Martyn Brown: The bottom line on the B.C. Liberal budget
Now that the Christy Clark government has offered its last budget, the pressure will mount on the NDP to show its hand. The B.C. Liberals are licking their chops, waiting to attack Adrian Dix’s long-promised “fully-costed platform” as a blueprint for runaway spending, endless deficits, and the end of the world as we know it. Indeed, the NDP might even agree with that last point.
Whether the issue of fiscal management will even be much of a factor in the upcoming election is a debatable point. I doubt it will, no matter what size of deficit Dix envisions in the NDP platform, or how much the Liberals rightly fixate on fiscal and economic management as their strongest suit. Yet despite the government’s relatively impressive fiscal and economic track record vis-à-vis virtually any other province, it will be hard pressed to overcome its credibility and trust deficit, as evidenced by recent opinion polls.
According to Ipsos Reid, some 72 percent of B.C. voters do not believe that budget is balanced. Only 12 percent do. Which means that only a small fraction of the B.C. Liberals’ own supporters now also believe the tabled budget is balanced. Not exactly a resounding vote of confidence. Eighty-three percent of British Columbians say that last week’s budget will either have no impact on their vote, or it will make them less likely to vote for the B.C. Liberals.
Most people know that this budget will never see the light of day. Yet even its most popular elements—the proposed tax hikes on higher income-earners and on corporations—also plays into the NDP’s hand. First, it validates and embraces the tax hikes that Adrian Dix had suggested. And second, with around 80 percent of all voters favouring those measures, it suggests there might be even more public appetite to move further in that direction.
The Clark government is now asking those “who have a little more...to contribute a little more.” Essentially it is arguing for a modest redistribution of wealth, just as Adrian Dix has been advocating. The question is, will the NDP now feel emboldened to further extend that argument to increase funding for services and to minimize its own deficit?
Watch for the NDP to reverse the Clark government’s planned four percent hike in medical services plan premiums, which are opposed by 73 percent of the electorate. Note that the additional one percent increase to the corporate income tax that Dix has promised beyond the one percent hike now planned by the B.C. Liberals would alone bring in twice the annual revenue of the government’s announced increase to MSP premiums.
Since 1980, we have had 24 deficit budgets and nine surplus budgets. The NDP had one of those surpluses and nine of those deficits. The B.C. Liberals produced five of those surpluses and six of those deficits. Next year’s imagined $197 million surplus must be evaluated in the context of that record and of this fact: since 2004, the smallest variance in the bottom line between what was originally projected in the budget versus what actually materialized was about $700 million. Most of those actual surpluses or deficits were at least $1.3 billion to over $3 billion off their original mark, for better and worse. No budget got it right.
The Gordon Campbell government actually cut overall real per capita operating spending from $8,876 in 2001-02 to $8,251 by 2004-05. That per capita spending grew during the ensuing surplus years. Yet despite new cuts after the 2008 recession, it grew again last year. It now sits at about $9,983. It defies credibility to think that those real per capita operating expenses will drop in each of the next three years, as the new budget fantasizes.
Anyone who believes that health care increases will be held to 2.6 percent over the next three years is dreaming in Technicolor. The Liberals’ mere two percent increase in 2014 is even smaller the projected growth in GDP. It will not offset the increased funding pressures from inflation, years of restraint, population growth, aging, increased utilization, higher drug costs, new technologies, new capital demands, and more. And that’s not even considering wage pressures.
Most public sector agreements are up again next year. The chances of holding to yet another net zero wage cost mandate are pretty slim. With total public sector payroll costs now running at about $24 billion annually, even a modest four percent wage lift over the next few years could easily add a billion dollars in unbudgeted costs.
The list of major cost pressures goes on and on. They won’t be easily wished away by budgets that ignore them altogether. Nor are one-time asset sales of some $800 million over the next three years either plausible or prudent. It makes no sense to sell Crown assets at fire sale prices when land values are depressed. And we should know that almost any parcel of Crown land that is put up for sale will immediately become subject to First Nations’ land claims. Constitutional requirements for consultation and accommodation alone could easily delay or even prevent those sales, and might also diminish their bottom line value.
It’s time to be honest about these hard facts. The Clark government’s laudable restraint budget largely dances around the uncomfortable realities that an NDP government will be compelled to face, if current polls prevail. My advice to Dix is pretty simple: don’t trust what you can’t see; don’t promise what you should know you can’t deliver; and don’t hesitate to highlight the fiscal pressures that you now know you will face. Honesty is actually always the best policy, politically, no less than morally.
My sense is, what most voters are yearning for today is someone to simply be honest about the funding challenges ahead and how they plan to address them. Within the context of a broad vision for growth that aims to diversify the economy and capitalize on B.C.'s inherent strategic advantages. Most people aren't looking for deep cuts in spending or services, least of all in health care and postsecondary education, as the Clark government's proposed government contemplates. They want responsible fiscal management predicated on a genuine commitment to balancing the budget over the business cycle without selling the farm or selling short British Columbians' needs for better public services. They want better value for each tax dollar they contribute and also more progressive taxation that is even more attuned to individuals' ability to pay and to corporate profits. There is much that can be done to make income taxes more progressive and to also improve fairness in respect of hidden taxes, like MSP premiums, drug costs, tolls, tuitions, transit fares, and user fees.
Today, Adrian Dix and the NDP are sitting pretty in the catbird seat. The new Angus Reid poll confirms that the B.C. Liberals' support is still stuck at 31 percent, some 16 points behind the NDP, with 29 percent of those who voted for Gordon Campbell's party in 2009 now saying that it is time for a change in government. Despite the throne speech and budget, Premier Clark still trails Adrian Dix on every issue, with a 58 percent disapproval rating and 45 percent saying their impression of her has worsened over the last few months.
By the time the next budget is tabled, the financial picture will have changed. That new reality will make a mockery out of many of the assumptions that have informed the Clark government’s stillborn budget. As such, Adrian Dix would be wise to wait as long as possible before finalizing his party’s platform. He must also be careful to openly qualify his spending and revenue commitments in light of all that he knows that he cannot possibly know today, sitting in Opposition.