BC Libs' Public Trust Deficit Just Grew

Officials in the Ministry of Finance give information to British Columbians on the state of the province's finances only four times a year. One of those was Monday.

The Second Quarter Report released on Nov. 28 is concerning. In addition to saying that the expected deficit has increased to $3.1 billion, an increase of $313 million since the First Quarter Report, it provided page after page of dismal economic news. Federal transfers are down because of lower population growth for B.C. and even gambling and liquor revenues are down. Private sector forecasts for GDP growth have been downgraded for both 2011 and 2012.

The report says: "Employment in the province has been trending relatively flat since early 2010, with the exception of a notable jump in Sept. 2011 that added 31,600 jobs on the month. This gain was somewhat offset as total employment shed 10,800 jobs the following month." Many observers considered September to be a statistical abnormality since that many jobs were added in only one other month (Jan. 1999) since 1976. The November figures will be out on Dec. 2.

The report also says: "Despite increased sales activity on the year, consumer purchases in B.C. have stagnated in recent months. Further, B.C. recorded the slowest pace of growth in retail sales amongst provinces over the first eight months of 2011. Modest growth in employment, high debt loads and economic uncertainty have taken a toll on retail sales, which have barely regained levels observed prior to the onset of the 2008/09 recession. Solid consumer spending will be fundamental to a sustained economic recovery, going forward."

The post-HST factor

A backgrounder accompanied the release of the Report, providing little information on the slow progress towards eliminating the HST and restoring the PST.

Several weeks ago I received an email that alleged an assistant Deputy Minister of Finance at a town hall meeting in front of 150 Finance ministry staff, stated that the reason why the PST computer system wasn't upgraded was because they knew they were getting out of the PST administration. If that is true, it means that the Ministry of Finance was preparing for the HST prior to the May 2009 election.

I submitted a freedom of information request for the dates when various computer programs were last upgraded. I received a response saying that it would be easier to give me a briefing. I accepted that offer but the expected phone call never came so I'm back to waiting for a written response to my request.

If it is true that steps to no longer administer the PST were taken long before the HST was announced, it would help explain why it is taking so long to restore the PST. Failure to act more promptly on the result of the referendum vote is a drag on B.C.'s economy as decisions are postponed, particularly with respect to costly home construction or renovations.

Why not blame corporate tax cuts?

The issues around the transition back to the PST are but one example of why the Liberals have a deficit of public trust.

Another reason is the public has a long memory about what was said about the state of the province's finances before the May 2009 election and what was revealed after the election.

That is why it is hard to understand why Kevin Falcon insists his budget will be balanced for 2013-14; that budget will be presented before the May 2013 election but the First Quarter Financial Report on that budget won't be available until late Sept. 2013.

Of course, with May elections the budget estimates are not passed, requiring budget updates in September of election years. It is unlikely that any of Premier Clark's cabinet ministers could say anything that would give credibility to the financial figures they will throw out before the 2013 election, but acknowledging that revenues are inadequate to meet the costs of essential services would be a good start.

An admission that part of the reason for the short fall is corporate tax cuts that the province could ill afford would be too much to expect.