Nova Scotia budget includes reserve fund, tax cuts amid U.S. tariff threats

HALIFAX — The Nova Scotia government has introduced a $17.6-billion budget that includes major tax cuts and a reserve fund to be used if the U.S. president makes good on his threat to impose crippling tariffs on Canadian exports.

Finance Minister John Lohr introduced a budget Tuesday forecasting a deficit of $697.5 million for the 2025-26 fiscal year — a figure that could rise if the $200-million reserve fund needs to be used.

“The threat of U.S. tariffs continues to loom over us. We don’t know what will come, but we are ready to respond,” said Lohr in his budget speech. “It is clear we are entering a period of heightened uncertainty and heightened risk.”

Economic headwinds include slowing population growth and potential American protectionism, which could trigger a drop in exports, say budget documents. In response, the Progressive Conservative government’s solutions range from lowering taxes to increasing capital spending on hospitals and public housing.

The $500 million in tax measures include a one percentage point reduction in the harmonized sales tax, to 14 per cent; the indexation of tax brackets; and an increase in the basic personal amount that is shielded from the provincial income tax — moves the government says will save the average household more than $1,000 this year.

Meanwhile, the budget removes parking fees at all provincial hospitals, at a cost of $19 million, and drops the tolls from the two bridges spanning Halifax harbour starting April 1, which will mean $39 million in lost revenue.

In reaction to threats by U.S. President Donald Trump to impose 25 per cent tariffs on Canadian goods in March, Lohr said the province is looking to diversify its economy in areas such as critical minerals, wind power and hydrogen. And the minister went on the attack against groups he thinks might oppose the plan.

Referring to critics as “special interests” 11 times in his speech — groups that “try to block opportunities for their fellow Nova Scotians” — Lohr said the government will reconsider existing bans and avoid future prohibitions on the development of uranium, natural gas and other resource projects.

Later in the day, the government followed through on that pledge, introducing a bill that would lift blanket bans on uranium exploration and hydraulic fracking of fossil fuels. Premier Tim Houston told reporters the legislation is needed to make the province more self-reliant and able to withstand economic challenges that would result from U.S. tariffs.

During a news conference Tuesday, Lohr said the government began thinking about a focus on resource development the day Trump was elected. “I think it was Nov. 4 … and following that the recognition that, ‘Oh my goodness, the world is changing,’” he said.

NDP Leader Claudia Chender questioned why resource exploitation wasn’t part of the Tories’ promises during the November election campaign, and criticized the government’s attacks on undefined opponents of unknown energy projects.

“The government has come in guns blazing with no market interest (in resource projects) behind them as far as we can tell and no actual stated opposition to a plan they never unveiled during the election,” the Opposition leader said. As well, she said the purpose of the reserve fund is unclear, as the budget didn’t include details on assistance to workers who would lose their jobs in the looming trade war with the U.S.

Government spending will increase across most departments, even as the province’s net debt is projected to rise to almost $23 billion in 2025-26 from $19.8 billion. Nearly $6 billion is earmarked for health care, an eight per cent increase from the previous fiscal year, including $1.4 billion for various capital costs and hospital expansions, with $26.9 million to cover the costs of the shingles vaccine for those aged 65 and older.

The province is describing the projected $2.3 billion in capital project spending — including the health infrastructure — as part of a wider strategy to “help stimulate the economy” amid the threat of U.S. tariffs.

The budget also includes figures on previously announced initiatives that are being put in place for the party’s second term. They include $25 million to create a Department of Emergency Management and a volunteer response group called the Nova Scotia Guard, both of which are to help the province address climate change. It also confirms a campaign promise to increase the minimum wage by $1.30 an hour, to $16.50, on Oct. 1, and it includes an extra $61.3 million for the school lunch program to help it expand by 77 schools.

Derek Mombourquette, the interim Liberal Party leader, said if the contingency funding is drawn down, then the potential deficit will be daunting for a small province of about 1.1 million people. With the latest projected deficit, the net debt per citizen would stand at about $21,009.

“It’s a deficit of almost one billion dollars and one of the largest I’ve seen,” Mombourquette said, adding the $697.5 million deficit forecast together with the $200-million reserve fund.

“A lot of it is not addressing any kind of tariff threat. It’s a substantial deficit to carry and it’s troubling,” he said.

This report by The Canadian Press was first published Feb. 18, 2025.

Michael Tutton and Keith Doucette, The Canadian Press