February 25, 2013
Capital spending cuts help balance B.C.'s books
The 2013 B.C. budget aims to eliminate the provincial deficit in the next fiscal year, by reducing capital spending on the construction of basic infrastructure and increasing taxation for businesses and families.
“It looks like the infrastructure budget has not changed drastically since last year, but I don’t find that too alarming,” said Manley McLachlan, president of the BC Construction Association.
“The amount of public sector investment in infrastructure over the last 10 years was significant. So, there was an expectation there would be a winding down in this area. We knew the focus was on a balanced budget, which means something had to decline.”
Finance Minister Mike de Jong presented the 2013 budget in Victoria on Feb 20, which he said fulfills a promise to deliver a balanced budget and honours a commitment to sound fiscal management.
De Jong said the three-year fiscal plan will not spend more tax-payer’s money than is received by the government in revenue.
This will be achieved by holding the line on government spending, while at the same time making significant tax hikes.
The 2013 budget estimates total capital spending will drop to $6.767 billion in 2012-13, compared to $7.141 billion in fiscal year 2011-12.
This decline is expected to continue throughout the three year fiscal plan with capital spending of $6.227 billion in 2013-14, $6.203 billion in 2014-2015 and $5.853 billion in 2015-16.
This represents a decline in total capital spending of $1.288 billion from 2011 levels.
The B.C. government’s third quarterly report shows a revised budget deficit of $1.228 billion in 2012-13.
The 2013 budget outlines the government’s long-term plan for economic diversification and growth, which is based on the development of a new liquid natural gas (LNG) industry.
“Right now, we can only sell natural gas to the U.S.,” said de Jong. “But, the demand and growth is across the Pacific Rim, and that’s a huge incentive for us to move forward aggressively to develop liquefied natural gas, using our twin advantages of a plentiful natural resource and strategic location as Canada’s Pacific province.”
According to de Jong, the private sector made a commitment in 2012 to invest about $4 billion in natural gas-related projects, including:
a plan by Shell to build LNG Canada with joint venture partners KOGAS, Mitsubishi and PetroChina;
a partnership between Spectra Energy and the BG Group to develop a new transportation system serving the Port of Prince Rupert;
a plan by Petronas to establish the Pacific Northwest LNG facility; and
Chevron Canada’s purchase of an operating interest in the Kitimat LNG plant.
Some people have reservations about the B.C. Liberal Party’s vision for establishing an LNG industry, which aims to ship gas to lucrative overseas markets in Asia.
“The government is putting all their eggs in one basket, which means we will either end up with eggs Benedict or an extremely oversized omelette,” said Tom Sigurdson, executive director of the B.C. and Yukon Territory Building Construction Trade Council.
De Jong said in the budget speech that the plan is being implemented in an environment of global volatility and uncertainty on the revenue side, due to a decline in the prices of export commodities such as coal and natural gas.
The Canadian Taxpayers Federation (CTF) is extremely critical of the tax hikes in the budget, which include an increase in corporate income tax from 10 to 11 per cent, an increase in personal income tax for anyone making more than $150,000 a year; and an increase in the Medical Services Premium (MSP).
“These taxes hurt families by making it more expensive to live here and for businesses to set up shop and employ people,” said Jordan Bateman, CTF B.C. director.
“Coming on the heels of a return to the PST, the creation of good jobs will slow.”
Taxpayer-supported debt is forecast to be $42.6 billion in 2013-14, $44.5 billion in 2014<0x2005>-15 and $46.1 billion in 2015-16, which reflects an increase due to the transition from the HST to the PST/GST tax systems.
Budget 2013 forecasts a surplus of $197 million in 2013-14, and surpluses of $211 million in 2014-15 and $460 million in 2016-17.
Total government revenue is forecast at $44.4 billion in 2013-14, $45 billion in 2014-15 and $46.4 billion in 2015-16.
The total expense over the three-year plan is forecast at $44 billion in 2013-14, $44.6 billion in 2014-15 and $45.6 billion in 2015-16.
The government predicts the economy will grow by 1.6 per cent in 2013, 2.2 per cent in 2014 and 2.5 per cent in 2015.
Major risks to the outlook include a return to the recession in the U.S. and further weakening of the U.S. dollar, the ongoing European sovereign debt crisis and slower than anticipated Asian demand for B.C. exports.
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