If voters reject the HST in a referendum June 13 through July 22, there will be a $2.57 billion deficit this year – a situation that would necessitate drastic spending cuts, according to Finance Minister Kevin Falcon.
“It is a net, almost $3 billion negative hit to the fiscal plan [so] that you just can’t balance the budget without serious program spending reductions under that scenario,” Falcon told a Vancouver Board of Trade luncheon May 26.
“We modelled what would happen if you go back to the PST-GST and then drop the PST to 5% to mirror what we’re doing under the HST. It’s a disaster. You literally are taking in excess of $2 billion in negative fiscal impact and deficits every single year going out. It’s a very unpleasant situation.”
If voters accept the HST, Falcon projects a $769 million deficit in the 2011-12 fiscal year. That declines to a $434 million deficit in 2012-13 and a $64 million deficit in 2013-14.
But Falcon said his government would be able to dip into a $450 million contingency fund and $350 million forecast allowance in 2013-2014 to ensure that the budget is balanced in that fiscal year.
Under a PST-GST regime, however, all bets would be off.
That scenario would involve a $2.566 billion deficit in 2011-12, a $543 million deficit in 2012-13 and a $356 million deficit in 2013-14.
However, government numbers show that the province would run a higher surplus in 2014-15 under the PST-GST regime ($405 million) than under the HST regime ($53 million).
The difference, though, is that consumers would be paying a combined 12% sales tax if the PST is reinstated whereas they would be paying only 10% if the HST is kept.
Glen Korstrom
Twitter: @GlenKorstrom