for and first published in TheTyee.com)
Minister Colin Hansen faces a credibility problem when he
presents his budget on Tuesday, September 1st. His government
is already in freefall in the opinion polls as a result of
last month's surprise announcement on the HST. He has to amend
balanced budget legislation a second time, confessing that
there will be more than two years of deficits.
watchers are likely to take any forecasts offered by Hansen
with a grain of salt as they watch for details on cuts. Many
arts organizations started getting letters last week informing
them that they won't be receiving gaming grants; that comes
despite an expansion of BC Lottery Corporation's Internet
gambling. Hundreds of community organizations fear that the
government will wreak havoc on their financial security. Big
cuts to services directly provided by government probably
won't be specified in the budget. It will be necessary to
compare the estimates book tabled last February with the update
tabled Tuesday to find general areas with cuts, and then wait
for leaks that identify the specific program areas that are
getting hammered. Health and education will be especially
tricky because government will point to absolute dollar increases
without considering whether those increases are adequate to
cover higher costs it imposed on health authorities and school
boards through contract negotiations.
can be believed, we will all learn to love and appreciate
the HST once he releases the charts and graphs that will be
part of his budget presentation. In particular, Hansen promised
to "set out some numbers
which will actually demonstrate
that the impact on typical seniors in British Columbia will
in fact be a net benefit
" Hansen may be correct,
but only because many seniors in British Columbia live in
family income is the level at which half of all families have
lower income and half have higher income. For all families,
all ages and all types, median family income in B.C. in 2006
was $62,600; for families with the oldest member being over
age 65, median income was only $21,900. According to the government's
website, "Low income families and individuals will
receive an annual B.C. HST Credit of $230 for individuals
with income up to $20,000 and $230 per family member for families
with incomes up to $25,000, paid quarterly with the GST credit."
The government estimates that "over
1.1 million British Columbians" will receive that
benefit, a testimony to the extent of poverty in B.C. - one
in four. Those figures indicate that 3.3 million British Columbians
will not qualify for the tax credit, in particular, anyone
working full-time and making over $13 per hour, unless Hansen
improves on what has been announced on his HST website.
and their employees are going to be amongst the hardest hit
by the HST. Not only will food service workers suffer as consumers,
but some will lose their jobs. In question period Hansen responded
to concerns raised by Ian Tostenson, President of the British
Columbia Restaurant and Foodservices Association, by saying:
"But at the end of the day, people in British Columbia
who are unemployed do not have the luxury of being able to
go out and enjoy the fine restaurants that he represents."
It is true that British Columbia has many fine restaurants,
but it also has hundreds of coffee shops and fast food outlets.
Tostenson's organization represents that full range of foodservices.
Hansen's remarks are misleading, and reflect his desperation.
With the HST, the $7.00 special at a food court will increase
to $7.49. For someone who eats like that every working day,
the increased cost over a year is about $125, and that's just
the increased cost of lunch, before the worker gets home to
look at higher hydro, gas and telephone bills thanks to the
misleading statement used by Hansen and other apologists for
the HST is that it will help to pay for health and education.
The province will receive a one-time payment of $1.6 billion
from the federal government "to
support the implementation" of the tax. Ontario is
using the transition money to assist families. B.C. is taking
it into general revenue. It could be called money for anything,
but it gets misleading when Hansen goes beyond the one-time
payment and suggests that the HST will help fund health and
education on an ongoing basis. That is only true in the sense
that the PST did the same. If the tax is truly revenue neutral
it won't do anything more than what the PST did for health
raised $5 billion. Hansen has said that the HST plus or minus
$200 million of what the PST raised. Unless they are lying
or confused about the HST being a tax grab, the HST has nothing
to do with short term revenue requirements; it is a tax shift
from business to B.C. families. Hansen tries to make the link
to health and education funding on an ongoing basis by arguing
that the HST will contribute to economic growth which in turn
will bring in more revenues to fund health and education.
That's the same tactic he uses when he claims it will help
restaurants; they'll take a hit but economic growth will make
up for it.
with Hansen's hope that the economy will be stimulated as
a result of the HST lies in the structure of the B.C. economy.
Resources continue to play a major role and the prices they
sell at are determined by international markets. With lumber,
minerals and natural gas selling at prices barely a quarter
of pre-downturn peaks, it will take more than an HST input
tax rebate before mills open. The Campbell government used
to say that tourism would cushion the blow in resource dependent
communities. That is one of the industries which will be hit
hard by the HST. It is possible that economic recovery will
be delayed as industries that might otherwise pick up some
of the slack during especially hard times in the resource
sector see their customers turn away due to higher prices
and lower incomes.
released its first quarter financial update. B.C.'s isn't
due until the end of September, but Hansen may release it
early as part of his budget update. Alberta is now forecasting
a deficit of $6.9 billion, up from $2.2 billion forecast in
its budget. Analysts point out the forecast is based on the
price of natural gas increasing substantially and averaging
Cdn$3.75 per gigajoule (GJ) over the fiscal year although
many think it could drop below $1. B.C. is not as vulnerable
as Alberta to changes in natural gas prices, but even in B.C.
government revenues drop $300 million for every $1 drop in
the price of natural gas.
tabled its $2.2 billion deficit, many said it was further
evidence that B.C.'s forecast of a $495 million deficit was
unrealistic. On Tuesday realism will hit home. In July 2010
we'll see the audited financial statements that will show
whether Hansen is more accurate with his post-election budget
update than he was with his pre-election budget.