Tuesday, February 15, 2011

Budget shows a drifting government

The weirdest moment in this year's budget lockup came when Finance Minister Colin Hansen was asked about the 15-per-cent income tax cut Premier Gordon Campbell proposed - and then withdrew - in the fall.
Didn't it now seem reckless to have proposed knocking $800 million off revenues when the province's debt will hit $60 billion by 2013, he was asked?
No, Hansen said. There were lots of savings the government could have made in ministry budgets - cutting things like travel - to offset the tax reduction.
So, why didn't it? Why wouldn't a cost-cutting government grab those savings anyway?
Basically, the budget is like one of those fake streets they build to shoot cowboy movies. Look around the back, and there is not much there.
The deficit is projected at $1.3 billion for the current fiscal year, which ends March 31, and is to shrink in the next two years before a return to balanced budgets in 2013.
Spending will increase for health - up 6.2 per cent in the coming year and about three per cent in each of the next two.
But most ministries will see their budgets cut in the coming year and frozen for the two following years.
Revenues are forecast to increase, with the HST and personal income tax leading the way.
But none of the numbers can be relied on too heavily.
The main aim in drafting the budget was to create a lot of room for the new premier.
So there is $950 million - about the same as the budget for law enforcement, jails and the courts - in various contingency funds in next year's budget. That's money the new premier can use to expand programs, cut taxes or bring in a balanced budget right away.
There are the easy cuts, according to Hansen, in ministry budgets that could deliver a lot more swag for the new leader to spend.
And it's likely revenues have been underestimated, as they were in the past year, given still more spending.
But while there was a lot of emphasis on creating political room for the new premier, there wasn't much on addressing the needs of British Columbians today.
The ministry of children and families, despite all its problems, faces a three-year funding freeze. The income assistance budget, despite rates that leave thousands of people with disabilities living in poverty, is also frozen.
There's no additional investment in universities or science, even though the government has made much of the need for innovation and a skilled workforce.
There was a lot of focus on debt in the budget lockup. The string of deficits, big B.C. Hydro capital spending plans and a huge infrastructure spending spree in the Lower Mainland - transit and roads and a new stadium roof and convention centre - are adding billions to the province's debt.
That's not necessarily bad. The infrastructure spending created jobs and the alternative to running deficits would have been deep spending cuts during the recession.
But the province's total debt will climb from $38 billion in 2008 to $60 billion in 2013. That's almost $13,000 per person. Interest payments will reach $2.9 billion a year by 2013; more if interest rates spike.
Debt is still at reasonable levels compared to the province's total economy. But the growth is extraordinary and while all British Columbians will share the obligation, it's unclear whether all will benefit from the spending.
The most striking thing about the budget was what was missing. Even with a leadership change, you would expect a mature government to have some policy goals and priorities that it would continue to fund over the next three years.
That was simply absent from a budget that looked more like a speadsheet exercise than an actual plan.
And so far, none of the Liberal leadership candidates have offered a vision or policy program that would fill the vacuum.
Footnote: The budget also faces a rewrite if voters reject the HST in the coming referendum. Hansen was vague about plans or costs, but hinted that unravelling the HST and returning to the PST could take longer than many people anticipate.


e.a.f. said...

with their decision to freeze the funds for children and families we can look forward to additional deaths. we already have 21 dead babies. I guess the lieberals think there is nothing wrong with that.
Of course if more people die because of underfunding the need for services will go down also.
maybe that is what the lieberals are planning.

DPL said...

Yes Paul, a mature government should have some policy goals. The only goal that bunch has is to stay in power for as long as possible. when asked Hansen gets really vague which seems to be his fall back position.