Public sector unions appear to be in Nova Scotia Premier Stephen McNeil's sights in 2015 as his government grapples with spending restraint and a sluggish economy that's showing few signs of growth. McNeil fields a question at a Council of Atlantic Premiers meeting in Saint John, N.B. on Monday, May 26, 2014. THE CANADIAN PRESS/Andrew Vaughan

HALIFAX - Public sector unions appear to be in Nova Scotia Premier Stephen McNeil's sights in 2015 as his government grapples with spending restraint and a sluggish economy that's showing few signs of growth.

McNeil warned in a year-end interview that tough decisions are ahead for a government that needs to rein in spending while creating "conditions" that will lead to more business investment and jobs as the economy struggles at about one-per-cent growth.

The province is operating with a projected budget deficit of $220.6 million for 2014-15, while jobs figures from November indicated little change over the previous year and an unemployment rate of 8.8 per cent.

While McNeil would only hint at what measures are contemplated for the economy, he identified public-sector wages as a key to getting government spending under control.

"Public sector wage settlements that have been 2 1/2 or three per cent, it's not sustainable and can't continue," said McNeil.

The tough talk follows a year where the Liberal government battled public-sector unions over two major pieces of legislation primarily aimed at the health-care sector.

In April, the government ended a day-long strike by thousands of Halifax-area nurses by passing legislation requiring unions and employers to have an essential services agreement in place before a strike or lockout.

That was followed by legislation that will merge the number of bargaining units in the health-care system from 50 to four by April 1. The government touts the law as a way of streamlining bargaining and an arbitrator's ruling on the reorganization is expected Jan. 19.

The new year also promises more potential confrontation with a new round of negotiations involving other public-sector workers, such as teachers and paramedics.

"We know it's not going to be easy to achieve what we believe is the right wage pattern ... but it's going to have to be done," McNeil said.

Programs and services will also be affected in 2015 by ongoing departmental reviews that McNeil said would result in the disappearance of some and the complete revamping of others.

As well, McNeil said the government will work to address the regulatory recommendations included in a tax review conducted by former Ontario cabinet minister Laurel Broten. As for taxation, McNeil would only say budget consultations are set to begin in January with an eye on establishing measures to be included in the spring budget.

Progressive Conservative Leader Jamie Baillie said action is needed after a year marked by government studies and attempts to curb spending.

In August, Finance Minister Diana Whalen had to implement a mid-year reduction in spending and a hiring freeze after departments were unable to meet a one-per-cent cut included in last April's budget.

"If we can just hold spending to current levels we could actually have a balanced budget and get on with the job of meaningful tax relief," said Baillie. "That will be the big test when we get to the Liberal's budget in April."

But acting NDP leader Maureen MacDonald said McNeil's tough talk about the public sector will only serve to slow an economy that still needs a push from the government. It's not enough to leave it strictly to the business sector, she added.

"This is a government that needs to be fighting hard for every single economic opportunity it can get in this province," said MacDonald.

News from © The Canadian Press, 2014