We have just published our quarterly Revitalise bulletin that looks at developments in public service reform across Scotland and beyond. In this issue we feature on Canada because their deficit reduction 'miracle' appears to be the new blue print for the ConDems cuts agenda. Canadian budget officials also gave evidence to the Scottish Parliament's Finance Committee inquiry. In fairness they did not regard their reduction as a 'miracle', explaining that it just involved some hard choices about service cuts.
The Canadian 'miracle' does not hold up to close inspection unless you think its fair to create hospital waiting lists, push people into poverty and raise the costs of higher education in order to afford tax cuts for the wealthy. In a similar way to the current media hype about the deficit in the UK, the Canadian Right created deficit hysteria in the 90s. Conrad Black's National Post newspaper led the way with page after page about the need for tax cuts. The same Conrad Black was convicted in Illinois in 2007 and sentenced to serve 78 months in federal prison for fraud and obstructing justice.
Canada did cut its budget deficit from 66% of GDP in 1993 to a surplus in 1998. While the media talks of successful deficit reduction, the cuts in Canada had massive social costs. Canada now has one of the least generous unemployment schemes in the OECD with less than half of unemployed workers qualifying for benefits.
The promised national childcare and early learning programme was cut before it was even implemented. At least 265 000 public service jobs were lost in Canada. Waiting lists for non emergency treatment grew. As is already being discussed here, tuition fees for higher education increased at an average annual inflation rate of 9.6%. In Alberta education spending was cut by 12.4% and healthcare by 18% and social services by 19.3%.
The cuts also had a lasting economic impact, so despite the Canadian economy growing in the late 1990s unemployment remained high: 8.7% in 2000 and average hourly and weekly wages stood still. The income gap between rich and poor grew faster than most of the other 30 developed nations when previously it had been average.
The reward for this pain was tax cuts. These though benefit the rich substantially more than everyone else while cuts in services hit those on low incomes. A tax cut of $20 a week hardly compensates for a 10% increase in the cost of sending your child to University.
It is therefore no surprise that the ConDems are so keen on the Canadian model. Rich bankers created the mess and the poor will pay the very high price of cleaning it up.