February 22, 2006
Check Against Delivery
I’m here today to talk about the budget, as I’m sure you’re aware. It’s a budget that really we should take a moment to think about because it takes a lot of work to get to a place where you can make real choices. The transformation that’s taken place in our province because of the hard work of individuals in every single region of the province has really been phenomenal. It’s required commitment and dedication and discipline.
In two years we’ll be celebrating the150th anniversary of the founding of the colony of British Columbia. We’ll celebrate the human spirit, the sense of discovery, the encounter of cultures between one another over the last 150 years. I think what we’ll really be celebrating, though, is the spirit of British Columbians, their commitment to one another, their commitment to creating a better world, to creating a better quality of life for everybody that lives in this great place. Because of the hard work of people all over this province, we are living in an incredibly exciting time in British Columbia. Optimism is everywhere.
I can remember feeling that way in the sixties, but we lost a little bit of that. It’s coming back. You feel it in the northwest, you feel it in the northeast, you feel it in the Kootenays, you feel it in the Cariboo, you feel it in the Okanagan, you feel it on Vancouver Island, you feel it in the Lower mainland. People are feeling good about themselves again. They’re feeling good about the province.
Yesterday’s budget was the third consecutive balanced budget. British Columbia is number one in job growth in Canada with 275,000 new jobs since 2001. We have the lowest level of unemployment in 30 years.
I’m going to talk about some of the initiatives that we’ve undertaken through this budget in 2006, but I think we have to remember back to where we were and think of where we’ve come to. You know what? We should remember: you can fall back or you can go forward, you can lead, you can build, you can create or you can watch as the assets we’ve got as a province deteriorate. I’ll tell you this: with this government we’re going to lead, we’re going to build, we’re going to create and we’re going to show the rest of the world what you can do in a province like British Columbia.
To do that, you have to keep your eye on the ball. One of the toughest things that we have to do as we think about the future is sticking to our plan.
Now, you may not remember this but the NDP government, from 1996 to 2001 had five separate financial plans. Every year they’d lay out a plan, every year they wouldn’t meet it, and every year they’d have to create a new one, a new title, a new objective, a new whatever.
We have not done that as a government because you have to create a sense of stability and confidence in outside investors and the people that live in the province. We laid out a plan, and what we’ve done is we’ve been able to outperform that plan over the last five years.
But I want to be clear about this: it’s not government that outperforms a plan; it’s the people of the province that outperform a plan. When we set goals and objectives for ourselves, it’s people that grab the ideas and say yes, let’s reach for the best that we can be, and they outperform it.
The forest industry that’s investing hundreds of millions of dollars, the tourism industry that is investing in literally dozens of different resort opportunities in every part of this province, the health care professionals that have been willing to step out front and create a health care system that’s been recognized by the Conference Board of Canada as the best health care system in Canada: those people are the leaders, those are the people who have made such a huge difference over the last five years.
I can tell you when I hear the commentary leading up to a budget and coming out of a budget it’s quite interesting because, at the end of the day, the challenge that faces a Finance Minister is that everyone’s got a favourite. There’s a favourite tax we should eliminate. Is there anyone in the room who wouldn’t like to eliminate all taxes? Well, we’re not going to do that. There’s another favourite: let’s not have any debt in the province. Of course, that would be great.
But when you decide that, you have to decide which hospitals you’re not going to build, you’ve got to decide which roads you don’t need. I haven’t heard anyone say they want us to reduce services. They want increased public health services, increased education services, increased post-secondary services, increased training processes, increased transportation infrastructure, increased hospitals, increased schools, increased universities. When was the last time you actually remember reading something that said it’s time for the government to cut dramatically back on its services? It doesn’t happen.
So part of what we have to face as we look at the budget is we have to recognize that we are a small, open economy. So as you look at the budget and the plan that’s been laid out by the province, you’ll see there that this year we’re anticipating a significant surplus. I want you to hear this about the surplus, though: there’s a lot of that surplus that wouldn’t be there without what’s happened in natural gas prices.
When people say we should plan to spend all the surplus, like they did in the late nineties, you have to consider that a one-dollar shift in natural gas prices either adds or subtracts $300 million from the government’s coffers. Now, in December of 2005 natural gas prices were $14 and some odd cents; today they’re $7 and some odd cents. Think of what that means if you annualize it. Think of the challenge that presents to a Finance Minister as she looks out and says: what can we depend on? Because this is a government that does believe in balanced budgets. This is a government that does believe in financial accountability. This is a government that does believe in fiscal stability. We are going to stay with that, and we’re not going to pretend that when you’re at a peak, it’s a new plateau. It’s a peak; it’s the highest it’s been. There’s not much chance it’s going to stay up at 15 bucks. We know that. It’s already down to seven. We hope it’ll stay between six and seven. Just think of this: if it falls to five, $600 million comes out of what we have projected, right now, for next year as a surplus.
We have a $600-million surplus next year plus an $850-million forecast allowance. It’s because of that volatility, that we have to plan that in. And we’re going to stick with the plan. No matter how much we’d like to move away from the plan, we have to stick to the plan. That’s why our credit ratings have been improved in British Columbia; that’s why we have stability; that’s why we have investment. That’s what we’re going to continue to do.
Everyone has a favourite, as I’ve said. In government we’re concerned about our debt, and we’re going to have to work to reduce debt. But I want you just to take a look at what’s taken place with debt over the last number of years. There’s been a dramatic decline, from 27 per cent to 20.8 per cent in the provincial debt-to-GDP ratio. We’re going to continue working to lower our debt.
But sometimes we do have to invest as our population grows. And we have become a place where people want to be again. I know we all remember the nineties when people were leaving; our kids were leaving; the tradespeople were leaving. You know what? They’re coming back.
Unfortunately, it’s hard to bring those trades people back, which is one of the reasons we’ve expanded the training budget.
But we’ve seen a net gain of over 16,000 people from other provinces. And our population has grown over 170,000 since we were elected as government. Our province is starting to grow again.
That growth creates demand. That demand may be in different places than it’s been in the past; so we have to plan out for the long term and say how can we meet the needs of those people?
We have said quite specifically that one of the things that’s critical for us is to keep our eye on taxpayer-supported debt. So again, we’ve committed to the continued downward trend of taxpayer-supported debt. The ratio of taxpayer supported debt to GDP has gone from 21.3 per cent in 2003-04 down to 15.4 per cent in 2008-09. That’s a very important measure. It’s a measure that’s used by rating agencies. Taxpayer-supported debt is a critical measure for us, and we intend to continue it moving down.
But for those who say we should eliminate the debt, we should be aware of the fact that this government, at least, is going to have to invest. We’re going to have to invest in capital plans. We had a huge capital deficit that was built up through the 1990s in roads, in hospitals, in post-secondary education.
We’re going to have to look at new ways of structuring our capital investments, to minimize the impacts, the risks, and the costs to taxpayers. That’s why British Columbia has established Partnerships BC. We actually have become a national leader in providing services and value to taxpayers, and everybody else seems to understand that except for the folks that live in British Columbia. I can tell you this: we’re going to keep using Partnerships BC because that’s where we’re going to get great value for people in the long term in this province, and that’s our goal.
It’s critical for us to recognize that the public services that we provide are critical to all of us. The public servants in British Columbia have done a great job over the last four and a half years. The job that’s been done is not done by politicians alone. We can lead; we can set goals; we can set objectives. It’s the public service that has stood up and actually been creative and thought of how they can make sure that our province is leading the country. And they’re doing that in jurisdiction after jurisdiction. Whether it’s the solicitor general ministry and what we’re doing in integrating police forces; whether it’s the health ministry and what we’re doing to try and make sure we have a comprehensive health plan, that goes from where we are to where we may be; whether it’s education or post-secondary education, with the largest expansion we’ve ever had, our public servants have actually led the way.
So you’ll know from this budget that the largest single commitment we made is to the public sector. The public service is important to us.
But I want everyone to understand this, because there are some difficult negotiations now. It’s not as easy as it was before because we’re going to look at what market comparators are, we’re going to look at different responses in different parts of the public service.
But just think of what we’ve done here. We’ve set aside up to $6 billion for the negotiating framework. I guess I’m never surprised anymore when people say that what we’re trying to contribute to the public service is never quite enough, according to some of their leaders. One out of every two dollars of fiscal room that we think we can have over the next four years, we have earmarked for public sector wage negotiations.
We’re trying to get those negotiations done. We’ve provided for a billion dollars from this year. Now where does that billion dollars come from? I mentioned natural gas to you earlier. We have a windfall here which we’re willing to share.
If we don’t, in fact, come to resolution, those dollars go directly to paying down debt. British Columbians will benefit from that in the long term; there’s no question about it.
But we do think it’s fair to look at the public sector and all the work they’ve done and say, look, we want to share some of this benefit with you.
But we do believe in generally accepted accounting principles. We’re recognized for that as well. We do believe that we have to follow through with what the auditor general has told us. So if we don’t have that upfront negotiated settlement in place, those dollars go directly to debt.
Then, there’s $4.7 billion that’s available over the term of the agreements, which we’d share out. On top of that, we’re saying we’re looking for a four-year agreement. We know that’s a longer term than normal; so there’s a $300-million amount that we’ve set aside for that.
I just want to put this in context, because it goes back to what I was saying before. We make choices. Now, frankly, I’m pleased to be in a position where we can make a choice today. When we were elected, there were no choices. We had to get our costs under control; we had to get the way the government was running under control; we had to eliminate deficits, and that eliminates a lot of choices. But we’ve got choices today. We’ve chosen to put resources toward the public sector.
But when you hear over the next few weeks that we haven’t done enough, I would like you to think of this. In the last year of the framework, the total annual compensation for increases in the $4.7-billion amount is $1.965 billion. That’s a cost every single year, going out. Put that in context: that’s the equivalent of a 4 per cent reduction in PST. The $6 billion that we’ve allocated for this framework over the next four years is the equivalent of building two Gateway projects: the South Fraser bypass, the twinning of the Port Mann Bridge, the expansion of the Pitt River Bridge – two of all those. Six billion dollars is a lot of money.
We’ve tried to be fair and reasonable to our public sector workers, and we’re going through these negotiations. I’m very hopeful that we will manage to find resolution by March 31.
One last contextual piece for your information because I want you to remember this as you go through the next few weeks and hear about what’s happening. The total tax reductions that we provided between 2001 and 2005 are $1.6 billion. Because the economy is starting to work, we’re ready to balance that off and be fair and reasonable with the public sector.
Some people have told me: you’re not being reasonable; you’re being too fair. I think it is fair because it provides a stable, sound foundation for us to move to the future. It’s that balance that allows us to move ahead with other initiatives that we’ve outlined in this budget: like the $733 million in total tax relief over the next four years, including $424 million in new tax reductions.
People have said: Well, you should have done more here or more there. We actually established a competition council last year to say: come back, and give us your advice on how we can be more competitive. And when you leave the room today, I’d like you to remember two specific words: competitive and productive.
We’ve said to the competition council: give us your advice. We’re going to work with them over the next year. But the great work that’s been done over the last four years can be eroded quite quickly if we do not maintain our competitive position and if we don’t increase our productivity in the province.
We’re going to come to you and ask for help; we’re going to come to industry sectors and ask for help; we’re going to look across British Columbia for help
