The provincial election will be held May 9, and to help set the stage, we will publish weekly editorials, starting today, on issues that are likely to dominate the campaign.
According to opinion polls, voters are most concerned about government finances, affordable housing, jobs and the economy, environmental protection, education and health care.
It is not our intent to critique party platforms, but to lay out the challenges that exist in each area. We’ll start today with government finances, because the state of the treasury affects everything else.
The principal concern when it comes to B.C.’s budget is what lies ahead. Finance Minister Mike de Jong recently announced a surplus for the current year, and predicted two more to follow. While the surpluses are razor thin, he intended to create, and probably did create, the impression that our prospects are solid.
But this is far from assured. Across the rest of Canada, the signs are ominous. Of the remaining seven provinces that have so far announced spending plans for the coming year, only two — Nova Scotia and P.E.I. — show balanced budgets.
The rest are projecting deficits, with Alberta in particular facing oceans of red ink for years to come. At the federal level, Finance Ministry staff predict Ottawa will run large and growing deficits every year for the next three decades.
What matters here are the underlying threats to our economy these deficits reveal. The engines of growth over the past two decades have been the manufacturing industry in Ontario and the energy sector in Western Canada.
Yet both of these wealth-drivers are in trouble. Some of the problem has to do with a drop in oil and commodity prices. Some of it is due to a shrinking workforce as the baby boomers retire.
But if the rest of the country does relapse into an extended period of deficit financing, B.C. might not escape the consequences. Federal transfer payments could shrink. Our closest neighbours, Alberta and Saskatchewan, might purchase less of our goods and services. Tax increases — the inevitable result of protracted borrowing — could impede growth everywhere.
This scenario, impossible to define with precision, but increasingly possible, represents a threat that must be given due weight.
Yet there is no sign, thus far, that any of our parties are doing so. All have committed to large-ticket items such as eliminating Medical Services Plan premiums. The revenue loss associated with a complete withdrawal of premiums is about $2.5 billion.
Promises like these are built on the assumption of continued strong economic growth in B.C. They do not contemplate the prospect of a nationwide slowdown, and the spillover effects that would have on our finances.
This is the challenge that must be faced by whichever party wins the election. If the revenues remain strong, everyone is happy.
But if it turns out B.C. is not an island, and the money isn’t there to support such promises, what will you do? Will you scale back those commitments and balance the budget?
Will you drive ahead and run deficits, as much of the rest of Canada is doing? Or will you try to gin up your revenues with tax increases?
Of course, the natural inclination will be to ignore this possibility, and worry about it later. But elections are about what comes later.
We have a right to hear from each of the parties how they would deal with a fiscal downturn, should it occur. This matter should be probed during the upcoming leaders’ debates.
