B.C. Budget Backgrounder

Contact:

Michael Walker, Executive Director
The Fraser Institute, (604) 714-4545 Email: michaelw@fraserinstitute.ca

Release Date: 26 March 1998

VANCOUVER, BC>>>  In an open letter to B.C. Premier Glen Clark dated 7 November 1996, the Fraser Institute opined that what was happening to British Columbia's deteriorating economy was not surprising but rather the result of the deliberate decision by the government of B.C. to continue to pursue a destructive policy course. "There is a tendency to assert that the current conditions of the provincial economy are reflecting the softness in forest product and mineral markets and not the state of policy," wrote Fraser Institute executive director Michael Walker. "This is not the case."

Sixteen months later, even a cursory examination of the situation in Alberta confirms Dr. Walker's point. There, the economy is still very dependent on oil and gas production. But, in spite of that, and the fact that oil prices have fallen more than 30 percent, Alberta's economy continues to grow and prosper, due in no small part to the increasing amount of B.C. business being conducted in Alberta.

But the main reason is that Alberta's policies are designed to encourage business, while B.C.'s repel it. According to Dr. Walker, the problem in B.C. is not the fate of the mega firms the Premier invites to tea. The problem is that the government has poisoned the environment for the small, 10- to 50-employee firms which account for almost all of the employment and income growth in the economy.

"Mr. Premier, the right thing to do today is the same as it was when we wrote our report two years ago," advises Walker. "All you require is the humility to admit that you have been mistaken and the courage to set a new course."

The purpose, therefore, of this Fraser Institute budget backgrounder is to compare B.C.'s fiscal situation with that of the other provinces.

Deficit

B.C. is one of five provinces that does not have a balanced budget. PEI expects to eliminate its deficit in 1999, Quebec and Newfoundland expect to have balanced budgets by the year 2000, and Ontario the year after. B.C. was supposed to have balanced budgets in 1995/96 and in 1996/97. Both years ended in deficit.

Provincial Tax Rate

The provincial government often claims that British Columbians have one of the lowest tax bills in the country. This claim, however, is not based on all the taxes that we pay. When indirect taxes are included - liquor and tobacco taxes, license fees, corporate taxes that get passed along as higher prices, and Crown Corporation profits -- the average B.C. family has the highest tax burden in the country. The "Provincial Tax Rate" (B.C. government revenue per dollar of gross provincial product) has risen from 18.7% in 1992/93 to an estimated 21% in 1997/98, a 12.3% increase (see attached chart).

Spending

The government of British Columbia is spending more per person in inflation-adjusted dollars than the average of the other nine provinces. This is a departure from the historical pattern where B.C. consistently spent less.

Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.

For further information:

Suzanne Walters, Director of Communications,

The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca

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