Home The 2001 Pre-Budget Public Consultation 
Preparing Our Budget

When government expenses are greater than revenues, the difference is "the deficit". Deficits can force governments to raise taxes or to borrow money and increase the size of the public debt. High taxes are a disincentive to economic growth. The cost of making interest and debt payments can erode the ability of governments to maintain essential public services.

In the 1990s, all governments in Canada strove to reduce their persistently high deficits. For 2000-01, eight provincial governments are now forecasting a balanced budget or surplus. Federal surpluses are forecast for the next five years.

In Newfoundland and Labrador, we have reduced our deficits significantly. By taking prudent measures, we have accomplished this while ensuring essential public services are protected. However, our fiscal situation is quite changeable, particularly because of volatility in federal transfer payments and our federally estimated income tax revenues. For 2000-01 we continue to forecast a modest deficit. Therefore, maintaining a sound fiscal position requires that we keep expenditures under control. Yet there is pressure to increase spending in many areas and also to further reduce taxes.

This is the challenge of budget preparation. On one hand, we must control the deficit and strive for balanced budgets if we are to have sustainable public services over the longer term. On the other hand, many public services could be improved by enhanced funding, while our tax levels must be competitive to sustain growth.

The art of budget preparation is striking a balance between the legitimate needs of our people for public services and fair taxation, and the need for prudent financial management to ensure those services can be maintained and improved over time.

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