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B.C. deficit jumps after HST rejection

The defeat of the harmonized sales tax has nearly tripled B.C.’s deficit forecast for the current fiscal year, doubled it for next year, and left a $458-million gap for 2013 when the B.C. Liberal government has committed to balance the budget and call an election.

Finance Minister Kevin Falcon revealed the latest projections in the province’s first quarter economic update last Thursday.

The ministry calculates that scrapping the HST will cost the provincial treasury $2.2 billion over three years, including $700 million less revenue once the old provincial sales tax is reinstated.

Further revenue reductions are expected in later years before economic growth makes up the sales tax revenue.

Falcon said he will be traveling the province this fall for the annual budget consultation, but he has already heard that the public has little appetite for new tax or fee increases to make up for undoing the HST.

He said the cabinet has not yet decided if the “net zero” mandate for public sector union negotiations will be extended after it expires this December.

But he gave a strong hint to the B.C. Teachers’ Federation and the B.C. Government and Service Employees’ Union, the two largest groups that have not yet agreed to contracts under those conditions.

“I think all we’re saying is that the public sector needs to recognize that in the world we’re in now, this isn’t a good time to be asking for significant increases,” Falcon said.

NDP finance critic Bruce Ralston refused to comment on whether teachers or other government workers should get raises, after his party helped in the two-year effort to repeal the HST.

He said if lower-paid public employees have to sacrifice for Falcon’s cost-cutting exercise, executives in government and Crown corporations should also share the pain.


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