Budget 2010 advance warning: more government spending cuts will further slow BC’s sluggish economic recovery

In anticipation of Tuesday’s provincial budget, the Canadian Centre for Policy Alternatives warns that further cuts to public spending will impede the economic recovery, which is already expected to be slow and jobless.

“There is no ‘fat’ to trim from public services as BC’s public sector is already among the smallest in Canada,” says CCPA economist Iglika Ivanova. “Recent rounds of spending cuts have compromised much-needed social services and removed a potential source of stimulus at a time when the provincial economy needs all the help it can get.”

Ivanova is the author of BC’s Shrinking Public Sector, a short report released today that shows:

• BC has the lowest level of public sector employment per capita of all Canadian provinces, and
• BC’s government spending has steadily declined since the early 1990s.

Ivanova warns that trying to reduce the size of the deficit by cutting spending is short sighted at best. “There are much more serious problems facing BC than the size of the deficit. British Columbians need their government to come forward with a post-Olympics vision for the province that would articulate a new rural development strategy, and address BC’s persistent poverty and growing income disparities, the lack of affordable housing and the looming climate change challenges.”

“An obsession with reducing the size of the deficit is misplaced and will only threaten the fragile recovery and push vulnerable British Columbians into further hardship,” says Ivanova, pointing out that BC’s deficit is among the smallest in Canada, when compared to the size of the economy (GDP).

“More importantly, BC does not have a structural deficit – our deficit is a temporary consequence of the recession-driven drop in government revenues, and will be eliminated once the economy recovers,” Ivanova adds. “There is absolutely no need to panic about the size of the deficit or our government debt at this point.”

“BC entered the recession with a very low debt-to-GDP ratio,” Ivanova adds, “which means that the provincial government is well positioned to borrow in order to fund the stimulus spending we need and to invest in programs that will have long-term payoffs for BC.”

Ivanova recommends that the BC government take some bold innovative steps on Tuesday with its budget announcement:

• Restore government spending to February 2009 levels at a minimum: repeal cuts to gaming grants and government ministries to ensure adequate funding for schools, literacy programs, services for children and families, environmental protection, arts and culture and other important programs and services.
• Adopt a comprehensive poverty reduction plan with legislated targets and timelines – polling shows that the majority of British Columbians support such a plan.
• Establish a fair tax commission to objectively assess BC’s taxation system. The commission would make recommendations for meeting the government’s revenue needs in an equitable way consistent with our economic development goals.
• Invest in green infrastructure and green jobs. Make BC attractive to employers who are committed to furthering BC’s environmental, social and economic well-being.
• Invest in social infrastructure to ensure that British Columbians are healthier and better educated than ever before, which will increase long-term productivity while also providing better quality of life for all.

For more information or for an interview with Iglika Ivanova, contact Sarah Leavitt at the Canadian Centre for Policy Alternatives, BC Office: 604-801-5121, ext 233, or sarah [at] policyalternatives [dot] ca.