British Columbia unveils budget in political vacuum

Tue Feb 15, 2011 6:10pm EST
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By Allan Dowd

VICTORIA, British Columbia (Reuters) - British Columbia introduced a "status quo" C$41.9 billion ($42.3 billion) budget on Tuesday designed to give financial wiggle room to the Canadian province's next premier.

But the package could soon run into trouble if voters overturn a controversial tax deal with the federal government.

The budget projects a C$925 million deficit for the 2011-2012 fiscal year that begins in April, with spending up about 2 percent and total revenue expected to increase 3.4 percent as the province's resource-based economy makes a slow, steady recovery.

The 2010-2011 fiscal year is expected to end with a C$1.26 billion deficit, down from the C$1.7 billion projected when that budget was introduced last March.

The new budget is being unveiled into a political vacuum as the B.C. Liberal government picks a leader at the end February to replace Premier Gordon Campbell, who is stepping down after a wave of voter anger over a new tax policy. The opposition New Democrats are also picking a new leader.

Officials wrote a "status quo" budget, with no major spending to tax initiatives and C$350 million contingency fund, to give "as much flexibility as possible" to whoever takes over a premier, Finance Minister Colin Hansen said.

But the budget and government will face a major test this year, when voters will decide whether to scrap an agreement by Campbell last year to merge the provincial and federal sales taxes and create into a harmonized sales tax (HST) that covers more goods and services.

"It is true if the HST does not survive the referendum there will be increased risks to the plan," Hansen told reporters, adding that scrapping the HST would put the province's economy in "uncharted waters."   Continued...