But let’s not blow our economic opportunities.
British Columbia is in election mode. Almost daily, full-page ads sing the praises of the government and its accomplishments in preparation for the May poll date.
Government House Leader and Finance Minister Gary Collins recently announced – with a degree of satisfaction – that B.C.’s deficit for the year 2003-04 would only be $1.6 billion. This brings the current debt for Canada’s most western have-not province (as defined by equalization payments) to $39.4 billion. The debt has increased by 16.6 percent during the last four years of Premier Gordon Campbell’s watch. This represents 21.9 percent of the province’s gross national product and results in a credit rating by Standard and Poor of AA-.
Months before the spring election, during the abridged version of the legislative assembly sitting, Collins promised to introduce a balanced budget for the fiscal year 2004-05. “As a result of our resilient fiscal plan, we are now able to fund new investments that bring out the best in education and patient care, accelerate funding for the province’s Olympic commitment and enhance our strategy for economic growth,” he said.
This outcome seems possible. The Campbell government has shifted revenue and expenditure in such a way that it seems the activity has taken place. The government has reduced personal income taxes by $1.5 billion; it also reduced taxes by $790 million for B.C. corporations. Campbell adopted Austrian Friedrich von Hayek’s Nobel Prize-winning economic philosophy of free-market capitalism, and it resonates well with B.C. business, as it does with me.
However, increasing provincial revenue from other sources during the same period confuses the Campbell government’s message. Through increased taxes and fees on items such as drivers’ licences, provincial park user fees, tobacco, beer, wine, liquor and a 50-per-cent increase in medical services plan fees, the government has clawed back $1.09 billion.
Having first raised the provincial sales tax by half a percentage point, the government has now restored the sales tax to its original seven percent, taking credit for the tax cut.
Drilling activity in British Columbia was up 40 percent in 2003 and is anticipated to yield $2 billion in royalty revenue. This revenue stream takes the “pole position” away from British Columbia’s ailing forestry sector.
Currently, oil and gas activity is largely taking place in the northeastern quarter of the province. The industry awaits a federal ruling that would permit offshore drilling in the Queen Charlotte Basin, Winona Basin, Tofino Basin and the Georgia Basin. If approvals are granted to begin offshore operations in 2005, additional royalty revenues will be generated from the $50 billion worth of oil and $60 billion worth of natural gas in these regions.
To support this initiative, a pipeline infrastructure from the Mainland to Vancouver Island is in planning.
Campbell has recently stated that these offshore projects are a key to British Columbia’s long-term economic health. Current leaseholders include Petro-Canada, Chevron, Texaco Corp., Shell Canada and Exxon Mobil Corp.
The 2004-05 budget supports the continuing success of the province’s oil and gas development strategy, by providing $17 million over three years toward the province’s offshore oil and gas initiative. China’s insatiable appetite for commodities continues to surge and as a result, like Alberta’s, B.C.’s provincial coffers are indicating that there is some discretion in budgeting.
So it seems that British Columbia has one more chance to become a have province. However, there is a problem.
The Conference Board of Canada has noted that over the long term, B.C. and Prince Edward Island will post relatively strong growth as they become retirement havens for the ageing population over the 2002-20 period.
Currently, 13.7 percent of British Columbia’s population is over the age of 65. This is higher than the national average. Alberta’s over-65 population is only 10.4 percent.
Added to the general ageing of the population, the provincial migrant growth that B.C. will experience is expected to be primarily retirees. Statistics Canada forecasts that by 2020, B.C.’s population will be comprised of 22.6- percent retirement-aged citizens. This will create a significantly increased draw upon the province’s social and medical services.
By 2040, the number of seniors is expected to increase to an alarming 40 percent of the total population, further stressing the systems.
Unlike debt-free Alberta, B.C.’s political leaders must exploit this increased economic activity. They must not squander the opportunity. Financial budgets must be prepared to accommodate the anticipated growth. Failure to do so today will result in undue hardship tomorrow.
Note: This article was originally published in 2005.