October 22, 2008

Campbell's Ten Steps

One week before the October 29th by-elections, Premier Campbell conducted an unorthodox 6:15 PM news conference in which he announced ten items he claimed were: "…immediate steps to improve the province's economic competitiveness and reduce costs for families and business in the wake of the global economic slowdown". BC has a very small economy that is open to world trade and the fluctuations in commodity prices. There is very little a province can do by way of providing fiscal stimulus, and trying to provide such stimulus can make a bad fiscal situation worse. What is realistic is for the province to guarantee that essential services, including health, education and the social safety net will not be sacrificed in order to balance the budget over one year rather than over the business cycle. Campbell said he would do the exact opposite. He made it more likely that the province will run a deficit in 2009-2010, and he promised service cuts when the quarterly financial reports indicate trouble. Of course, the first quarter report for 2009-2010 won't be produced until September 2009, four months after the May election.

Unfortunately, many BC families will see nothing by way of relief from Campbell's announcement; those that do benefit from the retroactive income tax cut will have to wait until March or April 2009 before they see a tax refund. Of course, that ties in nicely with the May 12th provincial election. No one has to wonder whether Campbell's rescue plan is designed to rescue his political skin or help BC families.

When the hated carbon tax was introduced, Campbell discovered that he could shift hundreds of millions of dollars between fiscal years. Cheques that were issued in June were charged to the fiscal year which ended the previous March 31st. He's using the same accounting trick to send tax refunds out just before the May 12th election while charging the $144 million in costs to the year that ends March 31, 2009. Those tricks are important to understand in the context of Campbell's rant against deficits. Because of windfall profits from natural gas, BC is expected to run a substantial surplus this year. That is the money Campbell is spending, and the year he is spending it in, with his accelerated tax cuts. It is questionable whether the province can run a surplus next year. That is the year when health, education and social services are threatened because of Campbell's rigid ideology.

Campbell announced that he will "rein in government spending" but, unlike 2002 when he made deep cuts across the board, he gave no indication of the amounts he is targeting this time. The size of the cuts has to be inferred from the context of his commitment to no deficits. If revenues from income tax, sales tax and property transfer taxes continue to fall, once the surplus is gone those loses will have to be met dollar for dollar by cuts in health, education and social services if Campbell remains as Premier.

Campbell announced a 30% cut in BC Ferry Fares and a restoration of service for the months of December and January. That's good news for ferry dependent communities, and it demonstrates that despite claims to the contrary, the BC government really does own and control BC Ferries. What about March, April and the rest of the year? Can Campbell be serious that he would jack the fares back up in March and re-implement the service cuts?

The first of the Premier's 10 steps was an announcement to immediately guarantee deposits in BC's credit unions, as is done in five other provinces. No one has suggested that the Credit Union Deposit Insurance Corporation is in any difficulty. While the new guarantee is unlikely to involve any cost to the government, the optics are good. Not so good are optics around his second, and very hollow, promise to create a new pension opportunity in the form of "a privately financed, defined contribution plan". Anyone who understands pensions knows that defined contribution plans are the same as RRSPs but with fewer choices for the beneficiaries. Who is Campbell trying to kid?

At a cost of $60 million over three years, Campbell announced the province will double the commission it pays business for collecting the provincial sales tax and hotel room tax. While no one is going to say no thank you, the $1,200 per year benefit for each of more than 100,000 businesses isn't likely to make as much difference to the families of those business owners as using the $60 million to ward off the promise to slash services if it looks like the province is headed towards a deficit.

The single step in the Premier's plan that addresses a recognized need is his announcement that 50% of property taxes will be rebated to light and heavy industry at an estimated cost of about $115 million over the next three years. When mills shut down they don't pay income tax, but they continue to pay property taxes unless they go into bankruptcy. Former Premier Dan Miller advised Campbell he should deal with that problem.

Campbell's politically timed announcement came on the day the Canadian dollar fell below $0.80 US, when the TSX dropped 558 points and on the eve of the refinancing challenge for the Whistler-Blackcomb ski development. Campbell didn't address how any of his steps will assist with falling real estate values, plummeting retirement savings, rising welfare rolls, homelessness, and stalled construction projects. He couldn't, or at least didn't, provide a single example of accelerated capital spending, or even a rough guess on how much money would be involved and how the failure in cost control that plagued the convention centre expansion will not be repeated as projects are rushed out the door.

Campbell announced that he would call the legislature for November 20th to introduce legislation that is necessary for some of his tax measures. According to the parliamentary calendar, the legislature should have been sitting at the time he made his announcement. By waiting another month before calling it into session, he guarantees that the NDP will have no more than five question periods. No one has ever accused him of embracing openness and accountability.