A contradictory message

UPDATE

Final Report from Select Standing Committee on Finance

The final report from the legislature's Select Standing Committee on Finance, which conducted a series of hearings in September and October to receive public input on the provincial budget, is somewhat contradictory. While encouraging the government to "stay the course" with regard to balancing the budget, in the end the committee makes only four recommendations-all of which call for the government to spend more money!

The final report, which was presented to the legislature on November 15, distills some 300 verbal and written submissions from the 13 public hearings conducted throughout the province into ten main themes, from which the following four recommendations were derived:

* Provide some form of assistance in the 2003 Budget to resource-dependent rural communities affected by government restructuring and the softwood lumber dispute.

* Give serious consideration to providing additional transitional funding for the K-to-12 education system.

* Consider making transportation infrastructure a top priority for capital spending now and in the future.

* Consider raising the current income threshold for the child-care subsidy.

The recommendations are disappointing from the perspective of BC's CAs. As noted in an earlier GR Update, the 11-member legislative committee, chaired by Peace River South MLA Blair Lekstrom, received formal presentations from a number of business groups and professional organizations during the public hearing process, including the Institute of CAs and a number of its individual members.* But despite mentioning the ICABC by name and outlining the key elements of its presentation, the final report ultimately ignores virtually all of the recommendations made by the Institute and individual CAs.

It is especially surprising how little attention is paid to the need for debt reduction and a debt management plan, given that during a committee meeting held in Victoria in October 2002, many committee members-- among them two CAs-reported to the chairman that these were among the clearest of messages received from the public during the hearings and in written submissions.

"Generally speaking, people are happy we're on course," said MILA for Vancouver-- Kensington Patrick along, CA. "I understand that a lot of people are concerned about the cutting of expenditures. However, people are really concerned about the increasing debt, and they need a debt management plan in the budget." MLA for Juan de FucaMalahat Brian Kerr, FCA, singled out the budget as the public's clearest concern: "I'll just reiterate loudly and clearly that it was to stay the course on balancing the budget. I think we heard that from just about everybody that came out there, because they understand the importance of it.... We also heard about setting up a debt management plan...."

Others, like Victoria-Beacon Hill MIA Jeff Bray agreed the public "clearly state[d] that they wanted government to stay the course and to get its fiscal house in order; they did feel a long-term debt management plan was important...."

The committee's deputy chair Ida Chong, CGA, the MLA for Oak Bay-Gordon Head, said: "What came out loud and clear this time around, this being my third year on this committee, was in fact that fiscal responsibility was a concern and that debt reduction was a priority that many people felt should take place, whether it be through a debt management plan or through deficit reduction...."

Better communication needed

Nonetheless, of the ten themes identified by the committee in its report, none focus on these issues. Instead, the report notes that one clear message was: "the government isn't doing a good enough job of communicating its long-term economic vision, or its overall economic plan." Another was that the concept of BC being open for business isn't being "communicated clearly enough to the field offices." The report also identifies the growing gap between rural and urban BCa theme that led to a specific recommendation.

The dichotomy between program spending and debt reduction is noted in terms of the future (a time when the province, theoretically, will have returned to a surplus fiscal situation). But while the four recommendations call for more spending, no specific recommendations are made about either debt reduction or a debt management plan. Nor does anything in the report encourage the Finance Minister and his cabinet colleagues to detail future business tax cuts or harmonize PST and GST (another suggestion from BC's CAs).

Harmonization

It's less surprising that the committee was unwilling to recommend harmonizing PST and GST, as considerable political baggage could be attached to such a move. Still, it's worth noting that at the October meeting, several committee members raised this idea when discussing the messages they'd received during the hearing process. For example, Lekstrom noted: "The issue of harmonization of the PST and GST was brought forward a number of times to our committee. To try and bring something that would allow business and small business to certainly enhance how they do business, enhance the taxation reporting structure and so on....

I think that came out very loud and clear." The ICABC would like to see this complicated issue studied with a view to harmonizing as quickly as possible.

CAs will continue to deliver this and other messages to Finance Minister Gary Collins in the coming future. It's hoped that a debt management plan will be included in the next provincial budget, which will be tabled in the legislature February 18, 2003.

We'll keep you posted.

* As discussed in the November 2002 issue of Beyond Numbers

Copyright Institute of Chartered Accountants of British Columbia Jan 2003
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