Double Blind

The new minister of finance, Colin Hansen, has been silent about what will be in this year’s budget. One possible reason is because he’s new in this position – he took over on December 15 after Gary Collins resigned to become CEO of Harmony Airways. Chances are that Hansen didn’t want to put too many radical thoughts in a budget with an election three months away. No doubt the premier’s office and the deputy minister had a chance to carefully comb over what would have the most effect on the electorate come this May 17, 2005.

What will we expect to see in the budget? Here are some guesses of mine.

1. Extra spending on health, probably to the tune of $2 billion over the next four years further than what we are already spending – for the mathematically disadvantaged, this means $500M/year, but you announce the cumulative sum just to get the “big spending” headlines. This will be yet more money wasted down the pipe, but it will look good on the newspapers and give the NDP (Joy McPhail, Carole James) less karma for saying “The Campbell Liberals are just spending what they took away in 2001′s tax cuts for the rich”.

2. Extra spending on education. Repeat the above, except with a slightly smaller number (let’s say $1.5B over four years) and the same response from the NDP.

3. Income tax reductions. A remote possibility is that we will see an Alberta-style flat tax implemented. More likely is a token reduction of the 6.05% tax bracket to 6%, and the 9.15% tax bracket to 9%. Possibly the 11.7% bracket will be eliminated (so it will be 9% all the way from $33061 to $75917). Another possibility is that there will be no changes to the tax rates or brackets, but the basic exemption will increase from $8676 to $10000 or higher (every thousand dollars more than the current level costs the government about $200M assuming no ‘trickle down’ effect of more people having more money to spend). My general guess is that when you add up the tax reductions in this budget, they will let people keep $800M more than they otherwise would be collecting. The response from the NDP will be the same, but they’ll concentrate on complaining either the tax bracket elimination will be benefitting “the rich”, or that the money the government gave out would be better spent in hospitals and schools.

4. A formal debt management plan. The province has $32B of debt, so they’ll most likely announce some sort of amortization scheme – maybe $300M/year, or some token amount. The NDP will reply that this is money that is better spent on hospitals and schools. See a theme here?

If you want a projected surplus for 2004/2005, my best guess will be $2.4 billion, net of the $300M forecast allowance. The surplus for 2005/2006 should be projected to be about the same, so this gives the government plenty of ‘wiggle room’ to satisfy the whole group – they can go nuts on spending and cut taxes at the same time. Of course, the actual surplus will not be $2.4B since they’ll have announced $1B worth of new spending initiatives and another $500M worth of tax reductions and $500M worth of debt repayments. So the final ‘announced’ surplus after their spending increases and tax cuts will be around $300M, with a $300M contingency.

Those are the low-lying fruit. I’m sure the government has some more items up its sleeves (specifically how to bolster the vote in the central part of the province east of the Lower Mainland), but that will have to wait until the budget is actually announced.

The NDP will probably have a difficult time fighting this budget – just like what happened in Alberta, it’s becoming clear that the strategies applied in BC after Campbell got elected have worked. If the NDP end up criticizing the fact that “Not enough money went into healthcare”, they’ll continue to sound like a broken record player and are most certainly going to lose the next election.

The Canadian Centre for Policy Alternatives will blast the budget for being too light on spending.

The Canadian Taxpayer’s Federation will blast the budget for being too heavy on spending.

I believe all of these organizations already have their press releases written even though they have little indication as to what is specifically going to be announced. If you see a press release issued 15 minutes after the budget is announced, then this is probably the case. If you see a press release a couple hours or later after the budget is announced, chances are the budget did not have what they expected and the press release actually had to be re-written! If you wish to see a sneak preview of the opposition comments, 90% of the material has already been written by David Schreck.

This entry was posted on Tuesday, February 15th, 2005 and is filed under Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.