Editorial — Facing the fiscal music
As the Liberal leadership race gets down to its final days, and the new premier of B.C. is selected by party members, B.C. residents should take some time to contemplate the provincial budget, which was released on Tuesday to a collective yawn.
As expected, it contained virtually no new initiatives, as there is no active government in place right now. Premier Gordon Campbell is in his final days as caretaker; the cabinet ministers who are still working are doing routine tasks; and the direction the government takes will be determined by the new leader, and by public reaction to that leader.
However, despite the lacklustre budget, there are a few noteworthy points. One is that government debt is rising at a breathtaking rate, with very little of that debt actually due to the current deficit. Most of it, in fact, is for capital projects, with much of that for BC Hydro.
The debt could be close to $60 billion by 2013. When the BC Liberals were first elected in 2001, the debt was around $34 billion, and it didn’t move much past that figure until 2007, when the government started throwing a lot of money around — perhaps encouraged by the booming economy of the day.
There is another point to take note of. Finance Minister Colin Hansen took pains to point out expected growing revenue from the HST. Revenue is expected to be $4.2 billion in 2010-11 (including PST revenue) and rise to $6.5 billion by 2013-14.
But there is no guarantee the HST will survive a referendum vote which is scheduled for September, but may be moved up to June. The old PST, if reinstated, would not bring in as much revenue because it does not apply to as many items. One leadership candidate, Kevin Falcon, has proposed cutting the HST rate to 10 per cent. And if the referendum gets rid of the HST, the province has to pay $1.6 billion back to Ottawa.
In other words, this budget has a great deal of uncertainty associated with it, and despite all the political song and dance routines we are hearing, B.C. has many major fiscal challenges ahead of it.