What should be the economic priorities for Premier Christy Clark in 2014?
While Premier Christy Clark aims to create an environment where growth and investment can flourish, little has been achieved since last years electoral victory. If Premier Clark is to help British Columbians obtain the desired prosperity and jobs, her top economic priority should be to make BC the most investment-friendly jurisdiction in Canada.
Heres whats needed.
The first and most immediate task is to ensure the 2014 provincial budget, set to be delivered next month, is balanced. While the latest financial update signaled that the Clark government remains on pace to eliminate the deficit, the challenge for BC is more complicated because the provinces operating expenses are separated from its long-term capital expenses.
In reality, the Liberals are forecasting a balanced operating budget but expect to increase the provinces taxpayer-supported debt by $3.8 billion. To reduce the burden being passed to the next generation, the Clark government should deliver a broad, balanced budget that includes both operational and capital spending, meaning no additional debt.
A second priority for Premier Clark should be an aggressive, purposeful plan for competitive taxes.
Budget 2013 unwisely increased both personal and corporate income taxes, albeit temporarily, to help eliminate the deficit. Unfortunately, the Liberals did not account for the changes in individual and business behavior that these tax increases will bring about. Economic research is clear that corporate and personal income tax hikes discourage investment, business development, work effort, and entrepreneurship.
To improve BCs competitiveness, the best course of action would be to immediately reverse these temporary increases.
The province also needs to develop and implement a plan to offset the marked increase in business taxes associated with the re-introduction of the PST, especially since almost all of BCs competitors have moved to a value-added tax like the now abolished HST, which exempts business inputs and lowers the cost of investment.
Another key priority for Premier Clark should be to reform BCs labour laws. BC is particularly uncompetitive relative to other provinces and US states with respect to the regulation of unionized firms. Indeed, only Quebec has worse labour laws in this regard.
For example, BC does not permit firms to hire temporary replacement workers to continue at least partial operations in the event of a strike. Banning replacement workers effectively increases the bargaining power of unions which already enjoy labour laws titled in their favour. Academic studies have found that employment and investment decrease in jurisdictions that ban the use of replacement workers.
BC would also do well to consider adopting worker choice laws, which allow workers to choose whether they want to join and financially support a union. Currently, workers can be forced to become union members and contribute union dues as a condition of employment.
Evidence from the 24 US states with worker choice laws shows that they increase economic growth and employment. A recent study, U.S. Worker Choice Laws and Implications for British Columbia and Ontario, finds that worker choice laws increase economic growth by about 1.8 per cent and employment by about one per cent in states that have such policies.
Lastly, the success of the economy and the growth in future jobs and opportunities will be closely tied to natural resource policy including energy and mining.
While environmental and First Nations challenges remain, expanding mining and natural gas production and exports will offer significant economic benefits to British Columbians.
The Liberals must propose a concrete resolution to the Pacific pipeline problem whether it is expanding the Kinder Morgan Trans Mountain pipeline or the construction of the Enbridge Northern Gateway pipeline (or both). Pipeline construction is important for our prosperity.
Balancing the budget, tax competitiveness, labour legislation reform and sound policies to harness our natural resources should top Premier Clarks economic priorities in 2014.
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