B.C. Liberals name fiscal watchdog to oversee budget

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The B.C. Liberal government has appointed a new budget watchdog in a move calculated to counter public skepticism as the province prepares to unveil a balanced budget.

B.C. Finance Minister Mike de Jong will announce on Tuesday the appointment of Tim O'Neill, former chief economist of the Bank of Montreal, to review the province's budget revenue projections. The Liberals are trying to repair the damage done to their credibility by the yawning gap between their pre-election budget in 2009, and the fiscal reckoning that followed in the months after the vote.

Mr. O'Neill will have 11 days to review the revenue assumptions in the provincial budget, giving Mr. de Jong just a week to make any required changes before he tables the budget on Feb. 19, sources told The Globe and Mail. Mr. O'Neill's findings will be released along with the budget documents.

More broadly, the appointment addresses a long-standing clash between the province's budget cycle and the fixed election dates. In an election year, the auditor-general does not render a verdict on the books until months after voters go to the polls. And both the Liberals and the B.C. New Democratic Party have been dogged by overly rosy forecasts in the lead-up to an election campaign.

In 1996, under the New Democratic Party government, the result was dubbed the "fudge-it budget." Then-finance minister Elizabeth Cull tabled a surplus budget despite internal warnings that forestry revenues were significantly off.

For the B.C. Liberal government, the biggest challenge is the chasm between the $495-million deficit budget it presented on the eve of the 2009 election, and the $1.8-billion of red ink that emerged in the months following the vote.

Going into the last election, the Liberals lowballed the deficit, and cut the traditional revenue cushion. The shortfall that emerged shortly after led to the hasty agreement with Ottawa to adopt the harmonized sales tax.

Last November, Mr. de Jong acknowledged the credibility gap as a major hurdle in convincing British Columbians that his February budget is realistic. Speaking to reporters, he said that massive revision of the 2009 budget after the election still hangs over his work.

"It was big-time wrong," Mr. de Jong told reporters at the time. He has promised to balance the budget in February, but more than that, he said he'll need a "sufficient surplus as to be credible."

Mr. de Jong's budget will present forecasts for the coming three fiscal years, and Mr. O'Neill will review the material supporting the economic and revenue projections for all three years.

"Budgets have to pass credibility with the public, and given the election there is a heightened awareness," a senior government source said Monday. The source said Mr. de Jong is prepared to amend his budget if Mr. O'Neill doubts the finance figures. "We'll make any adjustments as necessary."

Mr. O'Neill will not examine the spending side. The government maintains that it has kept within its targets on that side of the ledger.

The Liberals are determined to balance the budget before heading to the polls in May. They want to differentiate themselves from the opposition New Democratic Party, which intends to scrap the province's balanced-budget law.

But critics, including the Canadian Taxpayers Federation, have suggested they will be skeptical of Mr. de Jong's budget, given the Liberals' record of missing balanced-budget targets.

As well, B.C. Auditor-General John Doyle has fuelled the debate, arguing this year's deficit is bigger than Mr. de Jong claims. Shortly after that accounting spat, the Liberals began to search for a new auditor-general, but recently offered to extend his contract by two years.

Since he left the Bank of Montreal in 2005, Mr. O'Neill has spent two years as "visiting economist" for the Ontario Ministry of Finance, and has also provided consulting for the federal government and the province of Nova Scotia.