B.C. budget designed for ‘maximum flexibility’

Published Monday, Feb. 14, 2011 9:00PM ESTLast updated Monday, Feb. 14, 2011 10:50PM EST13 comments

The budget Finance Minister Colin Hansen introduces Tuesday comes with all the trappings of a real one – PowerPoint presentations, stacks of spending plans and a lockup of media and stakeholders to allow time to digest the news.

But Mr. Hansen’s budget will escape the usual weeks of detailed scrutiny and debate in the legislature this spring.

The Liberal leadership contest, now in its final two weeks, means that the government will swiftly bring in a supply bill to tide government over while the party sorts out who will be the province’s next premier. The New Democratic Party opposition has agreed to cut the session short – just four days this week – because it is in the midst of its own leadership race.

The next premier will likely want to put his or her own stamp on government with a new budget later this year.

“Probably,” said leadership hopeful Kevin Falcon. “I assume so,” echoed Christy Clark. George Abbott went a step further, saying he would aim for a fall budget only after the future of the harmonized sales tax has been determined in a referendum.

The main attraction of this budget likely will be the window it provides on the province’s economic state: The deficit for the year just ending will be smaller than predicted, thanks to a relatively robust economic recovery in 2010. Mr. Hansen will be cautious about the economy in 2011, with his forecast council predicting softer growth to come.

“There is still a fair amount of volatility,” Mr. Hansen said in a recent interview as he put the final touches on the budget that he must deliver by law on the second Tuesday of February. “There’s not as much fiscal room as we’d like there to be.”

On his desk was a recent CIBC World Markets forecast which notes that the rebound in the United States is especially good news for commodity-dependent B.C. That same report explains Mr. Hansen’s caution: The key indicators are all over the map; housing starts are forecast to drop, for example, even as consumer confidence improves.

Mr. Hansen said the budget he presents on Tuesday, designed to create “maximum flexibility” for the next premier and cabinet, could stand up for the year. It will be based on the status quo mapped out in the previous budget, which included ambitious targets to rein in cost increases in health care.

The single biggest uncertainty, however, is the fate of the HST. Outgoing Premier Gordon Campbell has promised a binding referendum to let voters decide if they want to keep the controversial tax.

The leadership candidates have proposed moving that vote up to June, and Elections BC is preparing for that likelihood.

Mr. Hansen said the HST cannot be untangled quickly, even if the public rejects it, but his ministry has been discussing a plan with Ottawa on how that might work.

The fiscal challenge is that Mr. Hansen has already collected $1-billion from Ottawa as part of the agreement to move to a single tax. Another $600-million is due to B.C. and is already counted as part of the formula that allows the Liberal government to promise to balance the budget by 2013.

De-harmonization of the provincial sales tax and the federal GST would make balancing the budget in two years a tough prospect. Last week, Ms. Clark said she would not institute any major new tax cuts or spending programs until the budget is balanced. Candidate Mike de Jong has also made eliminating the deficit a central plank in his platform.

Mr. Hansen said the budget could be balanced in 2013 even if the HST is axed – and B.C. is forced to return Ottawa’s cash incentive. But it wouldn’t be easy. The choices are to run more deficits, raise other taxes or impose major spending cuts. None is an easy option for a new premier facing an election in 2013.

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