Wednesday, February 20, 2019

Vaughn Palmer: B.C. NDP's rosy economic outlook starting to look a bit frayed

VICTORIA — While B.C. continues to enjoy healthy growth and significant surpluses under the New Democrats, this week’s provincial budget acknowledged a few clouds on the economic and fiscal horizon.
Take housing starts, a canary in the coal mine for both affordability and residential construction.
The New Democrats are forecasting that by the 2021 election year, housing starts will have dropped by about 30 per cent from when the NDP took office, a loss of tens of thousands of units and untold jobs and economic activity.
By way of explanation, I would note that the government’s vaunted 30-point housing plan concentrates almost exclusively on tax and regulatory changes, relief for renters and subsidized public housing.
There was next to no mention of measures to increase the private sector housing supply.  Likewise, this year’s throne speech paid only lip service to the challenges faced by developers, with a passing reference to “delivering more efficient and effective project approvals.”
No new taxes? Some New Democrats claimed as much. But one had to look at footnote no. 6 on the bottom of page 113 to be reminded that the carbon tax will increase by $5 a tonne starting April 1, raising an additional $200 million from taxpayers. That previously announced tax increase was acknowledged in the tiniest type face available to the ministry, and then only in parentheses. No wonder even some NDP critics missed it.
On the spending side, the New Democrats are budgeting for a $10-billion increase from when they took over from the Liberals, or about five per cent more per year.
Some $4 billion in all is sequestered to cover increases in wages and benefits for more than 300,000 workers in the provincial public sector.
Nor is that necessarily the end of the story. The province has yet to settle with the powerful B.C. Teachers Federation. The union is signalling it expects a bigger raise than the two-per-cent-a-year over three years standard in other public sector settlements.
The Health Ministry, as is usually the case, is the other major consumer of new funding. The ministry will get three out of every four dollars dedicated for increased program spending over the next three years.
Not surprisingly, other priorities will be squeezed.
Finance Minister Carole James highlighted a new tax credit for families with children under the age of 18, though it won’t kick in for another 20 months. Blame the federal government, say the New Democrats, for that is how long it takes to get Ottawa to work a new tax credit into the income-tax system.

One could as easily attribute the delay to the New Democrats. They took office 18 months ago with the promise of $10-a-day child care and are still some distance from implementing anything like it.
The New Democrats are also starting to spend in a big way on capital projects. There’s $30 billion budgeted over three years to build schools, hospitals, roads, bridges, transit lines, housing and B.C. Hydro projects.
By 2021, the total provincial debt is forecast to be just over $82 billion, up $17 billion from when the New Democrats took office.
As with some of the big debt increases under the B.C. Liberals, the NDP debt-loading is not expected to affect B.C.’s Triple A credit rating.
But some of the biggest ticket items, like the $1.8 billion replacement for St. Paul’s hospital or the $10.7 billion Site C project, have not yet been incorporated into provincial borrowing.
Perhaps the most dubious forecast involved the Insurance Corp. of B.C. In the course of turning around the mess inherited from the Liberals, ICBC was expected to reduce its losses to $684 million in the financial year ending March 31. Instead it lost a whopping $1.18 billion.
Still, the New Democrats insisted that the turnaround will be back on track when a crackdown on legal billings and court costs kicks in April 1. Projected loss in 2019-20: a mere $50 million.
I have my doubts that a company that missed its last target by half a billion dollars can make up so much lost ground in such a short time.
Another mystery involved revenues from casinos. The New Democrats have presided over a crackdown on large cash payments and other vestiges of money laundering.
Yet the service plan forecasts a $125-million increase in casino revenues over four years. If there were as much money laundering going on as some people claim, wouldn’t revenues be down not up?
I’m told that the increase is mostly owing to increased play on slots. Table revenues, the main attraction for those big-bucks cash-only customers, are down by $27 million or five per cent.
This also marks the first budget where the B.C. government has made any allowance for LNG.
It is too soon to record direct revenues but the look ahead on the economy includes the following: “On Oct 1, 2018, LNG Canada announced its final investment decision to build the LNG Canada facility in Kitimat. As such, the 2019 economic forecast includes the LNG Canada project. The project is expected to generate a significant amount of economic activity.”
No dollar breakdown. But the multi billion dollar investment in LNG Canada is one of several factors contributing to a modest improvement in forecasted economic growth over the next few years.
Just the sort of thing that might come in handy if some of those other forecasts falter.

No comments:

Post a Comment