N.L. surplus triples with oil-based windfall

Offshore oil revenues are propelling Newfoundland and Labrador to a projected surplus of $881 million, the provincial finance minister said Monday.

That's more than three times what Tom Marshall had forecast in April, when the government expected to reap a record-setting $261 million.

Marshall told reporters Monday that the government will be using much of the money to pay down its debt, as well as pay for much-needed infrastructure.

"We now have for the first time in our history an opportunity to also target our huge burden of debt," Marshall said.

By the end of the fiscal year in March 2008, the net provincial debt will stand at $10.8 billion, or about $700 million less than a year earlier. Part of the debt reduction will come from servicing payments.

Apart from oil prices which have been at least $30 per barrel higher than budget estimates made in the spring the government is benefiting from high nickel prices. The Voisey's Bay nickel mine in northern Labrador is one of the world's largest nickel finds.

The government had been expected to report a large surplus in its midyear financial statement, although far below what Marshall revealed on Monday during a news conference at Confederation Building.

The provincial government has been under heavy pressure to increase its spending in a wide array of areas, including civil servant salaries, schools, roads and health care.

Marshall said the government will be able to pay directly for some things, including infrastructure, instead of having to borrow.

But he reiterated that the government's key priority with windfalls is to reduce the debt.

"We can't blow this opportunity," said Marshall, adding that the government is spending about $750 million per year on interest costs alone.

"That is money that is not being spent on hospitals, nursing homes, schools, roads, affordable housing and policing, among other things," Marshall said.

Bradley George, the Newfoundland and Labrador director of the Canadian Federation of Independent Business, said the government's focus on debt is exactly what his members have asked for.

He predicted a snowball effect that will buoy the economy further.

"Quite frankly, they want to see tax cuts," he said.

"They think the surplus is fantastic. With tax cuts come increased spending, but also hiring, and increased wages."

Debbie Forward, president of the Newfoundland and Labrador Nurses' Union, is advising the province to balance debt reduction with a program to help health employers stay competitive with jurisdictions that pay significantly higher wages.

"I think we have an opportunity now to say to our young people that there is a future here, that we are going to be competitive in terms of our salaries and benefits and that we want you to work here," Forward said.