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Archive for September 14th, 2009

B.C. risks losing $1b in federal cash

with 3 comments

Vancouver Sun

Federal money in Canada does not come easily. It comes with conditions and a timetable.  In this case infrastructure spending intended to boost the economy was authorised for only  “shovel ready” projects that could start straight away and get the money spent, so that the stimulus could be felt quickly. But in  “in British Columbia, … less than 25 per cent of the estimated $1.04 billion in available matching federal-provincial funding [has been] committed to projects so far.” And the UBCM doubts that the province will get its act together in time to get the rest.

The BC Liberal Party ran its last election campaign on promises of spending – indeed much government money (not party funds) was spent on signs all over the province that appeared just before the start of the campaign to trumpet its pet projects – such as the Gateway. They also claimed that they were the only party that could be trusted to run the economy. Their earlier claims to be concerned about the environment being much muted.

What is striking about the present situation is how disorganised they are.  They try to claim that they were taken by surprise by the size of the deficit – orders of magnitude greater than what they claimed at election time. And as if to show how genuine that suprise is, announcements about cuts are made – and then countermanded. And ministers bluster to tv cameras about “tough decisions”.

This one should be really easy. Any child with a grasp of 1st grade arithmetic could do these sums.

Provincial officials, meanwhile, say they are working hard to find a way to match federal dollars in a year dominated by a dramatic economic decline.

I do not see what is hard about this. The rate of return on capital employed has always been very much higher for basic patch up jobs – like fixing holes in the road or repairing crumbling sewers – than new build. The main reasons being that repair is usually much more cost effective than new build, and it also eliminates that very high cost of making good after a catastrophic failure – such as the recent spate of floods in California due to ancient water mains failing.

All the BC liberals have to do is cancel some of their dafter pet projects. For a start, theres $100m set aside for gating Skytrain – a project not yet started, not likely to ever recover it costs and one that carries no downside if it is cancelled. Calling a halt to the SFPR and widening Highway #1 would be a bit more embarrassing, since somehow these got tagged with the “stimulus” fad too – but saves billions. Both will be white elephants once completed – since the previous economic model of running America on credit to buy cheap imported goods no longer works as their credit is no good now – and the cheap oil to run all that will not be around either. They were supposed to have been funded by P3s – and thus less of a drain on government – but that is not happening. So it should be simple to cancel them just by saying they were never budgetted in the first place.

But the greatest savings are simply to end the subsidies thrown at oil and gas. That way these important resources will still be there when prices recover and more government revenue can be earned from them. Trying to accelerate their development when prices are low is stupid.

The sheer level of incompetence on display in Victoria is maddening. How the wool was pulled over so many eyes seems now to be fairly obvious. What is less easy to see is what the rest of us can do about it. For we seem to be stuck with these clowns for another four years.

Written by Stephen Rees

September 14, 2009 at 9:54 pm

Posted in Economics, politics