Dix’s plan to scrap balanced-budget law causes few ripples

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In his efforts to build a rapport with the business community, B.C. NDP Leader Adrian Dix hasn't gone out of his way to talk about his intent to tear up the province's balanced-budget law. But his plans for scrapping the legislation, revealed in an exchange with reporters last week, is not proving to be the setback that his political rivals would like it to be.

B.C. Finance Minister Mike de Jong said Mr. Dix revealed "an ultimate lack of respect for taxpayers" when the New Democratic Party Leader said he doesn't support the province's balanced-budget law. The law was twice amended by the B.C. Liberal government to allow for deficit budgets. Mr. de Jong is now seeking to meet the legislative target in the February budget.

"The legislation isn't important, because it can be changed," said John Winter, president of the B.C. Chamber of Commerce, in an interview on Monday. "It's a government management strategy that is required, a public commitment to do something and follow through on what they say they will do."

Jock Finlayson, chief economist for the Business Council of B.C., said his organization supports balanced budgets but the law itself is not the critical issue.

"Obviously the law has not been binding," he said Monday. "If the province had been delivering balanced budgets every year, then the statement by Mr. Dix might have elicited more of a reaction from business circles."

Mr. Dix has been meeting with business leaders around the province to try to allay fears of what a return of NDP government might mean for the economy if he wins the election in May, 2013. When pressed by reporters last week about his intent around balanced budgets, he said he would not be bound by the current law.

"You have to have a plan to reach balanced budgets and that means in good economic times, you better have surpluses," Mr. Dix said in an interview Monday. "The goal clearly is to balance."

While the business community has long argued for balanced budgets as a hallmark of good fiscal management, there is now concern that outside factors, such as the collapse of natural gas prices and the slowdown of growth in China, could make such a target unrealistic in Mr. de Jong's coming fiscal plan.

On Monday, Mr. Winter spoke at a pre-budget consultation hearing, saying a balanced budget should be the target. "A requirement for balanced budgets holds governments' feet to the fire and sends a clear signal to international investors that B.C. is a safe haven in a troubled global economy."

But in an interview, he also argued that the province can't just "go to the tax trough and find more" if revenues collapse right now. In other words, the budget shouldn't be balanced at any cost.

Mr. Finlayson's organization has not yet decided what it will say in the budget consultations. "We would be leaning in the direction that says, provided the economy hasn't gone completely in the tank, that the government should be striving to balance the budget," he said.

He added that the budget law has served a purpose, but only in political terms. "I wouldn't say the law means nothing – if there is a balanced-budget law, it creates a problem for any government that wants to move away from it." Mr. Dix needs to explain how an NDP government would maintain that pressure, he said. "If the balanced-budget law is eliminated, fair enough, but what is the fiscal policy look like then?"