8.
So You Want to Be
Finance Minister?
The finance minister’s office is on the seventh floor of the Provincial Building, the squat stone building directly across the street from the front door of Province House. It used to house almost the entire provincial civil service. Now the Department of Finance, alone, takes up four of the eight stories. The Art Gallery of Nova Scotia is on the lowest two floors, and Communications Nova Scotia is on the third floor. The eighth floor, which used to house the civil service cafeteria, is used for storage, and populated mostly by mice. (There are way more mice over at ERDT, further down Hollis Street, but that’s another story.)
When I walked into the finance minister’s office for the first time, the short-term challenge was to show the civil servants that we weren’t a bunch of crazy lefties. They’d never had an NDP government, and they were worried. We also had to prepare and deliver the budget for a fiscal year that was well under way. The longer-term challenge was to restore some sense to the province’s finances.
How do you learn to be finance minister?
I’d been the NDP’s finance critic for seven years, but I discovered that I knew maybe 10 percent of what I needed to know to be finance minister. In some ways, being in opposition is the worst possible training for being in government, because you’ve learned to operate according to the Rules of the Game.
Once you’re the finance minister, there’s a totally different set of rules you have to learn and obey. To keep them separate from the Rules of the Game, I’ll call them the Laws of Finance. The Laws of Finance should trump the Rules of the Game, but — as I learned too late — the Rules of the Game are stronger.
And then I resigned.
The last one is a law of arithmetic, not finance. But based on my experience, there are plenty of people who think it doesn’t apply to running a government, so I’ve included it as one of the Laws of Finance.
These are laws, not suggestions. You can’t ignore them any more than you can ignore the law of gravity. Everything else you deal with as finance minister is a detail, or politics.
The most dangerous thing I did as finance minister — and I don’t mean politically dangerous — was during the second Back to Balance tour.
I was driving through the western Annapolis Valley with my executive assistant Josh Bates, heading toward Digby. It was the middle of winter and night was coming on. Snow started falling, and it got heavier and thicker until it was a full-on blizzard. We couldn’t see the highway. We could barely see ten feet in front of us. Josh was nervous. It was too dangerous to continue and too dangerous to stop — so we kept on. We made it to Digby in time to learn the meeting had been cancelled.
I found the work and travel associated with Back to Balance to be draining, and that night in the blizzard was just plain dangerous. But I pushed on because Back to Balance was the most important thing I ever did in the finance portfolio.
I knew, when I became finance minister during a recession, that there were going to be some tough choices ahead. If we were going to have any hope of winning public support, I had to get out of downtown Halifax and into communities from one end of the province to the other and see if we could find a consensus about how to handle the financial challenges. My job was to start the conversation.
The result was the Back to Balance consultation process.
Back to Balance was public consultation on a grand scale — the largest public consultation on finances in the province’s history. My deepest political belief is in the power of the people to make decisions for themselves. Back to Balance was to be the tangible way I demonstrated that belief to the people who had just elected us. I was on the road with the first Back to Balance tour from January to March 2010. I held nineteen wide-open public meetings and at least a dozen other meetings with interested organizations. We received a thousand written submissions, ranging from one-line emails to lengthy briefs, and I read them all.
And yet it almost didn’t happen.
It was a battle to get the Department of Finance to agree to the Back to Balance tour. It was way outside their comfort zone. Senior civil servants have become allergic to public consultations. If you want to see a look of horror on a civil servant’s face, suggest a “town hall.” The image that leaps to mind is an angry crowd, whipped up by the local demagogue who stands at the microphone and harangues the poor civil service souls at the front.
That’s why many “consultation” processes that we see these days are online or in writing — anything to eliminate politician-to-crowd meetings. Even where there is a public meeting, it tends to be in a form that breaks the audience down to small units, as small as individuals walking around a series of displays like my old junior high science fair. And even that doesn’t always eliminate friction — I saw one city-sponsored meeting on the widening of Bayers Road feature a profanity-laced shouting match, over a map on a table, between a citizen and a municipal staffer.
So I had to push the civil servants, to the point of mutual frustration, to get the consultation process going. After months of preparation, the first public meeting opened at the Royal Canadian Legion in Whitney Pier. We didn’t know what to expect. There could have been five people turn up. Instead, there were 135. The mood was positive, the discussion was lively, and everybody left feeling good. Once the civil servants saw the process would work, they breathed out, and their objections melted away.
I was idealistic about the power of public consultation, but I was no wide-eyed innocent. I knew I couldn’t wander into province-wide public meetings and hope for the best. There are plenty of ways for people and organizations with self-interested agendas to hijack public meetings. We had lots of choices about location, timing, and format, and it was my responsibility to find the right combination that allowed everyone to be heard and for a true consensus, if there was one, to emerge.
Each session started with a presentation, from me, about the facts of the province’s finances. The consultation would be pointless if the output was based on bad facts. And when it comes to provincial finance, few people have good facts. There was one NDP convention, for example, where a resolution was proposed to devote all the revenue from the tobacco tax to smoking cessation programs. Sounds sensible, right? But at the time, smoking cessation programs were about $1 million of the health budget, and the revenue from tobacco tax was over $200 million. When I pointed this out to the resolution’s sponsors, their jaws dropped. They had no idea of the numbers involved.
The Back to Balance meetings also included a section where people would talk to others at their table. To me, this was crucial. Community members need to talk to each other, and not just to politicians, about what the choices are. If we couldn’t find consensus within a community, I would say, how will we ever find consensus province-wide?
The broad consensus that emerged from Back to Balance was clear. People wanted to see a balanced budget, but not so quickly that the slashing of public services would be necessary. Balance within three to five years seemed right. Any shorter meant that important public services would suffer. Any longer, and the debt would grow too much. Both expenditure control and revenue increases were necessary, but more weight should be put on expenditure control, by a ratio of about three to one. People said they could live with a tax increase, and a two-percentage-point increase in the HST was preferred over an increase in income tax, as long as there was appropriate protection for people with modest incomes. There was one notable exception: at the meeting in Amherst, there was almost unanimous opposition to an HST increase, for fear of worsening cross-border shopping.
Back to Balance was good and real and gave us the guidance we needed. It respected the facts and the Laws of Finance. It formed the basis for the next three budgets I delivered as finance minister. Our critics dismissed the whole thing — months of planning, thousands of kilometres, meetings in communities that had never seen a finance minister before, a thousand submissions in the first year alone — with a wave of the partisan hand. But the Back to Balance process is my proudest accomplishment. It embodied the way I think politics should work: engaged citizens, armed with the facts and in open discussion with their neighbours, make their own decisions about what is best for themselves, their families, and their communities. With the benefit of hindsight, though, there are a few messages whose full significance I didn’t grasp.
The first was the complete lack of consensus about which part of government spending should be the focus of restraint. Whenever I raised the question of expenditure control at a Back to Balance session, I would get wildly varied answers. We never solved this problem, and so wandered into areas, like the Yarmouth ferry or P–12 education, where there was no public consensus and therefore not enough public support for what we were trying to do.
The second was that those who supported tax increases wanted someone else to pay. They suggested higher income taxes on the wealthy. Who’s “wealthy”? Someone else. They suggested taxes on luxuries. What’s a “luxury”? What other people buy. The non-smokers suggested higher tobacco taxes, and the non-drinkers suggested higher alcohol prices.
The third thing about Back to Balance that I misread was the degree to which its success depended on the Dexter government’s credibility. When we started, the mood was good, and we were getting the benefit of the doubt. As we saw in the last chapter, the honeymoon started dissolving when the auditor general released his report on MLA expenses — right in the middle of the first Back to Balance tour. After the report came out, I had to address MLA expenses at every session. It was a distraction from the real issues, to say the least.
We repeated a version of Back to Balance for the next two years that I was finance minister, but it was never the same as that first year. For one thing, the Back to Balance program was intended to last the life of our government, so subsequent years were more about checking on progress, rather than inventing something new. For another thing, the honeymoon was very definitely over after the auditor general’s report came out, and I don’t think the public would ever again have reacted in the same open, positive way they did that first year.
During the Back to Balance process, many people asked me why the government didn’t do something similar more often. The answer is that good, true consultation is really hard work. I made the effort and, in the end, I’m not sure how much we have to show for it. Two years later, I was out as finance minister. Three years later, we were trounced at the polls. Maybe there was no value to the Back to Balance consultation process; if there was, it was overpowered by politics.
Politics is About Choices
The government has a thousand ideas, and every day people are bringing them new ideas or new versions of old ideas. The government isn’t lacking for ideas. What the government lacks is money. That’s why most politics is financial politics. It’s about how public money is raised and how public money is spent. Because there are more ideas than dollars, politics is about priorities. Here’s one piece of advice from an ex-politician: Never listen to what politicians say their priorities are. Their true priorities are reflected in their budget: what got funded and what didn’t? The rest is just talk.
Politics is a back-and-forth process, where the level of services dictates the level and distribution of taxes, and where the level and distribution of taxes dictate the services. Back and forth, back and forth, the debate never ends. It never ends because people sincerely hold different views about where the right balance is, and because the social and economic context never stops changing. The tension between maintaining services and taxes as they are, or rebalancing them according to a different set of priorities, is the basic driver of politics.
The fundamental role of the politician is to negotiate this tension on behalf of citizens and make choices accordingly. It’s hard. It’s really, really hard.
Politics is About Escape Hatches
Because making choices is hard, politicians do everything they can to avoid it. When confronted with hard choices, they look for escape hatches.
And so do lobbyists, interest groups, and many citizens.
If we’re going to get anywhere as a province, if we’re going to tackle the big issues identified by the Ivany Commission, we need to name these escape hatches and seal them off. Then, and only then, will we start to have real conversations about the choices in front of us.
Escape Hatch #1: There are Choices, Just Not This One
If anyone is unhappy with a government decision, there is always another politician who is willing to say, “It doesn’t have to be this way.” And here’s the thing: usually they’re right. Other choices are always possible. That’s why it’s so hard in politics to make a tough decision and then hold the line.
That’s why financial politics in Nova Scotia swing back and forth: taps on with Buchanan, taps off with Savage, taps on with MacLellan, taps off with Hamm, taps on with MacDonald, taps off with Dexter. Each is a reaction to the one before. The pendulum swings with every leadership change, even within the same party. Every government has to make choices, which makes some people unhappy. Unhappy voices are louder and get more attention than happy voices. To quiet the unhappy voices, the opposition — which eventually becomes the next government — promises to make the opposite choice.
What the opposition leaves out is that those other choices will make other people unhappy. If they get in, they either break their promise so that the original group remains unhappy, or they keep their promise and produce a different set of unhappy people. Then someone else comes along and says, “It doesn’t have to be this way,” and the cycle continues.
Escape Hatch #2: Deny There are Choices
The next escape hatch is to assert that there really is no choice.
Margaret Thatcher is known as the Iron Lady, but she had another nickname — “Tina.” It stood for “There is no alternative,” something she repeated so often that it stuck. That phrase was her favourite escape hatch. It shut down any debate.
It’s interesting that the political leaders who are most admired, at least in retrospect, are people associated with resolve: Winston Churchill, Margaret Thatcher, Danny Williams, Pierre Trudeau. But it’s a difficult act to pull off and can just as easily lead to being reviled as to being renowned. There are easier escape hatches.
Escape Hatch #3: Don’t Talk About the Choices
Another common escape hatch is just to avoid talking about choices at all.
For example — and this is very common — the politician talks about taxes and services as if they’re totally independent of each other. In essence, they’re breaking the seventh Law of Finance (that taxes and services are two sides of the same coin).
If the politician talks about taxes without reference to what they’re used for — a favourite tactic of the political right — they don’t have to face the hard question of what public services, exactly, they would cut. Since they’ve avoided the hard question, they can say whatever they want about taxes.
If the politician talks about services without reference to how they’re paid for — a favourite tactic of the political left — they don’t have to face the hard question of who, exactly, is supposed to pay. Since they’ve avoided the hard question, they can say whatever they want about services.
Escape Hatch #4: Invent False Choices
Another favourite escape hatch is to pretend that there are more than three choices for finding money, in violation of the ninth Law of Finance. (If you want to increase services, there are only three places to find the money: (a) increase taxes, (b) cut spending somewhere else and re-allocate the savings, or (c) borrow it.)
Some politicians claim there’s a fourth choice, which is to increase revenue by growing the economy, or a fifth, which is to get more federal money. The growing-economy escape hatch is very common, and wrong. A 1 percent increase in Nova Scotia’s gross domestic product will bring about $40 million into the provincial treasury. Nobody knows how to increase Nova Scotia’s GDP by 1 percent, except through stimulus spending that would cost a lot more than $40 million. If they knew how to do it, it would have been done a long time ago.
The federal government escape hatch is just wishful thinking. Our federal government is intent on shrinking its payouts to provinces, not increasing them.
So there are exactly three choices. There are no other choices.
Escape Hatch #5: Make Stuff Up
If one of the first four escape hatches doesn’t work, you can just make stuff up. It doesn’t matter if it’s true. It just has to sound like it could be true.
It’s like being in a locked room with other people. When they’re not looking, you paint a door on the wall. Then you say, “Look, I’ve found a door!” This relieves the pressure, and gets people talking about what they’re going to do when they get out.
Here are a few of the most familiar painted doors:
In short, the painted-door strategy works beautifully — as long as nobody actually tries to use the door.
Escape Hatch #6: Change the Channel
In politics, if someone says, “You’re fat,” the correct answer isn’t “No, I’m not,” because that only keeps the conversation focused on whether you are, in fact, fat. The correct answer is “You’re bald.”
There are many techniques for changing the channel, and these are only a few:
Politicians look for escape hatches because the Laws of Finance lead to difficult conversations. Politicians don’t like difficult conversations. Difficult conversations make people unhappy, and people don’t vote for politicians who make them unhappy. If re-election is what motivates you above all — and that is the first and most important of the Rules of the Game — you want to avoid difficult conversations.
Escape hatches are magical answers to real issues. Wave the magic wand, sprinkle the magic dust, and the problem goes away. But like a real magic show, the elephant is still there. It’s only an illusion that it disappeared. The elephant is still there. Facts are stubborn things.
When I embarked on the Back to Balance consultation, it was with the beautiful idea that my job was to present the facts, seal off the escape hatches, and stand back and listen to the conversation that resulted.
I know now that it didn’t work. The escape hatches were closed inside the Back to Balance sessions, but they were open everywhere else. Anyone who hadn’t participated in one of the sessions, or didn’t like the result, headed straight for an escape hatch.
I don’t know what the answers are to the issues that confront us, but I do know that if we are to have any hope of finding workable answers, we have to recognize when our politicians are heading for an escape hatch and tell them to stop. Otherwise we will continue to fall into the Iron Grip of the Status Quo.
Politics is About the Iron Grip of the Status Quo
Our addiction to escape hatches — the avoidance of the real choices in front of us — is a major contributor to the Iron Grip of the Status Quo.
Darrell told Cabinet about a meeting he had with a group of senior deputy ministers. They were complaining about how hard it was to get the Public Service Commission to move on some key issues. Then it dawned on them: They were the most senior political and civil service leaders in the province. If they couldn’t move the status quo, who could?
It is a commonplace observation within government that change is very difficult, and sometimes impossible. Everybody acknowledges the Iron Grip of the Status Quo. The more interesting question is why? Why is change so hard?
Let me try a metaphor. Think of Nova Scotia as a huge, ocean-going ship with a million passengers and a crew (the civil service) in the tens of thousands. A change of government is only a change of the officers on the bridge. When the new officers come on board, they don’t start fresh. It’s a huge machine in motion, and it’s already in the middle of the ocean. There are plenty of ideas, among the passengers and crew, about where the ship should be going and how it should get there. If you’re going to do renovations, you can’t just stop and ask the million passengers to get off. Any renovations have to be done around the passengers, and they aren’t afraid to voice strong opinions about the pace or the cost or how much discomfort it’s causing them. Any course change can take a long time to complete or even to have any effect. Meanwhile, the sea can be rough and the weather conditions can be averse. By the way — you’ve never been trained to run a ship and there aren’t any maps. And every four years, the passengers get to decide if they want you to stay on the bridge or give someone else a try.
Maybe this metaphor is a stretch, but I have always found it helpful in explaining the Iron Grip of the Status Quo. When your party is finally elected, and when you become a minister, you discover that the provincial government is a huge machine in motion and that almost everything is committed in advance — money, wages, programs, buildings, methods. There’s not a lot of discretionary decision-making left. It’s as much as you can do just to keep the ship afloat while you’re dealing with the weather, the crew, and the passengers.
The truth is the provincial budget, in any given year, is virtually identical to the budget of the year before. My guess is that the budget is 98 percent the same from one year to the next. The only reason we might believe otherwise is that politics requires that differences be exaggerated. From one year to the next, no matter who is in government, and even if there is a change of government, the same civil servants do the same work the same way they did it the previous year.
The status quo has an iron grip because every piece of public spending benefits someone. There is no program that is so obviously a waste of money that everyone will agree that it should be cut — a point brought home to me during the Back to Balance consultation.
When the Hamm government was elected in 1999, it launched a comprehensive program review, buying into the idea that there was lots of waste in government and all it had to do was go and look for it. The Hamm government would cut it, get the kudos, and have lots of money for the good stuff. Eleven hundred spending programs were catalogued and precisely three ended up being eliminated. One was to sell the government’s airplane. (Apparently nobody was ready to go to bat for the airplane.) The other two were similarly minor—closure of the government bookstore and ending a subsidy for agricultural limestone. The other 1,097 programs stayed in place.
The status quo has an iron grip because everyone who benefits from the status quo knows who they are and will ferociously defend what they have or what they’re doing, while those who may benefit from a change do not necessarily know who they are and so are silent. The beneficiaries may be a community, an organization, a group sharing a certain characteristic, or even just the staff who administer the program.
The status quo has an iron grip because routines build up around every process and harden into habits and even into rights. Citizens, contractors, and civil servants get used to a certain service being offered in a certain place at a certain time in a certain way. Comfortable patterns develop, like work schedules or driving routines. Any change imposes a transaction cost. The patterns can go beyond comfort, to things like how much we earn and how predictable our income stream is, to how much things cost, to where we live. Resisting change is about imposing order in our lives and keeping order. Resistance can be acute when it’s “the government” that’s imposing a change, both because citizens feel they have some control over their government and because there are plenty of examples of change being cancelled if enough resistance is mounted.
Because of the “stickiness” of the status quo, the government faces a battle over every change. A government can withstand only so many of these battles. It’s wearing mentally and physically. One time I heard Darrell ask Maureen MacDonald, his health minister, to undertake a certain change, and she responded with a flat no. She was already fighting enough battles, she said, and she couldn’t face another one, no matter how sensible the change appeared to be.
Through all the battles, the status quo beckons enticingly, like the Sirens singing to seafarers, saying, “You don’t have to go through this. Stop fighting. Go with the flow. Stick with the status quo.” And that, in the end, is what most governments do.