VICTORIA, British Columbia (Reuters) - British Columbia will return to a budget surplus in the next fiscal year by clamping down on spending, hiking taxes and selling assets, its finance minister projected on Tuesday in a lean budget that is seen as make-or-break for the Liberals ahead of a May election.
The Canadian province’s annual budget projected a small surplus of C$197 million ($194.69 million) in the coming fiscal year, after a revised deficit of C$1.2 billion in 2012-13.
In the fall, the government projected a deficit in 2012-13 of C$1.47 billion and originally pegged the deficit at C$968 million last February.
It sees a surplus of C$211 million in 2014-15 and a slightly larger C$460 million surplus in 2015-16.
True to comments leading up to Tuesday, Finance Minister Mike de Jong’s budget was thin on pre-election goodies and did not pitch extravagant spending.
Instead, it was aimed at bolstering the Liberal government’s fiscal credentials ahead of the May election in which polls say opposition New Democrats have an edge.
“The numbers themselves speak to the level of prudence that is embedded here,” de Jong told reporters before delivering his budget speech in the legislature.
Over the next three years, total revenue is expected to grow by an average of 3 percent annually, but the budget projects spending will grow by an average of 1.5 percent a year.
The B.C. government is expected to swing to a surplus by finding savings of close to $1.1 billion over the next three years by keeping tight tabs on spending such as slowing health spending, as well as freezes on hiring and management salaries.
Tax changes are projected to generate $1.2 billion over the period, including a hike in the general corporate income tax rate to 11 percent from the current 10 percent, which begins on April 1.
The government will also implement a temporary two-year increase in the personal income tax rate for people earning more than C$150,000, boosting rates by 2.1 percentage points to 16.8 percent beginning January 1, 2014.
Planned property and asset sales are expected to return roughly $625 million over the next two years.
The budget follows the release on Monday of an independent review of the government’s revenue projections by former Bank of Montreal chief economist Tim O’Neill.
He said the numbers were “generally well-founded,” but he called for a more conservative approach to revenue expectations for natural gas. The analysis also recommended moving forward the implementation of the corporate tax hike.
Some stakeholders were skeptical the public would find the budget credible, with some suggesting the Liberals had borrowed from the New Democrats’ playbook, particularly on corporate tax hikes.
As well, still fresh on the minds of most British Columbians is former Premier Gordon Campbell’s promise during the 2009 election campaign that the budget deficit would be a maximum of C$495 million, but it wound up being C$1.8 billion.
“No one’s going to buy this. They’re laughing out there. The whole province is having a good hard laugh and wondering when is this going to be over,” said Jim Sinclair, president of the B.C. Federation of Labour. Sinclair also accused the government of effectively holding a “fire sale” on assets to balance the budget.
Jock Finlayson, executive vice president of the Business Council of British Columbia, said the figures were credible, but the province’s competitiveness may be less attractive given the impending return to the provincial sales tax, the corporate tax hike and other economic factors such as the strong Canadian dollar.
B.C.’s total debt is forecast to reach C$62.7 billion in 2013-14, C$66.5 billion in 2014-15, and C$69.4 billion in 2015-16. Taxpayer supported debt is projected to be C$42.6 billion in 2013-14, C$44.5 billion the year after, and C$46.1 billion in 2015-16.
The budget projects modest economic growth of 1.6 percent in 2013, before rising slightly to 2.2 percent in 2014, and 2.5 percent in 2015.
Reporting by Jennifer Kwan; Editing by Eric Beech