP would create "innovative public-private
partnerships." Soon after this meeting the Romanow government established
an industry-government committee to revise oil and other royalty rates.
They were not raised back to previous levels, as promised
in the 1991 election, but lowered below those set by the Tory government
of Grant Devine. Other tax breaks for business followed.
Prior to the 1991 campaign the NDP caucus had released a document, Tax
the 1990s. It pledged that an NDP government would introduce a social
democratic tax policy,
progressive taxation based on ability to pay. It called for corporations
to pay their fair share of taxes and denounced the Tory government for
cutting resource taxes and royalties. The 1991 election platform, The
Saskatchewan Way, promised to repeal the Provincial Sales Tax, introduce
the "wellness system" to health care, improve farm insurance
programs, bring in an Environmental Bill of Rights, introduce a comprehensive
energy conservation strategy, eliminate poverty in the first term of government,
and balance the budget. A public opinion poll contracted by the NDP and
released in November 1991 revealed that Saskatchewan citizens wanted a
real change in policy direction, with first priorities on job creation
and the elimination of poverty. There was no concern expressed in the
size of the government deficit.
people of Saskatchewan did not give the NDP a strong election mandate
just to continue the unpopular policies of Grant Devine's Tory government.
As MacKinnon stresses, the first task for the new government was to change
the Tory deficits and debt
the election campaign the leadership of the NDP stressed the fiscal mismanagement
of the Tory government and the government's involvement in the financing
of private corporate megaprojects. In November 1991 the new Romanow government
appointed the Financial Management Review Commission, chaired by Donald
Gass, a Saskatoon chartered accountant. Everyone knew that its job was
to present the worst possible picture of the fiscal mess created by Grant
Devine's Tory government. They did their job well. It is not possible
to examine this process in detail here.
the Gass Commission reported that the budget deficit for 1991-2 was $975
million, nearly three times as high as the Tory estimate. The total public
debt was set at $12.7 billion, of which $8.8 billion was accumulated budget
deficits and $3.9 billion borrowing by the Crown corporations. It reported
that provincial employee pension plans had an unfunded liability of $3.1
billion, and $1.7 billion in investments and loan guarantees were at risk.
The commission concluded that the NDP government had "no alternative"
but to reduce expenditures, to downsize the government, and to reduce
"the expectations of what the Provincial Government is able to do."
The accountants added that "our economy can no longer support the
public sector infrastructure that we have built to serve the quality of
life and the standard of living that we have come to expect."
The "left" feared the worst. The Saskatchewan Government Employees
Union hired Professor Jim Sentance, chair of the Department of Economics,
University of PEI, to do his own assessment. A Keynesian economist, he
attacked the accounting system used by the Commission, noting that it
was not used by any other province, and argued that it presented a distorted
view of the province's financial situation. True, revenues
were down, but they would recover with the economy. He pointed out that
the borrowing and debt of the province "was in the same league"
with the rest of Canada and was nothing exceptional.
financing as a percentage of expenditures, at 10.5 percent, was not untypical.
Much of the seemingly high budget deficit was due to one-time write offs
of poor investments and the impact of the recession. But no one in the
business community, the media or the political elite wished to hear this
case. It was time for the new policies of neoliberalism, being implemented
by Labour governments in New Zealand and Australia.
The first NDP budget, under Finance Minister Ed Tchorzewski, is described
by MacKinnon as "a landmark in Saskatchewan history." The trade
unions, the Saskatchewan Coalition for Social Justice, and the NDP pressured
the government to continue the CCF-NDP traditions. They failed. The NDP
government argued that the budget deficit had to be reduced by major cuts
to social programs, including health and education, and off loading on
the municipalities and school boards. Revenues were to be increased through
a higher sales tax and tax on fuel, plus a 10 percent surtax on top of
personal income taxes. Some business taxes were raised and others lowered.
The inflated deficit was "cut" to $500 million.
key issue of resource revenues
didn't need a doctorate in economics to find the cause of the provincial
debt and persistent budget deficits. A quick glance at the provincial
budgets over the 1980s clearly shows that the deficits were due to a decline
in revenues caused by the reductions in taxes and royalties on the resource
extraction industry. As Allan Blakeney and others often stressed, in a
hinterland economy like Saskatchewan, unless a fair share of the economic
rents from resource extraction goes to the public in the form of taxes
and royalties, the government cannot afford to finance the social programs
demanded by its citizens.
In the last two years of the Blakeney government, royalties and taxes
accounted for 33 percent and 43 percent of resource industry revenues
(or sales). In the first term of the Devine government, they fell to below
25 percent and below 14 percent in the second term. While the volume of
resources extracted steadily increased, and industry sales increased dramatically,
the share of resource industry sales going to the public treasury fell
to a low of only 11 percent in 1991.
As Doug Elliott reported in Sask Trends Monitor (April 1990), if the Tory
government had maintained the royalty rates at the levels set by the Blakeney
government, the revenues collected over the 1980s would have covered the
Tory deficits and debts.
Colin Thatcher reports in his memoirs that when he proposed a cut in the
royalties for oil extraction during the Devine government, there was strong
opposition in the cabinet. Over $400 million a year would be shifted from
government revenues to the oil companies. But he carried the day.
It is really astonishing that Janice MacKinnon has no discussion of taxation
and tax decisions taken by her government. All MacKinnon does is flatly
dismiss the critics of the left. The right wing Fraser Institute ranked
the Romanow government the second best government in North America. Why
would they do that?
the Wall Street bankers MacKinnon became finance minister in 1993, set
forth a four year plan to eliminate the budget deficit, and made further
cuts to programs. The cuts were necessary, the NDP insisted, because of
the inability to sell bonds in the New York City capital markets. An attempt
to raise $500 million in March "failed to sell easily and quickly.
It was a warning," MacKinnon argues.
MacKinnon insists that the NDP government "could not borrow money
in Canada" in 1993. But in 1992 they began to tap the $8 billion
in savings held by Saskatchewan residents. However, they only sought $150
million in the new Saskatchewan Savings Bonds. In 1994 they raised $800
There were other options. They might have gone to the trade unions and
negotiated some loans from their pension plans.There was no minimum tax
placed on the 30 percent of profitable Saskatchewan corporations who pay
no income taxes. In 1992 the NDP government promised to create a new Saskatchewan
Economic Development Bank to mobilize local capital for investment, but
they never carried through on this.
The Romanow government never addressed the cause of the debt and deficit:
the radical drop in revenues from the resource sector. Under the NDP government
from 1991 to 2001, the share of resource extraction sales that went to
the treasury varied from 11 percent to 17 percent. This was a much smaller
share than under the Blakeney or Devine governments.
the memoirs, MacKinnon insists that the federal government can no longer
afford to finance our traditional social programs. She argues that the
federal debt and deficit grew because of the expansion of our universal
social programs. This is not true. As Statistics Canada demonstrated in
a famous report in June 1991 (Mimoto and Cross), the accumulated budget
deficit was not caused by increases in program spending but to the introduction
of a number of personal and corporate tax breaks which greatly reduced
How have the people of Saskatchewan reacted to the new version of the
CCF-NDP? In the election in 1991 the party received 275,780 votes. This
fell to 192,320 in 1995 and then 156,243 in 1999. When the NDP was routed
in the 1982 election they received 201,190 votes. The percentage of eligible
voters going to the polls fell from the usual 80 percent in 1991 to 64
percent in 1995 and 56 percent in 1999. There has been no apparent rush
to the Saskatchewan Party or the Liberal Party. All three share the same
Thatcher once said that her greatest success as prime minister was transforming
the Labour Party into another conservative party. She insisted that there
was no alternative to the neoliberal agenda of the free market and free
trade. Janice MacKinnon and the new NDP leadership agree.
W. Warnock is a Regina political economist and author. His next
book, Saskatchewan: The Roots of Discontent and Protest will be published
in the spring of 2004. In 1971 he worked hard to elect his NDP MLA and
served on the executive of his constituency association.