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Auto insurance, the HST and BC Ferries are examples in which the tax cycle played out in B.C. and saw rates and charges for government services go up soon after an election. (DARRYL DYCK/THE CANADIAN PRESS)
Auto insurance, the HST and BC Ferries are examples in which the tax cycle played out in B.C. and saw rates and charges for government services go up soon after an election. (DARRYL DYCK/THE CANADIAN PRESS)

B.C. Politics

Rate hikes a regular part of election-cycle game Add to ...

Before the provincial election last May, the B.C. Liberal government stepped in on behalf of taxpayers and averted double-digit rate hikes for BC Hydro power. Now, the public is due for a post-election wakeup call as the Crown corporation once again turns to its customers to address steep revenue shortfalls.

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Energy Minister Bill Bennett is trying to wrestle down a threatened 26-per-cent rate hike. The final result, he concedes, will be unpopular as the Crown corporation seeks to address a $1-billion increase in costs.

It’s a familiar scenario that has played out over many an electoral cycle in B.C. With a little creativity, the rising cost of paying for government services – through taxes, fares or fees – can often be postponed to a more auspicious time. That time typically comes soon after election day, allowing taxpayers a chance to forgive and forget before the next time they head to the polls.

Here’s a brief history of the B.C. tax cycle:

The HST

What was said before the election? The B.C. Liberal government gave no indication it was planning to introduce a harmonized sales tax as it headed to the polls in 2009. But then-premier Gordon Campbell boxed himself in when, despite a worsening economy, he promised voters mid-campaign that he’d keep the deficit down to $495-million.

What came to light after? Surprise, surprise, the economists were right. The international financial storms touched down in B.C. To meet Mr. Campbell’s deficit pledge, the province seized on a pot of cash offered by Ottawa. In exchange, B.C. agreed to merge the provincial sales tax with the federal goods and services tax. The deal was announced just weeks after the election.

The fallout: Faced with an unprecedented public backlash, Mr. Campbell resigned, and a referendum eventually forced the government to return to the old provincial sales tax.

The lesson: Some surprises are just too big for B.C. voters to forgive.

ICBC

What was said before the election? A 1991 audit concluded the Social Credit government had perfected the pattern: Increases in insurance rates peaked just after an election, and were smallest just before an election.

What came to light after? The NDP government imposed a 19-per-cent rate increase in 1992, in part blaming the Socreds for suppressing rates. But the temptation to use ICBC as a vehicle to buy votes is still strong: The New Democrats handed out rebates and froze rates prior to the tough 1996 election. That reckoning would come after the B.C. Liberals took power in 2001.

The fallout: When motorists get angry over rate increases, it’s time to find someone else to blame. In 2012, the B.C. Liberal government attacked the Crown for management salaries and perks, and ordered budget cuts. The CEO of the day, Jon Schubert, resigned.

The lesson: After decades of wild fluctuations, ICBC is now promising to soothe customers with a plan to keep annual rate changes within 1.5 per cent in the future – but only after a proposed 4.9-per-cent hike this year.

BC Ferries

What was said before the election? Like ICBC, those double-digit fare increases never land in an election year. But the biggest course correction flows from the NDP’s fast ferries experiment: In 1996, then-premier Glen Clark promised to launch a new shipbuilding industry. Three new ships would be built for BC Ferries at a cost of $210-million, and the cost was fixed “right down to the toilet paper.”

What came to light after? The ships cost $463-million. Beset by technical difficulties and slower than promised, they were eventually sold off at pennies on the dollar.

The fallout: The “fast ferries fiasco” played a role in the near-wipeout of the NDP in the 2001 election. The Liberals used the affair to justify the semi-privatization of BC Ferries in 2003. The new business model has resulted in steeper hikes for the unprofitable routes, and service reductions are still on the table.

The lesson: Leave the prototypes to the private sector.

Follow on Twitter: @justine_hunter

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