February 27, 2012

Capital spending takes a small hit in tight B.C. budget

RICHARD GILBERT

staff writer

The 2012 B.C. Budget will reduce capital spending on the construction of basic infrastructure and increase some corporate income taxes, as part of a plan to eliminate the provincial deficit in the next two years.

“Generally, I think it’s a prudent budget that is based on a reasonable forecast,” said Keith Sashaw, president of the Vancouver Regional Construction Association.

“The government is taking steps to ensure there is a strong fiscal environment. Given what is going on in the rest of the world, this is the prudent thing to do.”

Finance Minister Kevin Falcon delivered the 2012 B.C. Budget in Victoria on Feb. 21.

He described it as a prudent and disciplined plan in a challenging world economic environment.

“We made a commitment to the people of British Columbia to return to balanced budgets by 2013-14,” said Falcon.

“We will honour that commitment.”

Budget 2012 forecasts a deficit of $968 million in 2012-13, and surpluses of $154 million in 2013-14 and $250 million in 2014-5.

The latest quarterly figures forecast a deficit of $2.5 billion for 2011-12.

Capital spending on public infrastructure between 2012-2013 and 2014-2015 is expected to total about $19.2 billion.

“There is a commitment to continued capital spending,” said Sashaw.

“The government’s expenditures between 2009 and last year were a response to the economic downturn. The budget recognizes that the private sector will start to step up, which we are seeing signs of, in particular the projects that are going to be built in the northern part of the province.”

The updated forecast estimates that total capital spending will be $7.141 billion for 2011-2.

However, total capital spending is forecast to fall to $7.103 in 2012-2013, $6.03 billion in 2013-2014 and $6.035 billion in 2014-2015.

The Business Council of British Columbia agreed that the 2012 budget is taking a responsible and cautious approach to managing the province’s finances at a time of considerable economic uncertainty.

“The business council believes in balanced budgets and we were hoping that the government would continue with its fiscal plan aimed at eliminating the operating deficit in a timely manner,” stated Greg D’Avignon, president and CEO of the Business Council of B.C.

“While there will be challenges in returning to the Provincial Sales Tax (PST) in 2013, we believe this budget strikes the right tone to position the province as a desired investment location. The combination of sound budget policies and an attractive overall investment climate will serve as a platform for growth and jobs going forward.”

B.C. will return to the PST on April 1, 2013.

The government will raise the HST rebate threshold for new home buyers to $850,000, from the current $525,000, on April 1, 2012.

This means more than 90 per cent of newly built homes will now be eligible for a provincial HST rebate of up to $42,500.

The small business corporate tax rate will be maintained at 2.5 per cent, instead of being reduced to zero, as had been planned for this coming April.

This decision will be revisited after the fiscal situation has improved.

If the fiscal situation worsens, the fiscal plan includes a temporary one-point increase in the general corporate income tax rate to 11 per cent, effective April 1, 2014.

However, the requirement to implement this tax measure will be re-evaluated in next year’s budget.

In addition, the government plans to generate revenue by selling off so called non-strategic surplus assets.

The government forecasts B.C.’s economy will grow by 1.8 per cent in 2012, 2.2 per cent in 2013 and 2.5 per cent per cent in 2014.

Over the next three years, government will contain spending growth to an annual average of two per cent.

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