Sharing the Wealth

The St. John’s region is red hot, thanks to a resources boom in Newfoundland and Labrador. But how is that infusion of wealth impacting rural areas of the province?

It’s the age-old debate in Newfoundland and Labrador — rural versus urban, “baymen” versus “townies.” Today, the province is in “have” status, no longer receiving payments from the federal equalization program, and benefitting like never before from a glut of resource-related revenues that have swollen government coffers and improved job figures in the traditionally hard-luck region.

In the metro St. John’s area, the signs of that prosperity are obvious. Residential real estate prices have shot up rapidly. City council is highlighting a half billion dollars in planned developments on the books. Unemployment in the capital is below six per cent — a number that would have seemed more in the realm of science fiction a decade or two ago.

While St. John’s is buzzing, there is a debate over how much of that wealth is making its way to the province’s smaller outports and towns. And since 2011 is an election year, a predictable amount of sparring has broken out among political foes on the topic.

“Rural communities continue to face serious challenges, including crumbling infrastructure, health care, and fisheries,” Opposition Liberal MHA Marshall Dean said in the House of Assembly May 25. “When will this government stop paying lip service to investing in rural Newfoundland and Labrador and make some real challenges to sustain communities?”

Rural Development Minister Susan Sullivan replied that the numbers support the Tory government’s record: “Seventy per cent of the investments we have made through all of our programs … including through our infrastructure programs, including all of the programs that we support in Innovation, Trade and Rural Development, have been made in rural Newfoundland and Labrador.”

But other numbers are less supportive of the economic vibrancy of rural areas. This June, the unemployment rate on Newfoundland’s south coast and Burin Peninsula was a whopping 21.9 per cent, according to Statistics Canada. The numbers were not much better in other rural parts of the province. The West Coast-Northern Peninsula-Labrador figure was 17.1 per cent; Notre Dame-Central-Bonavista Bay, 16.1 per cent. That compares to 7.8 per cent on the Avalon Peninsula, which is home to a largely urban population.

But Finance Minister Tom Marshall defends the government’s record in rural Newfoundland and Labrador, saying many initiatives are benefitting all parts of the province. “These revenues coming from oil and mining have enabled us to make the tax system competitive, which it wasn’t for many years,” Marshall said in an interview.

He points by way of example to cuts in income tax, insurance tax, and the pending elimination of the tax on home heating and electricity (which comes into effect just before the October fixed-date provincial election). According to Marshall, the province’s taxpayers are now sending $500 million a year less to government than they were in 2007. “That’s a big number. So that’s government’s hands out of people’s pockets, and that gives people more disposable income.”

Marshall also says the province has made investments to help grow and diversify the rural economy. He points towards the fledgling aquaculture industry on the south coast, which has received financial assistance from the government. Marshall recently visited the region for the first time in decades, and was astonished by what he saw. “It’s booming down there. People told me, ‘You know, everybody who wants a job down here can have one.’ The biggest complaint I heard was a woman in a hotel who said to me, ‘We won’t expand the hotel, we can’t get anybody to go to work here.’”

And then there is infrastructure. The government has long touted an aggressive capital spending program — partially to stimulate the economy during the recent recession, partially to catch up on a lack of work done in the past. In recent years, Newfoundland and Labrador has been plastered with bricks and mortar and pavement — especially pavement.

In fact, Premier Kathy Dunderdale has rejected the idea of a Norway-style sovereign wealth fund for oil revenues, saying the legacy of today’s resource cash is in those physical investments. “People talk about a legacy fund all the time and we respond to that by saying, ‘That’s our legacy fund, the investment in infrastructure,’” Dunderdale recently told the St. John’s Telegram. “Because unless you have roads and wharves and hospitals and schools, your economy can’t grow.”

The province also plans to leverage nonrenewable oil and mining revenues into renewable resource projects such as hydro that can provide long-term benefits into the future.

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