On a quiet afternoon in the legislature with scarcely any attention, Finance Minister Mike de Jong attempted to explain the most jarring political contradiction in B.C. (next to the “New” in “New Democratic Party”).
The B.C. Liberals are utterly committed to eradicating the province’s accumulated long-term debt.
And at the same time they are increasing it like never before.
After introducing a budget in February that projects dramatic increases in debt over the next three years, Premier Christy Clark turned around and made “debt-free B.C.” one of the cornerstones of her successful re-election campaign. What gives?
De Jong opened by copping a plea.
“The debt goes up. There’s no question about that.”
It’s partly the response to the economic meltdown, which was to accelerate infrastructure spending to prime the economy, he said.
It’s partly the accumulation of red ink from four deficit budgets.
Those two factors explain much of the ride from $38 billion in total debt to $50 billion in four years, closing in on $56 billion today.
But the plan for the next three years shows the ride will continue — to $70 billion by 2015. Other governments talk about halting stimulus spending, now that the 2008-09 crisis has receded. B.C. is just easing off the accelerator; there’s no sign they’re actually hitting the brakes.
It’s partly because of a continuing “unprecedented” building plan, which needs billions in capital borrowing, de Jong said.
From the time Clark first put “debt-free B.C.” on her campaign bus out to 2015, debt will have increased by almost $10 billion.
Try explaining that during the 2017 election campaign, when it will probably be even higher.
De Jong said the key point about the plan to make B.C. debt-free in 15 years is that it is based on one new revenue source: liquefied natural gas.
And the arrival of that new money is still a long way off.
“I will say again in this house very clearly that the significant revenues that we believe the public will derive ... do not accrue or begin to flow, if we take advantage of the opportunity and move forward, for another seven or eight years, de Jong said.
“So they are not contained or projected or included in the budget.”
That means the overall plan is very much back-end loaded. They want B.C. debt-free by 2028, but the LNG revenue — now zero — won’t start arriving until 2020.
It’s going to take an ocean of money arriving over a concentrated time to meet that target.
In the meantime, de Jong indicated any debt-reduction will be minimal.
The “conventional” economy and the usual budget-cutting will reduce debt at a much slower rate, until the LNG money arrives, he said.
De Jong also said that even at the ramped-up rate, B.C.’s debt is the envy of other provinces.
“The Ontario finance minister would love to be dealing with the scenario we have.”
The picture he described is one in which B.C. will operate as is for up to eight years, with conventional economic growth and continued government budgetary restraint.
Then the hoped-for bonanza will arrive. But the caution flag on government spending will still be up, as the revenues will be directed to reducing debt.
The Liberal government isn’t spending much directly, but it has a huge investment of political capital in LNG, since they’ve promised tens of thousands of jobs arising from it.
Voters appeared to endorse that bet in May. It was a marked contrast with the NDP Opposition’s campaign, which was non-committal to the point of being negative about jobs.
So the Opposition’s reaction to de Jong’s defence was interesting.
Other party critics in other debates are asking hard questions about other aspects of the dream. But not finance critic Mike Farnworth. He suggested the Liberals have too much of the future staked to LNG. But it was in a mild fashion. Farnworth said LNG could be great, and “if we could be debt-free tomorrow, I’m sure all of us would like that.”
His only criticism was the degree of reliance on one idea that needs lots of work and a few breaks before it pays off.
