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January 17, 2014

Future News Today

If government had to abide by the same regulations as private companies with respect to claims about the future, it would undermine the credibility of its news releases, but government routinely gets away with bad news by saying the sun will shine tomorrow.

Security regulators in Canada and the US require publicly traded companies to make disclosures with respect to claims about the future. Some companies meet those requirements by including "boilerplate" qualifications at the end of their news releases, such as:
This document contains "forward-looking statements" that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect", "anticipate", "intend", "plan", "believe", "seek", "see", or "will".

As weak as those boilerplate declarations may be, their inclusion in government news releases would be a step forward. It would be an interesting exercise to ask journalism students to go through a week of government news releases and media reports to identify what percentage of the words in all reports deal with what has happened and can be confirmed as opposed to what percentage deal with what is expected to happen at some future date. Government frequently resorts to claims about the future when it wants to avoid being accountable for the present.

For over a decade, First Call BC has issued reports on poverty that usually put BC at the bottom of the barrel. It's November 23, 2013, "Child Poverty Report Card" said: "The latest figures from Statistics Canada (2011) once again show that BC is the worst province in Canada when it comes to major measures of child poverty "

Statistics on poverty are always a couple of years behind because they are based on samples from income tax data; hence the 2013 report depends on data from 2011. That enables government to respond by saying "that was then but this is now" or words to that effect. Minister of Children and Family Development Stephanie Cadieux was quoted, in response to the report, showing more compassion than some of her predecessors when she spoke of not wanting to see children in poverty, but she returned to the old government line that: "B.C.'s jobs plan to create jobs in the mining and natural gas sectors is a key weapon in the government's plan to fight child poverty". First Call reported hard statistics on what happened, the government response was "forward looking". Imagine next year's report; the response will likely be the same as experience shows the changed future seldom comes.

BC's job performance left a lot to be desired in 2013. CBC reported: "B.C. lost 4,400 jobs in 2013, joining Newfoundland, PEI and Manitoba as the only provinces in Canada to have negative job growth in 2013." It went on to say: "Despite the lack of success, Premier Christy Clark has insisted the jobs plan will continue and she expects job creation to increase this year." That illustrates the technique of touching on the bad news and quickly moving to claim better times for the future.

How good are economists at predicting the future? Vancouver Sun Columnist Vaughn Palmer recently reminded readers of an old joke: "What do you call an economist with a forecast? Wrong." That was in the context of noting that despite bad job performance in 2013, the Conference Board and others think the economy will improve in 2015. Consider the recent performance of economists in their forecasts of provincial real GDP growth. The province's economic forecast council report which was included in the May 2011 budget showed an average of 3.0% for 2012 GDP growth. When Statistics Canada provided the actual figure BC came in with only 1.5% growth. When the 2013-14 budget was tabled in February 2013, the average economic council forecast was 2.1% for GDP growth in calendar year 2013. When the budget was updated in June, the average forecast was lowered to 1.6% and when the forecast council reported in December the average forecast was further lowered to just 1.4%. It will be late April 2014 before the preliminary estimate of provincial GDP is available from Statistics Canada. In the meantime, forecasters are providing figures for 2014 and 2015 and some media are reporting the forecasts as if they were fact rather than figures to be revised several times before reality is tested by Statistics Canada. In December 2013 the average 2014 forecast was 2.3%, already lowered from 2.5% in the June forecast.

Of course what might be the biggest forward claim by any provincial government in the history of Canada might be the claim that LNG will yield $100 billion over 30 years and 100,000 jobs (75,000 permanent jobs to operate five plants). All claims about LNG in BC are speculative. As of January 2014 no final investment decisions have been made. The government needs to carefully consider advice from its Jobs and Investment Board which gave the government advice on the strengths and weaknesses facing eight sectors: forestry, mining, natural gas, agri-foods, technology, tourism, transportation and international education. There are other sectors in the economy, from retail trade to health and social services (public and private), but the Board's report is sufficient to demonstrate that for the sun to truly shine on BC's future, attention needs to be paid to more than LNG.