VANCOUVER, B.C.—British Columbia Premier Gordon Campbell ranks as the best of 10 provincial premiers at managing key aspects of fiscal policy including government spending, taxes, and debt and deficits, according to a new peer-reviewed study released today by the Fraser Institute, Canada’s leading public policy think-tank.
The study, Measuring the Fiscal Performance of Canada’s Premiers
, ranks Campbell first overall with a score of 89.1 out of a possible 100. Former Manitoba premier Gary Doer ranked second with a score of 78.2. Newfoundland and Labrador Premier Danny Williams scored 71.0 and ranked third. Premiers Ed Stelmach of Alberta (66.4) and Brad Wall of Saskatchewan (57.9) followed in fourth and fifth positions respectively, giving Western Canadian premiers four of the top five spots in the overall rankings.
Of the remaining premiers, only Québec Premier Jean Charest (53.7) scored above 50.0. Three of the four remaining premiers were from Atlantic Canada: Rodney MacDonald, former premier of Nova Scotia (33.7), Shawn Graham, former premier of New Brunswick (33.2), and Robert Ghiz of Prince Edward Island (30.0). Ontario’s Dalton McGuinty ranked last overall with a score of 29.7.
“Of the 10 premiers we examined, Premier Campbell simply did a better job than the others of managing his province’s public finances and pursuing sound long-term economic policies,” said Niels Veldhuis, Fraser Institute senior economist and co-author of Measuring the Fiscal Performance of Canada’s Premiers
“Given the size of Ontario’s economy, the last-place ranking of Premier McGuinty is particularly alarming. The lesson here is that Premier McGuinty should follow Premier Campbell’s lead and stick to prudent spending increases, lower taxes, and surplus budgets,” Measuring the Fiscal Performance of Canada’s Premiers
examines the relative fiscal performance of 10 Canadian premiers for the duration of their time in office up to the most recent year of available data (2009/10). Each premier received an overall score out of 100 and rank out of 10 based on their performance on three components: government spending, taxes, and debt and deficits.
Some premiers are evaluated over a longer period than others, such as former Manitoba premier Gary Doer, who came to power in October 1999 and was evaluated for the longest period (2000/01–2009/10), whereas Saskatchewan Premier Brad Wall entered office in November 2007 and was evaluated for the shortest period (2008/09–2009/10).
“In a world of increasing competitiveness, sound fiscal policy is a critical determinant of long-term economic success, so it’s important that provincial premiers show leadership by prioritizing, rather than simply increasing, existing government resources. They must ensure balanced budgets and focus on improving incentives for individuals and businesses to engage in productive economic activity,” Veldhuis said.Government Spending
Economic research shows that sound policy in the area of government spending is characterized by restraint and not allowing spending to increase at unsustainable levels.
Campbell ranked first on the government spending component with a perfect score of 100. Only three other premiers scored above 50.0: Doer (85.5), Charest (81.7), and Williams (61.2). The remaining six premiers each scored below 50.0 with McGuinty scoring 29.8, good for seventh place on this measure.
“Campbell managed the growth in government spending in a relatively sustainable manner and ran a particularly tight fiscal ship during his first term in office,” said Charles Lammam, Fraser Institute senior policy analyst and study co-author.
“At the other end of the spectrum, McGuinty took a spendthrift approach, increasing Ontario’s government spending by more than three times the rate of economic growth. As a result, Ontario’s size of government increased to 20.8 per cent of GDP in 2009/10 from 16.2 per cent in 2003/04.”Taxes
Tax rates and the structure of the tax system have a significant impact on economic incentives that influence the behaviour and decisions of businesses and individuals.
Campbell also topped the rankings on the taxes component, ranking first with a score of 83.1. Graham (80.3) ranked a close second followed by Stelmach (61.7), Williams (51.7), and Wall (50.9). The remaining five premiers all scored below 50.0, with McGuinty finishing seventh with a score of 39.2 and Charest eighth with a score of 25.3.
“Premier Campbell topped the taxes component because of the personal and corporate income tax cuts implemented shortly after he came to power, as well as those scheduled and implemented over a number of years,” Lammam said.
“Premier McGuinty took the opposite approach and raised Ontario’s personal income taxes and business taxes shortly after taking office. Fortunately for Ontario, the premier appears to have realized how destructive these tax policies have been and he introduced a phased-in reduction to corporate taxes in his 2009 budget.”Debt and Deficits
Debt and deficits are a critical aspect of fiscal policy because annual deficits increase the overall level of government borrowing and debt, requiring more and more tax dollars to be spent on debt servicing and ultimately reducing the amount of money available for public services.
Premiers Wall, Williams, Doer, and Stelmach tied for top position on the debt and deficits component with a perfect score of 100, as all four averaged budget surpluses during their time in office.
Campbell also averaged a surplus but reduced B.C.’s net debt to a lesser extent than the other premiers, and as a result scored 84.3 out of 100, ranking him fifth overall. MacDonald and Charest were the only other two premiers to score above 50.0.
The remaining three premiers (Ghiz, McGuinty, and Graham), each averaged deficits during their time in office and failed to score above 50.0. Notably, McGuinty ranked ninth, with a score of just 19.9.
“Most troubling is that Ontario Premier McGuinty so often resorted to deficit financing to pay for additional government spending and this inevitably increased government debt. Between 2003/04 and 2009/10, Premier McGuinty increased Ontario’s net debt to 34.1 per cent of GDP from 28.2 per cent,” Lammam said.