B.C. to slash spending, freeze hiring

Another round of “austerity measures” is about to hit as the B.C. government struggles to replace more than $1 billion in natural gas revenue that has vanished.

Finance Minister Mike de Jong said Thursday he still believes his Liberal government can deliver a balanced budget in February, but only if it starts cutting hundreds of millions in spending to make up for the missing gas money.

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De Jong unveiled a plan to freeze hiring and salaries for government, Crown corporations and health authorities.

The government is also implementing “extreme” controls for travel and discretionary spending — but even that, de Jong acknowledged, will make up only one-third of what’s needed to balance the books.

“All these austerity measures are designed to immediately curtail spending in areas where government has some discretion,” he said.

The government has brought in similar restrictions since the global recession in 2008.

“We are resolved to do everything humanly possible to meet our commitment and show that respect to taxpayers that goes with not spending any more of their money than we have to,” de Jong said.

The rest of the cuts, he said, will be decided in coming weeks.

The newly minted finance minister offered little positive news, at one point describing the situation as “ugly.”

Natural gas used to be one of the province’s biggest revenue-generators. B.C. makes money by taking a royalty on gas pulled from the ground. The higher the price, the more money the government earns.

But natural gas now sells for the near-historic low price of around $2 to $3 a gigajoule and hasn’t bounced back as forecast. Before the start of the 2008 recession, the price was as high as $6.33.

More than $1.4 billion in revenue the B.C. government was counting on — mostly from natural gas — has vanished in the past few months, de Jong said.

As a result, the government needs to cut $241 million this fiscal year, as well as $389 million next year and $483 million in 2014-15, he said.

“I hesitate to in any way suggest there is a silver lining — the only one I can think of is we’re almost at a point where it is difficult to imagine gas prices dropping any further,” he said.

The Liberal government’s own legislation mandates that it produce a balanced budget in February, just months before the May provincial election.

But de Jong brushed aside suggestions that British Columbians might view his financial figures as politically motivated.

Business groups, including the B.C. Chamber of Commerce, praised the government for making a balanced budget the top priority.

But the union representing more than 25,000 government workers said any money saved should be used to increase wages.

NDP finance critic Bruce Ralston said the government’s “reckless” natural gas price forecasts were unrealistic.

“They gambled on a price on natural gas and now that hasn’t happened,” he said, adding the Liberals have been talking about travel and discretionary-spending cuts since 2008. “This is an old movie — we’ve heard this before.”

Thursday’s financial update also showed the deficit for the 2012-13 fiscal year (ending March 31) will be $1.14 billion, or $173 million more than budgeted.


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