Collins' gloomy economic forecast should make you nervous
By Paul Willcocks
VICTORIA - As the boss, you should be a little worried about Gary Collins' first quarter financial report.
After all, you write the cheques. When the finance minister shows up to report on the progress for the first three months of this budget year, it's your approval he needs.
In a past corporate life I used to go through this process, both as a presenter, putting the best face on often ugly news, and as an audience, waiting to see how much confidence I could have in the brave plans of managers.
I wouldn't be calling in the outplacement counsellors to help Collins pursue other interests yet. But it is time to get nervous.
Too many things have gone wrong. The Liberals knocked down their forecast for economic growth this year and next when they presented the latest update. The economy is now expected to grow 1.5 per cent this year, down from the 2.4 per cent the government predicted back in February. B.C. will have the worst performing economy in Canada.
There has been a ton of bad luck - SARS and mad cow scares, a soaring dollar, and of course the softwood dispute.
But the prolonged softwood shouldn't have been a shock. And other provinces have confronted many of the same issues, and done better than B.C.
And anyway, you don't hire managers to tell you that things have gone wrong - well, except for accountants - you hire them to fix things.
Here are three things that should concern you in Collins' report.
First, and most importantly, the government's economic measures are not producing results. The New Era of prosperity isn't here, and the government's own projections have B.C. limping along at the Canadian average through 2007. Politicians can cherry pick statistics and trot out all the upbeat anecdotes they like. The fact is that the B.C. is under-performing.
Second, the prospects for a quick recovery look slim. The first quarter reforecast knocked personal income tax revenues down from budget, because we aren't earning as much. And it says the shortfalls will be greater over the following two years. The same pattern is true for sales tax. We don't have the money to spend the Liberals expected.
And third, the Liberals' promise to bring in a balanced budget in six months is looking risky.
They'll make it. Give Collins credit - he has hit all his targets so far, and there's no reason to doubt him when he says he'll hit this one. But missing the target isn't the only risk.
The government's plan called for a $2.3-billion deficit this year. But that included a $500-million cushion, and before the forest fires a real deficit that was up to $1 billion lower was likely.
Not now. Moving from a $2.3-billion deficit to a balanced budget in one jump will require a big jump in revenues, or a sharp decline in expenses. The plan calls for revenue to jump by $1 billion next year, a steep but doable target.
The Liberals also want to cut spending by $850 million. Every ministry, outside health and education, must spend less than it did this year. Even the solicitor general's ministry, concerned with safety and emergency preparedness, faces a 20-per-cent cut.
Even hitting those targets leaves the government with a razor-thin surplus, and no cushion for emergencies like this year's $500 million forecast allowance.
It can be done. But the danger is that the poor economic performance - the Liberals' original plans predicted much higher growth and revenues - are going to force dangerous cuts, made not because they make sense but because an artificial political deadline looms.
You're the boss. It might be time to congratulate the finance minister on managing to the budget. But it also might be time to note the lack of real results.
After all, that's what managers get paid for.
Footnote: The Vancouver missing women's case has now cost you something like $40 million. The investigation - mostly at the Pickton farm - will cost $26 million this year, on top of more than $10 million last year. Trial costs are expected to reach another $4 million this year. How much would it have cost to keep them alive, instead of sifting through dirt to learn about their deaths?