Liberal Budget Questioned

Marco Procaccini

The BC government’s fiscal plan calls for a balanced budget, but many people aren’t buying the predictions—and many are wondering who it’s balanced for.

Liberal Finance Minister Gary Collins has repeatedly touted that the $30.2 billion 2004-05 budget will deliver a $100 million surplus—the first surplus BC has had since the record-setting $1.5 billion surplus realized by the last NDP budget of 2001.

“We have introduced a balanced budget for 2004/05 and are on track to beat our bottom line target for last year, despite more than $1 billion in unexpected costs from forest fires, floods, SARS, BSE and changes to federal equalization,” said Collins. “As a result of our resilient fiscal plan, we are now able to fund new investments that bring out the best in education and patient care, accelerate funding for the province’s Olympic commitment, and enhance our strategy for economic growth.”

Collins also predicts a $275 million surplus for 2005-06 and $300 million in 2006-07 based on projected GDP growth rates of 2.8 per cent this year and 3.1 per cent for the following two years.

But critics are dismissing Collins’ claims as overly optimistic and dishonest, and predict BC’s faltering economy will continue to sink as a result.

“This budget is balanced, but on a razor’s edge,” says Marc Lee, an economist with the Canadian Centre for Policy Alternatives. “If there are any economic shocks — such as a repeat of last year’s forest fires, or if planned changes to federal equalization payments go ahead — we’ll be back in the red.”

He adds that economists are predicting slow growth for BC over the next year, and that further austerity measures, such as cuts to education grants and insufficient increases to health care and education included in the budget, could hinder growth even more.

This view is largely shared by B.C. Federation of Labour President Jim Sinclair, who says working class families, already fleeced by tax increases, service cuts and falling wages under the Liberal reign, won’t benefit from this budget.

According to the government's own numbers, a two-income family of four making $30,000 a year will pay $435 more in taxes. A two-income family of four earning $60,000 pays $128 more. And a senior couple with a pension income of $30,000 also pays $128 more.

“Today’s BC Liberal budget is proof that Gordon Campbell’s economic plan has failed, and public services have been ruined as a result,” said B.C. Federation of Labour President Jim Sinclair after its release. “The BC Liberals may say they’re in the black, but they’ve definitely put BC’s working families in the red.”

Sinclair joined students and educators in condemning the Liberal budget for further cuts to education by reducing post-secondary education grants and providing no new funding for grade school.

He is part of legions of labour and social justice activists who are angry the budget has no job creation and economic development initiatives. Sinclair also echoed comments from economists warning Collins his budget would likely end up running a deficit because his forecasts are too high.

“Budget 2004 shows that BC will continue to lag the country in economic growth, and unemployment levels will continue to remain in the 7-7.5 percent range,” Sinclair said. "Tax cuts didn’t work, and they certainly didn’t pay for themselves."

But despite the huge cuts, layoffs and huge deficits in their three years in government, Collins insists the province is overall better off than it was when the Liberals took office.

“We have turned B.C.’s financial situation around,” said Collins, claiming the deficits and sagging economy are the fault of the pervious NDP government. “We will balance the budget this year, next year, and every year thereafter.”

That claim has been refuted by NDP leader Carol James, who is warning working class British Columbians to hang on to their wallets, since user fees and other stealth tax increases are taking their toll on them and the economy.

"A balanced budget is crucial," said James. "But this government inherited a balanced budget from the previous government and turned it into a string of record-high deficits, resulting in the radical, mean-spirited cuts that British Columbians have lived through for the past three years.”

She adds that Statistics Canada figures show BC outperformed other provinces in job creation and public services during the NDP tenure. Now BC is in last place.

“Exports are down, retail sales are flat, average weekly wages are falling, and unemployment is higher today than when the Liberals took power in 2001,” James said. "BC is the only province in the country where paycheques are getting smaller.  And our economy is dead last in the country.”

Meanwhile, many economists and business leaders are warning Collins not to put place much confidence in his balanced budget predictions.

BC Business Council representative Jock Finlayson is concerned that rising health care costs, which he refers to as a “black hole,” could wipe out the predicted surpluses.