Martyn Brown: Contract? What social contract?

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      When is a contract not a contract? Time and again, the answer is obvious: when it is one that was made with a government that an incoming government chooses to ignore or unilaterally terminate, sometimes even without compensation.

      Somehow lost in the coverage of the NDP’s announced fiscal plan is a policy that appears to amount to a breach of a social contract that stands to cost some 240,000 families $2,200 each. And no one seems to have cared or noticed.

      We are now told that an NDP government would scrap the B.C. Liberals’ B.C. Training and Education Savings Program and reallocate the $30 million per year that had been budgeted for that program to other priorities. Fair enough. It’s always a new government’s prerogative to change programs and to reallocate spending going forward for other initiatives, especially when it receives an election mandate to do that.

      But Adrian Dix needs to immediately clarify his party’s intentions with respect to how that change of policy will effect all of the people who were told by their government that they would be entitled to money set aside for each new child born after 2007 to help them with their postsecondary education costs.

      On the surface, it appears that the NDP plans to take back that money owed to those parents and their kids.

      Six years ago, the Gordon Campbell government created the Children’s Education Fund—a special account that today has over $300 million set aside to honour its commitments to parents and kids. Under that 2007 budget initiative, the parents of every child born after January 1, 2007, including kids adopted by residents of B.C., would be entitled to a cheque from the B.C. government upon their child’s entrance into a qualified postsecondary institution, to help defray their child’s education costs.

      Each year, the government invested $1,000 into that special account for every new child born or adopted in B.C. The parents of those kids all received a letter that explained their entitlement. They were told that they could expect to receive a grant equal to about $2,200 when their child entered a postsecondary institute, based on that initial $1,000 investment made for their child, with accrued interest.

      This year, the Christy Clark government changed that program. Under the new program, each child will still get the money he or she was entitled to for their postsecondary education or skills training. But instead of having the government invest that initial $1,000 and manage that investment until the new child is 18 or so, parents would be entitled to receive $1,200 when that child reaches age six and to manage it themselves. That amount roughly equates to the $1,000 per child investment, with interest, for six years.

      To access that money, all parents will have to do is open up a Registered Education Savings Plan (RESP) sometime in their child’s sixth year, before they turn seven. Just like the original plan, they will not have to invest any money of their own, or do anything upon their child’s birth or adoption. They only have to set up an RESP and apply for the grant to which they are entitled.

      Under the new program, parents will hold and invest their own child’s money within the RESP. The interest earned on that $1,200 will continue to grow as well until it can be used for its allowable purpose, when the child enters postsecondary education. None of that money will be taxable income, which is a major benefit and improvement to the original program.

      There are about 40,000 new kids born each year in B.C. Under the original program the government set aside $1,000 for each of those new children, for an annual investment of $40 million in the Children’s Education Fund. That fund still exists and contains six year’s worth of investments, plus interest—just over $300 million.

      With the most recent changes, the Clark government only plans to invest $30 million a year into that fund. That’s because, the original program assumed that 100 percent of all children born or adopted would eventually want to access their grant. Now the government assumes an uptake of only 57 percent. A different accounting treatment also adjusts for the fact that the first payments to parents would now start flowing in 2013, instead of in 2024.

      Here is what is important.

      It looks like the NDP plans to retroactively take away that grant for each of the 240,000 new kids whose parents were told they already had taxpayer-funded deposits that were effectively made in their child’s name.

      It seems that the social contract the government created and entered into back in 2007 is being unilaterally nullified. The money that those parents and kids were told that they would get will not be granted after all. No matter what new program the NDP might announce to reallocate that $30-million annual grant program, existing new parents may not get the money they were promised.

      That means, those 240,000 families who had every right to believe they were already entitled to a tax-free grant that would be worth about $2,200 by the time their child enters postsecondary school, will not be getting that money. And that’s sneaky and wrong, if true.

      Back in 2002, the NDP went understandably ballistic when the Campbell government shredded aspects of public-sector collective agreements in order to save taxpayers money. As I said in my e-book, ripping up contracts is never right. It’s wrong, no matter how “noble” or well-motivated a government might think it is being through its actions, which in that case, also flew in the face of an explicit commitment not rip up union contracts.

      The difference here is that on May 14, the NDP appears to be running on a commitment to take away 240,000 children’s postsecondary cash entitlement, while also telling future parents not to expect that grant in future. The likely government-in-waiting looks like it is running on a platform that effectively allows the majority of voters to give it permission to unilaterally rip up the social contract that its predecessor made with those new parents who have had kids or adopted new babies since 2007.

      What is the NDP planning to do with the $300 million in cash now sitting in that special account? We don’t know. It was not announced in the NDP fiscal plan, which also includes four tax increases that I happen to support.

      Indeed, the tax changes the NDP is proposing are all fair, smart, and consistent with what Dix has been promising.

      The expansion of the carbon tax base to capture emissions from oil and gas venting only makes sense. If anything, it doesn’t go far enough in using the carbon tax to penalize pollution, especially given the massive increases in greenhouse gas emissions that will be created by that industry in its expansion plans.

      The extra one percent bump in the corporate income tax, to 12 percent, is also reasonable and nationally competitive. Restoring the corporate capital tax on banks and credit unions is a no-brainer. It rectifies a gift to those massively profitable money-machines that never should have been made in the first place, in my view.

      Ditto for the increase in the personal income tax on high wage earners. Again, if anything, we should be doing more to make taxes more progressive. Hidden taxes, user fees, tolls, and fees for service are all increasingly hitting middle-income families harder than they do upper income earners. We need to take a hard look at that in B.C., and I hope that the NDP has something to say and offer on that score in its platform.

      In the meantime, Dix needs to clarify his party’s position on the children’s education savings and training issue.

      Is he planning to honour the social contract that was made with 240,000 B.C. families, representing maybe 400,000 or more voters? Or is he planning to retroactively take away the grant to which they rightly feel they are entitled?

      He can certainly stop the program going forward, to deny future new parents and their new kids the grant that they would likely otherwise get. But he should honour the commitment that was made to all of those who should be able to have confidence in their government, regardless of its political stripe.

      The government gave those parents and kids its word. It will be interesting to see if Dix will honour the social contract that their government made with them and that it has backstopped with $300 million in hard cash to meet its obligations. Ripping up contracts was not right when it wrongly penalized unionized public-sector workers. It is equally wrong to use the blunt power of government to renege on commitments made to parents and kids that the NDP should honour.

      Martyn Brown is the author of the new e-book Towards a New Government in British Columbia, available on Amazon. He was former B.C. premier Gordon Campbell’s long-serving chief of staff, a top strategic advisor to three provincial party leaders, and a former deputy minister of tourism, trade, and investment in British Columbia.

      Comments

      11 Comments

      EG

      Apr 12, 2013 at 1:09pm

      You can't take one policy measure in isolation. If the NDP cancels the wildly inefficient grants program and introduces other education support, then families may come out ahead.
      The Liberal government tripled university tuition and that cost my family $25,000 in unplanned expenses. Then in 2007 they tossed some crumbs to younger families in an attempt to sway voters.

      cHriSTy

      Apr 12, 2013 at 2:04pm

      The BC Liberals needed to cancel the HST IMMEDIATELY after the second referendum BC had on the issue. They didn't, instead they held on to their HST for months and months and months...

      sd

      Apr 12, 2013 at 2:08pm

      It would be more efficient for the government to use the money for education than to give it to the parents to give back in the form of tuition in 12 years.

      The government could even do something innovative to encourage first year BC students to go to university or training by having the first term tuition-free to qualified BC residents. The amount of money from the government would be the same, but it would be more wisely spent instead of going to administration of RESPs, plus the additional administrative costs involved in getting parents signed up for the program.

      Boutique tax credits are good for feel good ads, but not much else. They reward behaviour that would have occurred anyway.

      DavidH

      Apr 12, 2013 at 2:09pm

      Mark my words ... Martyn Brown has embarked on a political campaign that he will one day use to enter the well-paid Legislature. That place where people can earn significant pension benefits.

      The fact that he can use a phrase like "social contract", and defend it, is proof enough. He would have gagged on those words a few years ago.

      Ryan

      Apr 12, 2013 at 5:07pm

      What a silly argument. You can say this every time a government changes a program of a past government. So no government now can make any changes to any program because it'll be "breaking" a contract?

      And although this wouldn't make his argument any less silly, the program itself is silly. Lower tuition for all. Why shouldn't an older worker enjoy a lower tuition if they want to upgrade their stills or change jobs? But keeping tuition high, you lock people into their jobs. I would rather see tuition lower for all, instead of this break for people with kids.

      Susan

      Apr 12, 2013 at 10:44pm

      Come on Martyn! You are beyond transparent. Nothing compares to the Campbell government "shredding" those public sector agreements. Thousands of people (a majority of them women) lost their jobs, could no longer contribute to the economy and now many live in poverty. Their jobs were outsourced to corporations to whom the bottom line is profit. They hired people, untrained at minimum wage who often had to work 3 jobs to pay their rent. The only thing that flourished as a result of this were the germs in hospitals - they fared much better than any tax-paying citizens that I know of.
      That measly little token provided to a few of our children isn't going to ensure anybody an education - it is just a carrot and really, given the tuition fees that result in most kids coming out with a degree and $40,000 in debt, it is a joke! My hope is that Adrian Dix has learned his lesson and that his government is in turn able to expose the corruption of the Campbell government as he was (for a relatively minor offence similar to possibly spending the "Training and Education" funds more responsibly) because like the shredding of the public-sector contracts, the Basi-Virk case, the selling of BC Rail and the Sun River monstrosity are criminal acts!

      doubletalk

      Apr 13, 2013 at 3:26pm

      I wouldn't expect Adrian Dix to honor any contract. This is a person who didn't honor his position in government when he forged a government document during a police investigation. Since he was resigning in disgrace I guess he felt he was "entitled" to $70,000 in severance pay also. Really Adrian, did you really deserve the severance pay? That's more than most people who don't forge documents make in a year or two. Certainly no friend of the working class.

      won't get fooled again

      Apr 13, 2013 at 5:12pm

      Brown attempts to re-invent himself after long-service for a government that re-invented tearing the social (and other) contracts. Why does this guy get anyone's time?

      SPY vs SPY

      Apr 14, 2013 at 11:19am

      I would estimate that about 50% to 70% of BC households cannot afford to put this kind of money aside.

      This looks like a great deal, except only the 30% of BC Citizens (the Richest) can afford this program, 30% of BC Citizens (the Richest) do not need more tax breaks.

      This is just a subsidy for The Rich

      Martin Dean

      Apr 15, 2013 at 7:47pm

      So let me get this right Martyn,

      So don't do as YOU did when given the opportunity as Gordo's lackey, but instead, do as you say now? That about it?

      Your conversion on the road to Damascus comes off as self serving and insincere.

      Please go away or go lobby for Hill & Knowlton or the Fraser Institute - they celebrate the kind of crapola you are shovelling these days.

      Hypocrites the like of you give me gas.