For the second year in a row, spending has been essentially frozen. Worst of all, while Finance Minister Mike de Jong eked out a surplus, the margin is razor-thin. On an overall budget of $44 billion, the surplus for 2013 is just $197 million.
It’s true those figures contain a safety margin. But surpluses this small can easily evaporate. Last year, revenues came in a whopping $650 million lower than forecast. If that happens again, kiss goodbye to those surpluses.
It is difficult to overstate how grim the numbers are, or the economic turmoil they reveal. Five years after the 2008 recession, vital areas of production still haven’t recovered.
In 2007, the resource sector brought government $3.9 billion in revenues. In 2012, the take was only $2.5 billion. And over the same five-year period, there was basically no increase in personal income-tax revenues, despite a growing population. Yet this is the government’s single-largest source of funds.
In the face of such obstacles, balancing the budget was a remarkable feat. Whatever criticisms can be directed at the Liberals, they have run a tight ship. Only the health ministry gets any sort of lift, and then just 2.5 per cent in the coming year.
In contrast, oil-rich Alberta is projecting a deficit for 2012 of around $4 billion, and Ontario faces a staggering $12-billion shortfall.
Whether it was sound political strategy, however, is another matter. By raising taxes on corporate income and on those people earning more than $150,000, the Liberals have done their opponents a huge favour.
If the New Democrats win the provincial election in May and revenues firm up, they can stand pat.
If money is hard to find, however, the NDP can impose a second tax hike, and what complaint would the Liberals have? They went that route themselves.
But the real message contained in this budget is that a limited range of options lies ahead. On the one hand, if the next government ramps up spending right away, there will almost certainly be another string of deficits. After the years of sacrifice to balance the budget, that would be unfortunate.
It would also be destructive. Interest payments on the province’s debt, at $2.5 billion each year, already exceed the cost of child-care services, residential care for people with disabilities and low-income tax credits combined.
On the other hand, given the frail state of the economy, further tax hikes might tip us back into recession.
What other options are there? NDP critics have slammed the Liberals for demanding large dividends from B.C. Hydro and ICBC.
Yet they did it themselves in office. During the 1990s, NDP administrations siphoned $3.3 billion from those corporations.
The reality is that whoever wins in May will face a long climb back to prosperity. Tuesday’s budget was a courageous first step.
But we’ll need a lot more of that grit over the next couple of years, just to create stability.
That’s really what the upcoming election is about: grit.
© Copyright 2013