Economic analysis

Five seriously austere measures that aren’t in the Drummond report

From alcohol duties to the Queen’s pay–here’s what others are doing to stretch their budgets

Roger Blackwell/Flickr

Economists have long warned that current spending patterns have put Ontario on track for a fiscal doomsday. In an attempt to show Ontarians the way to economic salvation, Premier Dalton McGuinty appointed a commission on public-service reform last year, headed by former TD economist Don Drummond. His report, unveiled on Wednesday, is a 362-item long laundry list of cost-cutting (and a few revenue-boosting) measures the provincial government should consider to keep the public deficit from ballooning to $30.2 billion by 2017-18. The prescriptions go far beyond the usual calls for budget freezes and capping wage increases in the public sector; Drummond recommends scrapping all-day kindergarten, increasing class sizes, and shutting down casinos. To make Ontarians feel better about the coming age of austerity, we’ve put together a list of the five most unusual ideas other governments have considered or implemented to fix their own beleaguered finances. 

1. If you can’t remember it’s yours, it’s ours

Even before the great recession dug deep into Americans’ pockets, reducing income tax revenues across the U.S., several state governments had occasionally been spending money that wasn’t really theirs. We’re talking about so-called abandoned property, or stuff people leave behind and forget to claim: bank deposits, uncashed paycheques, unused credit on gift cards, the contents of safe-deposit boxes, stocks, and so on. All U.S. states have unclaimed-property laws that require banks and companies to hand over to the state any dormant asset they’re left with–the idea being that public authorities will do a better of job of tracking down owners and reuniting them with their forgotten property. That’s the theory, anyhow.

But according to a 2008 investigation by the Wall Street Journal, “states from Massachusetts to California have turned their programs into big money-makers, and routinely dip into unclaimed assets to cover state expenses.” (You can read the article here, the link opens a PDF.) Back then, the Journal revealed, unclaimed property was Delaware’s third-largest source of revenue, accounting for US$365 million in fiscal 2007. According to another Journal article published this week, the state of California has a forgotten check for US$659.01 with Angelina Jolie’s name on it, New York state has at least two checks that belong to Rudy Giuliani, and Illinois has just under $100 from Ezekiel Emanuel, the brother of Chicago’s mayor. Is it really too hard to locate these guys?

2. Get the people drunk

There was something counter-intuitive in Irish Finance Minister Brian Lenihan’s 2010 austerity budget: the government was introducing tax cuts on a number of alcoholic beverages. The duty on a pint of beer or cider, as well as that on a half-glass of spirits, would fall by nearly 20 cents, while the duty on a bottle of wine would drop by over 80 cents. With unemployment soaring past 10 per cent and the economy shrinking by 7.5 per cent that year, had Irish lawmakers decided to encourage the beleaguered taxpayer drown her sorrows at the pub? Not quite.

The move was actually meant to boost public revenues coming from the sale of alcohol, which had dropped drastically after penny-pinching drinkers started deserting the pub and swarming to Northern Ireland to buy cheap drinks. Alcohol sales fell by 6 per cent in 2008, the worst slide in 25 years for Ireland’s $9-billion drinks industry, the Irish Times noted. According to the same article, in 2009 the state was set to lose over $130 million in tax revenues due to cross-border booze-shopping alone. Lowering the duty on alcohol, then, was a sleek move to lure the Irish back to the local pub, thus revamping the consumption of domestic pints and of tax inflows from them.

3. Taxes by any other name

At $480 (U.S.), California’s fine for running through a red light is the steepest in the world, according to the San Francisco Chronicle. It’s also a lucrative source of cash for public coffers. Red-light cameras, installed at intersections all over California, are estimated to bring in $80 million annually to the state and another $50 million to cities and counties. One camera in Oakland reportedly generates over $3 million a year by itself. Of course, there’s nothing wrong in slamming drivers who race through a red light, but a number of California motorists say authorities are making it too easy to commit an infraction. They even have an advocacy group—the Red Light Camera Protest Group.

For one, they say, yellow lights are too short. An experiment conducted in the city of Fremont, south-east of San Francisco, showed that adding 0.7 of a second onto the yellow light of a busy intersection produced a 62-per cent drop in red-light camera tickets. And according to a study conducted in South San Francisco, 98 per cent of the city’s red-light camera tickets were for rolling right turns.

Most other U.S. states charge about $100 for running a red light, and the second-highest fine of the kind in America is $250. Ontarians may want to take notice of the fact their own red-light camera penalty is $325.

4. Show off your assets

In a bid to lure more foreign movie-makers, Greece’s culture ministry recently cut the cost of a permit for a film shoot at tourist attractions like the Acropolis, Delphi, and the Temple of Poseidon at Sounion by over half, from $5,000 a day to just over $2,000. In addition, taking photographs of ancient ruins now costs $256 per day, down from $385. And the Acropolis will also be up for rent, officials say. This week Greece agreed to $3.3 billion-worth of budget cuts in return for $170 billions in rescue funds–the country’s third bailout package since 2010.

5. Yes, even you, your majesty

Austerity spares no one, not even the Queen of England. The royal household will have seen its funding cut for six successive years by 2015. According to the Daily Telegraph, Queen Elizabeth II has seen her pay steadily dwindle since since the financial crisis began. In 2009, she made $60 million, a steep drop from the $122 million she made in 1992.

There’s more. British taxes will no longer cover the travel expenses of William and Kate, whose whirlwind tours will now be financed by Prince Charles. And with the royal budget squeezed, repair work on palaces will likely be delayed at least until 2015. The Queen has also agreed to make some rooms at St. James’s Palace available as party venues during the 2012 London Olympics. Companies with close ties to the royal family will be able to rent the spaces for corporate events.

The British sovereign, for her part, is doing her best to lead by example. “You don’t really realize, but the Queen is going around Buckingham Palace, turning off the lights, having fewer staff, even turning the heating down,” Ingrid Seward, editor-in-chief of Royal magazine, told ABC News. “She sometimes even writes letters in her very own fur coat.”

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