For most of her nearly two years on the job, B.C. Premier Christy Clark has been criticized for failing to present a vision for the province. Now just months before British Columbians go to the polls, she is staking her party’s re-election chances on a big, bold idea that bets the farm on B.C.’s resource sector.
On Tuesday, Ms. Clark’s Liberal government unveiled plans to create a B.C. Prosperity Fund, modelled very much on the Heritage Savings Fund started by former Alberta premier Peter Lougheed in 1975. But instead of filling its coffers with oil money, Ms. Clark envisions it will one day be filled with billions from the natural gas industry.
Ironically, the announcement comes as Alberta struggles to cope with an uncertain future, thanks in part to the province placing its entire economic trust in the oil sector. The price of Alberta crude has plunged in recent months, leaving an indelible red mark on the province’s books. Meantime, B.C. has been put on watch by at least one major credit rating agency concerned about debt levels that have recently climbed, in part because of lower-than-expected tax revenues from resource development.
The Premier’s plan was revealed in B.C.’s Speech from the Throne, which, from a news perspective, was one of the thinnest in ages. It is Ms. Clark’s plan to run on a balanced budget, which will be tabled next week. Given the somewhat fragile state of the province’s finances, this balanced-budget promise has consequences.
There is little money available to make the kind of vote-friendly offerings one usually sees a government dangling before the electorate in the run-up to an election. The Throne Speech was devoid of any. Ms. Clark’s campaign platform will focus on job creation and responsible stewardship of the economy. Balancing the budget is a key part of establishing the government’s credentials in this area. And so, it would appear, is the vow to create a Prosperity Fund that the government says would be called upon to – among other things – pay down a cumulative provincial debt that sits at about $56-billion.
In the short term, however, it will be used primarily to help get the Liberals another term in office.
Given how the rest of Canada has always looked longingly at Alberta’s Heritage Fund, Ms. Clark’s pledge to begin something similar in B.C. is sure to be well-received in many quarters. But as is the case with many of the Premier’s announcements, the question is asked: Is it good policy or just good politics? Perhaps more to the point, is this idea based on sound economics or the kind of pie-in-the-sky metrics that formed the foundation of her recently announced – and quickly dismissed – plans for a 10-year labour agreement with the province’s teachers?
The numbers that form the basis of the Prosperity Fund proposal look impressive enough. The Liberals insist that liquefied natural gas development will trigger about $1-trillion in cumulative gross domestic product over the next 30 years. Of this, more than $100-billion would flow into the fund. This, we’re told, is based on the most conservative estimates of the number and size of LNG plants to be built in the province and the price of natural gas over that period.
But three decades is a long way out. Even a few years can be, as the Alberta government is discovering. B.C. has already been battered by lower-than-expected revenues from natural gas production. It could happen again. And again. LNG competitors like Australia could beat B.C. to lucrative markets in Asia. There is a lot of uncertainty and a lot of if-everything-goes-according-to-plan belief underlying the government’s forecasts.
The Prosperity Fund is a wonderful idea but it is nothing more than that right now – an idea. There will be no legislation introduced to support it before the election, so we will have no idea how it will actually work or what, if any, safeguards would be put in place to protect it from being raided by governments needing to pay for mistakes or pet projects.
In the Throne Speech, Ms. Clark’s government held out the prospect that such a trust could one day be used to eliminate the provincial sales tax. In other words, the kind of tantalizing promise that is pure gold on the campaign trail. At this rate, the Premier could soon be holding out hope that her rainy-day reserve might one day be used to buy everyone in the province a new car.
Right now, it is the Premier’s hope it will provide her with the kind of big, feel-good brainstorm that resonates with voters. And in this case, there does not need to be a penny in it for her to reap some electoral rewards.