The following statement was issued today, by Paul Dicks, Minister of Finance and Treasury Board. It was also read in the House of Assembly:

I wish to provide Honourable Members with a midyear update on our financial position for the 1996-97 fiscal year.

In the 1996 Budget speech of May 16 we stated: "Midyear budget corrections in recent years have created uncertainty in both the public and private sectors and diverted efforts from the real job of planning and providing services." In preparing the budget, one of our objectives was to minimize the opportunity for a disruptive midyear correction to arise this year. Part of our budget plan was the inclusion of a $30 million contingency reserve in the budget to assist in ensuring our budget targets would be met.

I am pleased to report to Honourable Members today that no midyear correction will be required. There have been variances in some revenue and expenditure items, as there is with any budget, but overall we are meeting the financial targets we set for this year. In fact, both revenues and expenditures show favourable developments that could lead to a net improvement in our financial position from the budget forecast. The most significant expenditure variance is projected savings in debt servicing costs. On the revenue side, federal transfer payments could end the year above forecast because of re-estimates of entitlements from prior years. I would note, however, that even if there are no interest savings and no gains in transfer payments, we still would be on target with our budget forecast. We have controlled expenditures. We have accurately projected revenues. We have been realistic. We have been fiscally prudent. We have been competent managers of the province's finances.

Because we are on target, and there are no major items which would cause us to materially restate our financial position at this time, we are not issuing a revised budget or new forecast of our budgetary position at midyear. Sound planning and good management have left our original budget intact. If the current trend continues, and some factors, like lower interest rates, reap financial benefits for us, we could realize some improvement over budget in our fiscal performance by year end.

The provincial economy also is performing somewhat better than forecast at budget. This results primarily from the slowdown in Hibernia construction taking place later in the year than initially expected and some positive developments in the fishery. This year we had a capelin fishery that was not anticipated at budget and the shellfishery has been more successful. There will still be a decline in real GDP, but in magnitude it will not be as great as initially expected.

While our financial performance is showing some improvement over budget at midyear, this will not permit us to be any less vigilant in our fiscal management. There are still risks to the budget in the second half of the fiscal year that could reverse some of the improvements that are developing at midyear. This is particularly true of federal transfers, which are subject to further federal re-estimates before year end. A budget is simply a financial forecast utilizing the best information available at a given point in time. It is always subject to unforeseen and unforeseeable events.

While we remain confident that we will achieve our fiscal targets this year, the province still faces significant financial challenges over the next few years. Our performance to date indicates that our budget planning has been prudent and responsible. It is imperative that we maintain a sound fiscal position to ensure we can continue to provide essential and sustainable public services.

I would remind Honourable Members that the budget plan for this fiscal year is not simply government's plan. It was put in place only after extensive pre-budget consultations with the people of the province, the first such consultations in the province's history. The result is a strategy that was built on consensus and common sense. Its elements are simple; protecting essential public services by more efficient delivery, while maintaining a sound financial position. It is our objective to operate more efficiently and at a lower cost through better management. It is clear that this is what the people of the province want. It is equally clear that they do not want increased taxes on average families and irresponsible increases in the public debt.

The reality is that we must spend less in the coming fiscal years. This is inevitable given declining federal transfers and present economic conditions. Spending less means we must spend smarter. I announced in the Budget that a process was being established to review all the expenditures and programs of government. This "program review" process is now well under way. A select committee of ministers is reviewing detailed submissions made by all government departments and agencies. It will make recommendations to rationalize our spending and restructure government. The results of program review will be put before the people for their views and suggestions as part of the 1997-98 pre-budget consultation process before any of the recommendations are implemented.

With the results of the pre-budget consultation process and program review, it is our objective to introduce a three year fiscal plan in the 1997-98 Budget. This will permit more effective budget planning throughout government. With a longer planning horizon, departments, agencies and all those funded by government will be better able to focus on their most important task, delivering essential and necessary public services. The three year plan is another example of how this government is addressing the considerable challenges of ongoing fiscal restraint in a managed, consistent and responsible manner. All those who rely on government funding need and deserve a stable, predictable and clear financial basis on which to conduct their service planning. This cannot be done in a fiscal environment that lurches from year to year, interspersed with financial shocks brought on by midyear corrections.

A key component of our financial plan is to set reasonable fiscal targets and either meet or exceed them. The people of the province can be assured that this government remains committed to responsible fiscal management. If we are to sustain and over time enhance essential public services, there is no other effective course of action. Our performance this year demonstrates this government's commitment to prudent budget planning, responsible fiscal management and the maintenance of a sound financial position.

I must caution, and emphasize, however, that this performance does not signal a reversal of our financial fortunes. The challenge lies ahead of us, not behind us. We are facing a period of significant adjustment to the size and structure of government. Our commitment to the people of the province is that we will meet this challenge in a planned, reasonable and consistent manner, one that will yield the same positive results in the future that we report to you today.