> Lawrie McFarlane: Tough calls,
B.C.’s outgoing finance minister, Mike de Jong, has taken abuse for releasing a fiscal update on his government’s deathbed.
Last week, he reported that the surplus for 2016, predicted in February to be $1.5 billion, will come in at $2.8 billion. (The reason for the delay is that government fiscal years end in March, and it takes several months after that to run all the numbers.)
De Jong attributed the improvement to a revenue surge caused by a stronger-than-anticipated economy. B.C.’s gross domestic product grew by 3.6 per cent last year, nearly triple the national average.
The timing, of course, looked suspicious. Green Party Leader Andrew Weaver called the announcement a purely political calculation.
Yet what else could de Jong have done? Say nothing, and a few weeks from now our new finance minister, whoever he or she is, would have eaten his breakfast.
Why hand an incoming government the pleasure of announcing good news, and no doubt taking credit for it?
Impossible, you say: The surplus was run up entirely by the B.C. Liberals. Yup, but the rule in politics is that whatever news breaks on your watch, you own, good or bad.
However, let’s move on to the current year. Frequently, in a pre-election budget, the governing party spends every available nickel, so if they lose, the other guys don’t get the cash.
I recall Saskatchewan’s late premier Allan Blakeney marvelling at his government’s good fortune in inheriting a $50-million surplus from the previous administration ($50 million was real money in those days). He assumed they would have left the cupboard bare.
Initially, it appeared the B.C. Liberals had followed that strategy. The 2017 budget showed a surplus of just $295 million.
But that was based on roughly $2 billion of new spending plans that would take months to develop, plus a cut in Medical Services Plan premiums deferred till the following January. In other words, those funds were earmarked, but they weren’t spent.
That means a surplus of about $2.3 billion is still sitting there, waiting for the NDP. Indeed, the actual amount is probably closer to $3 billion, since those improved revenues in 2016 will carry over.
De Jong might have been better to announce a major tax reduction, effective right away, or cut the MSP premiums starting April 1.
That would have eaten up the surplus immediately. Yes, the NDP could have recovered the money by repealing those measures, but not without taking a political hit.
That said, what does this sudden accretion of wealth mean for the new premier, John Horgan, and his administration? Money you work for is usually spent carefully. Money that arrives in a windfall is more often squandered.
True, with a razor-thin majority (assuming the Greens play their part), Horgan has a reasonable chance of controlling his caucus. But $3 billion is an awfully tempting pork barrel.
And there is the reality that the Liberals are stepping out at what might be the summit of our fiscal strength. From here, almost any way forward is down.
If the economy loses steam, can the NDP muster the kind of iron discipline de Jong and his colleagues displayed?
Can our new finance minister find the courage to say no, and will the cabinet listen if she or he does?
I suspect voters will accept some running down of the surplus, as long as a portion remains. But if, in a year or two, red ink suddenly returns, all bets are off.
A recent Angus Reid poll showed that some voters who abandoned the Liberals in May already regret their decision. There will be a lot more of them if our new government throws away the strong fiscal position it inherited.