What BC Revolution?

Most British Columbians believe we are in the middle of a radical revolution, involving sweeping government changes constituted by large spending reductions, massive tax cuts, and unprecedented privatization. This impression is at least partially the result of propaganda spread by those that oppose the BC Liberals ideologically, mostly critically organized labour.

Consider the comments of many so-called experts like the Caledon Institute, which characterized the BC government as “commencing a program of radical reform” which included “budget cuts to health care, education, welfare and legal aid.” Seth Klein, BC Director of the union-sponsored Canadian Centre for Policy Alternatives, has used such phrases as “reckless spending cuts,” and the “dismantling of programs” to describe the reform program in British Columbia. In these very pages, Paul Willcocks stated that the Campbell government implemented “irresponsible tax cuts” that required “quick, deep” spending cuts. A web-based search netted more than 300 articles discussing spending cuts in British Columbia.

The reality, however, is that the BC Liberal government has increased spending, dramatically in fact, reversed course on tax cuts, and implemented very little that could be characterized as revolutionary.

To truly understand what’s happened in British Columbia, one must understand where the BC Liberals began: at the end of the NDP tenure. In the NDP’s last budget, presented in 2001, the NDP proposed total spending of $24.4 billion, which in and of itself represented a substantial increase from the previous year. Included in the $24.4 billion were healthcare spending of $9.2 billion and education spending of $6.7 billion.

Upon entering government and beginning the revolution, the BC Liberals increased total spending to $26.2 billion, a startling $1.8 billion more than the NDP had proposed for the same year. They increased health spending alone by some $536 million. Granted, there were some “special” one-time items in 2001, such as Skeena Cellulose, but clearly the BC Liberals did not reduce spending.

In 2002, the Liberals first full budget, they again increased spending to a total of $28.5 billion. Healthcare and education spending, the two portfolios most discussed in terms of cuts both experienced increases: healthcare spending totalled $10.2 billion and education spending amounted to $6.8 billion, both above where they were when the NDP left office.

The BC Liberals plan to spend $27.8 billion this year, a marginal reduction from last year but still well above the level proposed by the NDP. It seems almost impossible to say that the BC Liberals have been cutting spending given their record.

The same people howling about spending cuts have also been busy spinning fear and misinformation regarding the deficit. The general thrust of the argument is that the deficit arose because of radical tax cuts. What’s interesting is that if the Liberals had spent at NDP proposed levels, we’d have a balanced budget this year! Specifically, according to the NDP’s last budget, planned spending for 2003/04 was $25.8 billion. The BC Liberals expect to collect $26 billion in revenues this year. Presto: balanced budgets. The problem, therefore, is not a lack of revenues but rather the dramatic increases in total spending.

So, what about those radical tax cuts. The BC Liberals in their first 6 months in government reduced personal income taxes, business taxes, and a host of other taxes in an attempt to make BC more attractive for investment and more tax competitive. Unfortunately, the next two years witnessed major tax increases, including increases to the Medical Services Plan (MSP) premiums, sales taxes, property taxes (twice), tobacco taxes (twice), the gas tax, and a host of other minor taxes. These tax increases significantly mitigated the net effect of the original tax cuts.

Even with the original tax cuts, British Columbia remains uncompetitive when compared to Alberta. Our top statutory personal income tax rate was still 50 percent higher than Alberta. Our corporate income tax rate (13.5 percent) will be well above Alberta’s (8 percent) in 2006. British Columbia has yet to fully eliminate corporate capital taxes, which do not exist in Alberta. And finally, British Columbia continues to charge sales taxes on business inputs (with the exception of machinery and equipment) while Alberta has no sales tax.

There are a number of other areas, such as privatization, deregulation, and resource development, where the popular perception of radical reforms does not match the reality of incremental, and often times timid, reform.

Most puzzling, however, is why the BC Liberals have not undertaken more radical reforms like actually reducing spending and more aggressively cutting taxes. They are clearly paying the political price for enacting such policies while foregoing any economic benefit due to the absence of any real changes. One of the reasons the province’s economy continues to struggle is because of the absence of such reforms. Simply put, the BC Revolution has not occurred. Our economy and our prosperity will not improve until such changes are implemented. Unfortunately, an election looms and such policies are almost never enacted prior to elections.