New NDP government puts B.C. finances back on shaky ground

During the spring 2017 election campaign, John Horgan convinced many British Columbians that his NDP government would be different than the previous New Democratic regime, particularly when it came to the province’s finances.

Unfortunately, the first few months of NDP reign don’t augur well for the future of government finances.

Consider just how markedly British Columbia’s finances have changed in the few months since the election and what that implies for the future.

In the spring of 2017, the then-governing Liberals estimated revenues for 2017-18 at $50.8 billion against spending of $50.2 billion, resulting in a surplus of just over $600 million.

Then the NDP’s September budget update estimated that revenues would be higher than originally budgeted by almost $1.6 billion.

That should have meant an estimated 2017-18 surplus of $2.2 billion.

Instead, between July (when the NDP assumed power) and mid-September, Premier Horgan’s government introduced $1.7 billion in new spending for this year.

And the government has said it plans to increase spending by $4.5 billion over the next three years, 2017-18 to 2019-20. (Thanks to higher revenue projections, the expected surpluses over this period are basically the same as those assumed by the Liberals in the spring.)

Notably, this increase doesn’t include many of the spending initiatives outlined in the NDP-Green Party coalition agreement or the NDP’s campaign platform.

The NDP-Green agreement included a number of initiatives largely absent from the budget update:

Invest in transit and transportation infrastructure;

Long-term funding for transit;

Build hospitals, schools and other infrastructure;

Increase funding for health care, particularly preventive initiatives and services;

Introduce an essential drugs program;

New health spending focused on seniors, including home care;

Additional funding for kindergarten-to-Grade-12 and post-secondary education;

New investments in childcare and early childhood education;

A new pilot program on basic minimum income;

New investments in affordable housing.

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In addition, while there’s a great deal of overlap between the NDP-Green agreement and the original NDP campaign platform, there are also several major commitments that seem either underestimated in the budget update or altogether absent.

For instance, while the agreement calls for greater investment in childcare and early childhood learning, it doesn’t specifically introduce the $10-a-day childcare program proposed in the NDP platform.

The combination of immediate and marked spending increases, zero fiscal room for additional spending, and a large number of unfulfilled and expensive campaign promises means there’s a strong likelihood that B.C. will slip back into deficit spending and/or face additional tax increases, perhaps as early as next spring’s budget.

The Horgan government could have followed the fiscally responsible path taken by other NDP governments in the past, including in Saskatchewan in the 1990s and early 2000s.

Instead, it’s sent a troubling signal with its first budget that big spending, tax increases and (more likely than not) deficits are back as the governing fiscal policies of the province.

Large spending increases financed by higher taxes and deficits eerily echo the 1990s, when the NDP last governed the province. That period was rightly characterized as a lost decade.

Let’s hope the euphoria of returning to power subsides and more reasonable policies prevail as the government begins work on its 2018-19 budget.

Jason Clemens and Niels Veldhuis are economists with the Fraser Institute.

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