VICTORIA – British Columbia’s Liberal government tabled a balanced budget Tuesday, delivering a fiscal blueprint that forecasts three years of surpluses and introduces plans to levy a two-tiered income tax on a liquefied natural gas industry still years away from production.
Finance Minister Mike de Jong said his “boring, balanced” budget is the second consecutive surplus for his government — a result of their commitment to controlling spending and adhering to the hard-work values of British Columbians who re-elected the Liberals last May despite a widespread expectation they were heading for defeat at the hands of the Opposition New Democrats.
The government will end the current fiscal year with a surplus of $175 million. The Liberal fiscal plan forecasts a surplus of $184 million in 2014-2015, a surplus of $206 million in 2015-2016 and a surplus of $451 2016-2017, he said.
“It may not be glitzy or chock full of goodies, but it is the right plan for British Columbia,” he said.
The surplus “doesn’t mean it’s all clear sailing. In fact, to continue meeting our targets, we will have to rely on more of that old-fashioned discipline that got us here in the first place.”
B.C. and Saskatchewan are the only provinces to post balanced budgets this year. Last week Federal Finance Minister Jim Flaherty tabled a deficit budget, saying the Tories will balance the books in 2015, an election year.
De Jong’s budget paid a great deal of attention to the LNG industry. Though prospective plants are at least three years away from operating, he said any conversation about the future of B.C. must take into account the huge potential represented by LNG.
Premier Christy Clark has said LNG generate economic benefits of up to a trillion dollars and create 100,000 jobs. De Jong said one single LNG plant could generate up to $1.4 billion in taxes after 10 years in production.
“I expect the skeptics are going to find it harder and harder over the coming years to deny that this is happening,” de Jong said.
Opposition New Democrat finance critic Mike Farnworth said the government’s LNG plan was short on detail and at least a year behind schedule. He said the Liberals promised to roll-out an LNG tax structure last year, but it now appears to be “next year, next year, next year.”
“It’s a pipe dream,” said Farnworth.
And he said Liberal election campaign promises to use LNG revenues to pay off the province’s debt in 15 years don’t add up. The provincial debt is currently at $60 billion, but is forecast to rise to almost $70 billion over the next three years.
Farnworth said even if LNG plants start operating within the next three or four years, the government would have to contribute $6 billion a year to pay down the debt in that time.
“When you look at the budget, it’s a disgrace,” he said.
One of the few spending items in the budget is $29 million to support development of B.C.’s liquefied natural gas industry. The budget also provides $9 million to support environmental assessments for LNG, pipelines and other major resource development.
The proposed LNG Income Tax will be introduced as legislation in the fall.
The first tier of the tax will be 1.5 per cent to be introduced at the start of production. The second tier, when introduced, could rise to seven per cent once the plant is running and capital costs have been deducted.
But de Jong acknowledged that no LNG revenues are in the three-year plan and tax dollars won’t flow until plants are in production.
The Canadian Association of Petroleum Producers was lukewarm towards the tax regime. B.C. spokesman Geoff Morrison said the plan provides a framework but more work needs to be done on the rates.
“I expect downward pressure on the rates,” he said. “It’s not just about the tax policy, it’s about the all-in cost structure.”
Morrison would not speculate on a tax-rate number that would satisfy industry.
Iglika Ivanova, of the Centre for Policy Alternatives, said the Liberals have placed too much emphasis on balancing the budget.
“The focus of the budget is to obviously reduce the fiscal deficit to say it’s balanced fiscally, but there’s other deficits that are not being addressed like social, economic, environmental, jobs and skills training,” she said.
The budget forecasts B.C.’s economy to grow by two per cent in 2014 and 2.3 per cent in 2015. The debt is forecast to rise to $69 billion by 2016-2017, up from $61.6 billion this year.
Despite the rising debt number, de Jong said B.C. is better off than most other provinces. He said Ontario, for example, pays 9.3 cents of every dollar of revenue on interest — double what B.C. pays.
“Balancing the budget wasn’t easy, but we’ve proven it can be done. Paying down the our debt won’t be easy, but it, too, can be done.”