Gabriel Yiu: B.C. Liberals' contractual obligations hide magnitude of provincial debt
I still remember that in the 1990s, the business community, the Fraser Institute, the taxpayers' federation, the media, and the pundits often raised a hue and cry about the increase in debt incurred by the NDP regime. And they spared no effort in slamming the government for it.
They said such debts condemned our children and grandchildren to bearing the responsibility to pay for reckless spending.
Today, we can see that compared to the B.C. Liberals, the NDP's increase to the public debt was merely child's play.
B.C.'s finance minister, Colin Hansen, recently released his budget. Although the spending figures are just temporary and transitional, the large increase in debt is here to stay.
When the NDP won the election in 1991, the provincial debt was $20 billion. When the NDP stepped down in 2001, it was $33.8 billion—i.e., an increase of $13.8 billion during the decade of NDP governance.
The infrastructural capital construction under the NDP included new schools, health-care facilities, social housing, community facilities, the Island Highway, the Skytrain Millennium Line, SFU’s Surrey campus, and the fast ferries.
This year, B.C.'s provincial debt is at $47.3 billion. On the surface, the debt increase under a decade of B.C. Liberal governance is $13.5 billion.
Nevertheless, that is merely a faí§ade because the debt does not cover many of the B.C. Liberals' public-private-partnership projects, like the upgrading of the Sea-to-Sky Highway, the construction of the Canada Line, or the Abbotsford Hospital.
Actually, the B.C. Liberals have another ledger called “contractual obligation” to record these “debts".
The B.C. Liberals have been building infrastructure projects with the P3 model. Compared to the traditional approach of government borrowing and holding a public tender, the P3 model costs more.
These P3 projects are considered "contractual obligations” instead of debts.
Thus, they are not stated in the government budget and the government does not provide detailed information about them because they are deemed to be private business secrets.
In the 2009 B.C. election, I was an NDP candidate. At the first election forum organized by the Chinese media, the B.C. Liberals sent Hansen to debate me.
At the forum, I asked the finance minister three times: "What is the total amount of the government’s contractual obligation?"
Hansen did not reply to my question. He simply beat about the bush, and led people up the garden path. After this event, I have not met Hansen in other Chinese media election forums.
So what is the total amount of B.C.’s contractual obligations?
According to the recently released Public Accounts 2009/10, on page 75, it was stated they amount to $53 billion!
I am not kidding. The rounded-up figure is $53,041,000,000. The obligation this year is $7.3 billion; next year is $4.4 billion; the following year is $3.6 billion.
So after a decade of B.C. Liberal governance, if we add the debt and “contractual obligation” together, the total “debt” increase is $66.5 billion.
This amount is almost five times that of the NDP decade!
Even if we put aside the “contractual obligation” and concentrate on the “traditional debt”, Hansen’s latest budget has revealed a disturbing surge in our provincial debt.
According to page 108 of the latest B.C. budget, after the BC Liberal party won the 2009 election, the province’s “traditional debt” will have increased drastically from $38 billion in 2008-09 to $60.4 billion by 2013-14.
Another term of the B.C. Liberal government will bring in an additional $22.4 billion in additional debt. Keep in mind that this excludes contractual obligations.
Why is there such a huge jump? The explanation would seem to be that the financial tsunami has caused difficulties for big businesses to raise funds, thus making the “public-private partnership” model impractical.
So the B.C. Liberal government has to return to the traditional model, with government borrowing the capital, thus resulting in a big jump of “traditional debt".
Ordinary citizens might have difficulty relating to these astronomical figures. Let me try to provide some reference points.
The B.C. Liberals have repeatedly said that the financial consequence of cancelling the HST would be severe because the provincial government would have to reimburse the federal government for the $1.6 billion signing bonus.
To our provincial government, $1.6 billion is indeed not a small amount; our spending on the “protection of persons and property” this year is $1.5 billion.
If we add the B.C. Liberals’ “traditional debt” of $26.6 billion by 2013-14 and its “contractual obligation” of $53 billion (2009/10), we get $79.6 billion. Let's then divide this sum by 4.5 million that make up the population. The Liberal debt load per person comes to $17,688. A family of four would have to bear $70,755.
The most amazing thing is this: those who yelled at and slammed the NDP for building up a debt that will burden future generations are now curiously silent.
Gabriel Yiu is a small businessperson and was the B.C. NDP candidate in Vancouver-Fraserview in the 2009 election.