Finance minister's rosy economic pronouncement a gesture in futility
Vancouver Sun – May 22, 2010
By Vaughn Palmer

Finance Minister Colin Hansen made another attempt to change the political storyline this week, when he dropped by the legislative press gallery to announce the recession was over.

"What we have seen is steady economic growth," he told reporters as his ministry distributed a release showing recent improvement in 10 key economic indicators, from forestry to building permits to mining.

"What the economists will tell us is that meets the definition of the end of a recession," Hansen continued. "So I think we're going to see steady economic growth from here forward."

The numbers were up to be sure, but only in comparison to the last couple of years and to other places. British Columbians from still-troubled parts of the province and still-troubled sectors of the economy would say the good times are a long way off.

More accurate to take a leaf from the Economist magazine, which recently declared Canada to have the "least-bad rich-world economy," meaning we are performing relatively better than the other, mostly-in-worse-trouble members of the G8 and G20 nations.

Call us one of the "least-bad" provinces in the "least-bad rich-world economy," and leave it at that until fears of a double-dip recession are completely put to rest.

Hansen's release was a gesture of futility in any event, because these days his government can't buy good publicity. The B.C. Liberals are in so much political trouble even their more favourable releases are discounted, dismissed or ignored altogether.

Most of those troubles, it needs to be repeated, are self-inflicted. They range from the accumulated baggage of nine years in power – arrogance, evasion, betrayals, outright scandal – to the post-electoral double cross of the harmonized sales tax.

In reference to which, the best question for Hansen this week went roughly as follows: If the B.C. economy is already back on a steady-as-she-goes course, why does the province need such drastic medicine as the HST?

"We want to make sure B.C. is a growing economy in the decade to come," he replied. "The HST is the single biggest thing that will drive that."

Predictable. But as the signature tally on that anti-HST petition soars in Liberal-held ridings, some of his colleagues must be having second thoughts about the wisdom of a measure that has raised a populist revolt against their government and may yet – through the medium of recall – unseat them before their time.

Yes, yes, the single most important thing they can do for the economy. All of them have said it. And the time for easily backing off is gone.

The HST has been charged on longer-term services since May 1. Businesses are changing over their accounting systems in anticipation of full implementation on July 1. Tax collectors are moving from the provincial to the federal public service.

Resource companies and investors are already making decisions in anticipation of gaining hundreds of millions of dollars worth of input credits from the changeover to value-added taxation.

Still, groups of politicians bent on saving themselves have done worse things to the economy, here and elsewhere, than reversing direction on a horrendously unpopular tax.

If the Liberals were to go that route – as the leaders of the anti-HST campaign will demand once the petition is certified – the first challenge would be how to manage the bottom line on provincial finances.

Cancelling the tax would also cancel the $1.6 billion in federal transition funding, which has already been booked into the three-year budget and fiscal plan. The need to pay back what has already been paid and to forgo scheduled payments this year and next would boost the deficit for the current year to $2.7 billion from $1.7 billion and for the next year to $1.6 billion from $1 billion.

But those are just the raw numbers. The government could choose to borrow more, spend less or bring in other taxes to adjust to the loss of the transition funding.

Indeed, the debate over how the province could make do without what many have denounced as a $1.6-billion "bribe" from Ottawa might open the way for the government to move beyond a debate it has already lost, namely the one about the merits of harmonizing the sales tax.

Suppose on the morning after the petition is certified, the Liberals were to ask the independent auditor-general to calculate the impact of cancelling the tax and to present the options for making up the difference. Then promise that the public that rose up against the HST will be given the opportunity to approve a way out by referendum.

But that is pure speculation. The government gives not the slightest hint that it is thinking about how to move beyond a tax measure that threatens to turn into a suicide pact.

When the Liberals are asked what they will do once the petition is certified, as it almost certainly will be, they say "we'll cross that bridge when we come it." Never mind that the thing they are driving toward looks less like a bridge than a cliff.