Vancouver Sun

A few months in, and NDP already has B.C. nervous

Horgan must think before he spends, Jason Clemens and Niels Veldhuis write.

- Jason Clemens and Niels Veldhuis are economists with the Fraser Institute.

During the 2017 election campaign, nowPremier John Horgan convinced many British Columbians that his NDP government would be different than the previous NDP regime, particular­ly with respect to the province’s finances. Unfortunat­ely, the first few months the NDP’s reign do not augur well for the future of government finances.

Consider just how markedly B.C.’s finances have changed in the few months since the election and what that implies for the future. In the spring of 2017, the then-governing Liberals estimated revenues for the 2017-18 fiscal year at $50.8 billion against spending of $50.2 billion, resulting in a total expected surplus of just over $600 million.

The NDP’s September budget update estimated that revenues would be higher than originally budgeted for by almost $1.6 billion. Put differentl­y, if the now-governing NDP didn’t change the spending plans originally introduced by the Liberals in the spring, the estimated surplus of the government for the year should have been roughly $2.2 billion.

Instead, between July (when the NDP assumed power) and mid-September, the NDP introduced $1.7 billion in additional spending for the year.

The push for higher spending was not just for 2017-18. The NDP government increased planned spending by $4.5 billion over the next three years — 2017-18 to 2019-20.

Put differentl­y, this government has effectivel­y increased spending by an additional $4.5 billion in the first few months of its term. (Thanks to higher revenue projection­s, the expected surpluses over this period are basically the same as those assumed by the Liberals in the spring.)

Critically, this material increase in spending does not include many of the spending initiative­s outlined in the NDP-Green coalition agreement or the NDP’s campaign platform. For example, the NDP- Green agreement included a number of initiative­s that are largely absent from the recent budget update, including:

investment in transit and transporta­tion

infrastruc­ture

long-term funding for transit

building hospitals, schools and other infrastruc­ture

increased funding for health care, particular­ly

■ preventive health initiative­s and services

introducin­g a new essential drugs program

new health spending focused on seniors,

including home care

additional funding for both K-12 and postsecond­ary

■ education

new investment­s in child care and early childhood

■ education

a new pilot program on basic minimum

income

new investment­s in affordable housing.

While there’s a great deal of overlap between the NDP- Green party agreement and the original NDP campaign platform, there are also several major commitment­s that seem either underestim­ated in the budget update or are altogether absent.

For instance, while the agreement calls for greater investment in child care and early childhood learning, it does not specifical­ly introduce the $10-a-day child-care program proposed in the NDP platform.

The combinatio­n of immediate and marked spending increases, zero fiscal room for additional spending and a large number of unfulfille­d, expensive campaign promises means there is a strong likelihood that B.C. will slip back into deficit — spending more than it raises in revenues — or experience additional tax increases, perhaps as early as next spring ’s budget.

The Horgan government could have followed the same fiscally responsibl­e path as other NDP government­s in the past, including the Saskatchew­an NDP in the 1990s and early 2000s. Instead, it has sent a troubling signal with its first budget that big spending, tax increases, and (more likely than not) deficits are back as the governing fiscal policies of the province.

Large spending increases financed by higher taxes and deficits eerily echo the 1990s, when the NDP last governed the province during what was rightly characteri­zed as a lost decade. Let’s hope the euphoria of returning to power subsides and more reasonable policies prevail as the government begins work on its 2018 budget.

The push for higher spending was not just for 2017-18. … This material increase in spending does not include many of the spending initiative­s outlined in the NDP-Green coalition agreement or the NDP’s campaign platform. Jason Clemens and Niels Veldhuis

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