Exports up 12.8%, retail sales up 8.8%, employment up 3.8%, housing starts down but still tracking well above historic norms, and a government surplus of $2.7 billion that will help eliminate the government’s operating debt for the first time since the 1970s.
Without acknowledging the previous government that helped put it in that position, Carole James boasted of B.C.’s strong fiscal position Friday September 22 and defended her government’s plan to raise taxes and spend $2.7 billion more than the previous Liberal government planned to spend, during her first address as finance minister to the Greater Vancouver Board of Trade (GVBOT).
James reiterated some of the key spending and tax measures announced in her government’s recent mini budget, which includes eliminating bridge tolls, halving of MSP premiums and PST on power, a $500 million capital commitment to build 1,700 new rental housing units over four years, and increased corporate and carbon tax hikes.
She also acknowledged that, despite B.C.’s current strong economy and fiscal position, the potential shocks are numerous, including the long-term impact of wildfires on B.C.’s timber supply, trade disputes with the U.S., rising interest rates, a Crown corporation (ICBC) that is approaching “insolvency,” slowing growth in China and Japan and a looming wage hike for government workers in 2019.
Which is why “prudence and caution” were built into her recent budget update, James said.
That prudence includes a budget that low-balls expected GDP growth, a $300 contingency reserve and surpluses of roughly $250 million annually over the next three years.
From the previous Liberal government, James inherited a $2.7 billion surplus. That money can’t be touched, however.
Under the Liberal government’s balanced budget legislation, which the NDP is keeping in place, at least for now, it must all go to paying down the government’s operating debt, which could be zero by next year.
But James’ government also inherited two Crown corporations from the Liberal government that are staggering under unsustainable revenue-to-debt ratios, especially ICBC, which could threaten B.C.’s sterling credit rating.
“Both are a concern,” James admitted. “We’re very concerned about the fiscal sustainability of both of them.”
James pointed out that B.C. has insulated itself somewhat from U.S. trade dispute shocks through export market diversification. Whereas 75% of all B.C. lumber went to the U.S. when the last softwood lumber agreement was signed in 2006, it’s now down to 65%.
“It still has an impact on British Columbia’s economy – there’s no question about that, “James said, referring to trade issues like softwood lumber duties. “But diversification has certainly assisted with some of the challenges that are there.”
However, B.C.’s forestry industry now has a new challenge, thanks to this season’s unprecedented wildfires, which wiped out about a year’s worth of annual allowable cut. James confirmed that the loss of so much timber will have a long-term impact.
“There’s a lot of fibre in that area that will now be pulled out of market,” James said.
One item that could have a big impact on future budgeting is compensation for civil servants. A compensation contract expires in 2019, and the government will have to start planning for the impact of wage hikes in the 2018 budget, James said.
“That’s going to have an impact onto the budget,” James said. “We believe it’s important to acknowledge it and recognize it.”
Despite the $500 million earmarked to build 1,700 new purpose-built rental housing units over four years, plus some additional money for child care, the NDP government has been criticized for not fully implementing its ambitious affordable housing and $10 a day child care plans right away.
“We don’t implement a comprehensive housing strategy overnight,” James said. “You’re not going to address housing affordability in two months.”
Moderator Bill Good pointed out that the NDP government is “against pretty much all major energy projects – Enbridge, Kinder Morgan, Site C. How do you justify that to your union supporters who see all those projects as good jobs?”
James responded by justifying her government’s referral of Site C to the BC Utilities Commission for review as something that should have happened up front, and said she thought there is still a chance a large liquefied natural gas project could be built in B.C., despite the recent cancellations of multi-billion projects by Petronas and Nexen.
“Do I believe that we’ll see and LNG plant, for example, in British Columbia?” James said. “I certainly hope so.
“We are working with the industry. The market is not at a place right now that the industry believes that it can come forward in British Columbia. I think we may still an LNG plant in the future.”
Just a few hours after James spoke to GVBOT, Andy Calitz, Shell’s CEO for LNG Canada, was also scheduled to speak to GVBOT members
It’s not clear whether any NDP ministers were also meeting with him, although James did say that her government has met with some oil and gas and mining industry leaders to talk about things like mining and liquefied natural gas.
Asked if Green Party Leader Andrew Weaver also sat in on those meetings, James confirmed he had not.
That could be a problem, since the NDP needs the Greens’ cooperation on any measures that are not strictly budget related.
The NDP’s formal adoption of the United Nations Declaration on the Rights of Indigenous People (UNDRIP) has caused some angst among resource sectors, since the “free, prior and informed consent” from indigenous people on all development is viewed as a veto.
James said UNDRIP in no way gives First Nations a veto over development, and said the reality is that, without First Nations cooperation, resource extraction projects that don’t have First Nations consent tend not to go ahead already.
“The word ‘veto is nowhere in this document,” James said. “In the discussions I’ve had with industry, if the First Nations are not in dialogue with the companies before they go in to do the project that they’re looking at, that project does not go ahead.
“That has nothing to do with veto. That has to do with good relationships and ensuring that the people who have say in the land are involved in the discussions.”