With Vancouver set to welcome the world, it's understandable that Premier Gordon Campbell, Finance Minster Colin Hansen and the provincial Liberal government are focused almost exclusively on ensuring a successful Olympics.

But before the Games kick off this week, Lt.-Gov. Steven Point will deliver a critical speech from the throne that will outline the government's post-Olympic agenda and highlight what can be expected in the upcoming provincial budget.

No budget since 2001 has been as important as the one that the Liberals will deliver on March 2, just days after the Olympics end. Last year the B.C. economy contracted by 2.4 per cent, shed nearly 55,000 jobs and saw unemployment increase from 4.6 to 7.6 per cent. While the economy is forecast to improve this year, we are by no means out of the woods.

Given the economic outlook, it is critical that Hansen deliver a budget focused on economic prosperity characterized by higher incomes, lower unemployment rates, job creation and higher levels of investment. A prosperity budget would strengthen B.C.'s investment climate with the goal of making the province the most attractive jurisdiction in Canada in which to work, invest and engage in entrepreneurial activities.

Most critically, B.C. needs additional tax relief to help attract and retain professional and skilled workers as well as promote and encourage investment and business development.

In fact, a recent analysis by Harvard economists Alberto Alesina and Silvia Ardagna of stimulus initiatives in Canada and 20 other industrialized countries from 1970 to 2007 found that successful attempts to stimulate lagging economies are based on tax relief, not increases in government spending.

Tax reductions worthy of implementation include: eliminating the top personal income tax rate of 14.7 per cent and moving toward a single-rate tax (as is the case in Alberta); further reducing the general corporate income tax rate with the goal of maintaining the country's lowest rate; and increasing the small business threshold to $1 million to help mitigate the tax penalty on small businesses as they grow.

The government will likely use the deficit as an excuse not to reduce taxes. So how do we square the circle to reduce taxes and balance the budget?

The solution is rather simple: The government must reduce spending.

One obvious place to start is health care which accounts for 42 per cent of total program spending in the province and is the largest expenditure item in the budget. Despite continuous rhetoric from special interest groups (i. e., public sector unions) who benefit from the structure of the current system, B.C. could reduce spending and simultaneously improve the state of health care. The key is program reform.

Indeed, other developed nations with universal access health care are able to purchase more health care for less money than B.C. (and indeed Canada generally). The lesson from these nations is for B.C. to adopt two key health policies: competition in the delivery of publicly funded care and cost sharing.

We estimate that cost sharing, requiring patients to share in the cost of their care, would reduce total health care spending by 12 per cent (after accounting for the additional out-of-pocket payments for British Columbians) and government spending by about 20 per cent. International evidence shows that when patients are responsible for some of the cost of their care, they use fewer resources and end up no worse off in terms of health outcomes. Cost sharing would result in a savings of about $3.1 billion in 2010-11.

Another way to reduce spending and improve the state of health care is to change the way hospitals are funded and allow more competition in the delivery of publicly funded services. Moving to activity-based funding in which hospitals would be paid per patient they treat rather than receive a pre-set yearly budget would result in about $735 million in savings in 2010/11.

Introducing just these two sensible health policies could reduce public health spending by an estimated $3.8 billion in 2010-11 alone. Similarly, education and other government services could be vastly improved through program reform, while spending less.

The $3.8 billion annual savings would not only bring spending in line with revenues, it would allow B.C. to enact a multi-year tax-relief plan including many of the reductions highlighted above.

Lastly, a prosperity budget would address the excessive burden of government regulation which decreases innovation, delays the development of products, stifles entrepreneurship and restricts competition. Recent estimates of the cost of regulation on B.C. businesses amount to $4.8 billion a year or 2.5 per cent of total economic output. This does not include the impact of new environmental initiatives being considered such as the proposed cap-and-trade system aimed at reducing greenhouse gas emissions. Reducing red tape and scrapping pet environmental initiatives should be a key priority in the 2010 budget.

After years of budgets that have focused on narrow interests, it's time the government put forth a renewed vision that focuses on promoting prosperity. A budget that reduces spending, reforms key government programs, balances the budget and reduces taxes and regulations would provide the necessary incentives for individuals and businesses to engage in productive activities. Most importantly, it would ensure a bright future for all British Columbians. Let's hope Campbell and Hansen make it happen.