Think Tank Proposes “Alternative” BC Budget

We’ve invited the world. They’re coming. And the place is a mess.

Canadian Centre for Policy Alternatives BC office

The 2010 Olympic games are coming in just six years. The world will be watching—but what will they see?

If the spotlight shines on a Vancouver ravaged by poverty and homelessness, crippled by traffic congestion, or in the middle of an environmental controversy, any efforts to promote the city or province will be seriously blighted.

The provincial government needs to prepare British Columbia for a truly world class performance in 2010. If we continue to ignore pressing social needs, we’ll wind up hoping no one looks under the carpet, instead of welcoming the global spotlight.

The 2004 BC Solutions Budget uses the Olympics to anchor a six-year public investment strategy that would go beyond the minimum requirements for hosting the games, and use the Olympics as a springboard to revitalize the provincial economy.

The Solutions Budget six-year plan restores the province’s fiscal capacity (tax revenues), rolls back the painful spending cuts, creates a more fair and sustainable tax system, achieves substantial public investments in the BC economy and key public services, creates a meaningful plan to stimulate private sector investment—and leaves BC with a smaller debt-to-GDP ratio than in any year since 1991/92.

It’s time to change direction for BC’s economy and finances.

So far, the provincial government’s plan for BC has centred on tax and spending cuts, deregulation and privatization. But it simply is not working. The economy remains weak, and has not been kick-started by tax cuts. BC trailed the rest of Canada in economic growth the past few years, and the outlook for 2004 is not much brighter. There is no boom in private sector investment on the horizon, and public sector investments—with the exception of Olympics commitments that are concentrated in Vancouver/Whistler—have been cut back in the name of budget restraint.

Given the economic situation, there is no compelling reason why balancing the 2004 budget should be the government’s number one priority. Going from a $1.85 billion deficit in 2003/04 to zero in 2004/05 is no easy feat. Finance Ministry estimates suggest that about $800 million in spending cuts will be required to balance the 2004/05 budget—and that would mean a drag on economic growth.

Balanced budget legislation is a completely artificial constraint. Spending cuts have already had a major impact in terms of health care waiting lists, school closures and larger class sizes, reduced eligibility for welfare, cuts to children and family services, and decreased environmental protection. Attempting to balance the budget this year will only make the situation worse.

The Solutions Budget shows that budgets are about choices. There are many alternatives to the narrow business-dominated thinking of the provincial government. Indeed, by making strategic and thoughtful investments, we can address the province’s social needs and improve our economy at the same time.

An investment revival is key if BC is to reclaim its status as an economic leader in North America. The public sector needs to play a stronger role in launching new investment—along with measures that encourage greater private investment.

The Solutions Budget rolls back spending cuts made since 2001 and sets out a six-year public investment plan that focuses on education and training, transportation, social housing and health care reform. The six-year plan boosts investment in these areas by $2.3 billion (above and beyond rolling back the government’s spending cuts) in 2004/05, rising to $4.1 billion in new investments by 2009/10. Over the six years to the Olympics, our public investment plan is a cumulative $19.6 billion package.

Stimulating new private sector investment is also essential to BC’s economic revitalization. Tax cuts have not done the job. Above all, BC needs a coherent industrial strategy that includes resource industries through to manufacturing and advanced technology sectors. We propose a system of ‘carrots and sticks’ that creates the incentives for investment, production and employment, plus other social and environmental objectives.

The Solutions Budget implements a number of tax changes to fund our public investment strategy and that make the tax system more fair and sustainable, including the complete elimination of MSP premiums and changes to the personal income tax structure that make it more progressive.

The Solutions Budget runs a deficit in 2004/05 and would gradually reduce this deficit over the course of the investment plan, ending with a zero deficit in 2009/10. Because the deficit is largely the result of investments in people, it should not be as much of a concern as recent deficits to finance tax cuts.