Wednesday, July 13, 2011

A fall 2011 - is it one anyone would want to win?

The political chattering class in this province seem to be convinced there will be a fall election, but is this really an election anyone would want to win?

If we do have an election, whoever wins is going to be facing one of the most dire budgetary situations this province has seen in many, many years.  

Factors

  • Getting rid of the HST - the province will owe the federal government $1.6 billion dollars, the province will have to spend a bunch of money to reintroduce some form of a provincial sales tax.
  • Reduction in business investment - loss of the HST will delay investment in lumbers mills and mines in this province.   My rough estimate is that we will see a loss of about $100 to $200 million in government revenue in 2012/13 because of this.  This will rise to more than $500 million in a few years.
  • Loss of the HST will mean a large slow down in the retail sector which will boost unemployment and restrict economic growth in BC. 
  • Public sector negotiations - the teachers are coming up now and others sooner than people expect.    A net zero mandate is not likely to fly again.    I expect that the public sector negotiations will end up at a 2%-4% increase per year for the next few years in publicly supported wages and benefits.
  • The federal government will be making some major cuts in transfers to provinces to deal with their deficit.
  • We have a weak globally economy and beyond oil and gas, mining, and forest products, the BC economy is not healthy.   We are still at an unemployment level this is not ideal.

Whoever wins a fall 2011 election is looking at something on the order of a $2 to $3 billion dollar budget gap. No opposition is going to allow the government live with a large deficit.

Adrian Dix will have the added difficulty of having to deal with the expectations of the left after 10 years of Liberal government.   There will be demands for significant increases in school funding, welfare rates, services for the poor,  healthcare, and more.   He will either have to introduce a dramatically large deficit or deal with a lot of very pissed off supporters.

If Christy Clark wins, odds are she will have as many as 20 or more first time MLAs and effectively have a very green government that has to handle with a budget crisis and this in the face of NDP enraged at having lost the election.

I suspect that whoever wins a fall 2011 election will have no realistic chance of winning the election after that because they will end up being labeled one of the most financially ruinous governments in BC history.    Better to win a 30+ member opposition than government this year.
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