How the B.C. Liberals, like federal Tories, want to shrink government

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Bill Bennett, the cabinet minister responsible for the "core review" of the B.C. government, made his first progress report in Victoria on Tuesday morning, announcing two Crown agencies will be folded into the civil service.

This is Round Three of austerity for the B.C. Liberal government, which took power in 2001. The changes announced Tuesday will yield savings of $6.6-million – still well short of Mr. Bennett's target to harvest $50-million in cuts.

"There isn't a lot of low-hanging fruit out there," he acknowledged.

But his government, determined to deliver a balanced budget on the eve of the election last spring, set ambitious targets – per capita operating expenses are set to shrink this year, after inflation and population growth are taken out of the picture. To meet that election commitment, Premier Christy Clark's government needs to uncover new savings.

The first round of fiscal restraint was announced shortly after the Liberals took power in B.C. In 2002, the job and service cuts prompted one of the largest demonstrations in the provincial capital's history – an angry affair where an effigy of the premier of the day, Gordon Campbell, was hung from a tree.

When the recession hit in 2008, it turned out the Liberals had drifted from the tough fiscal agenda that had first landed them in power. More belt-tightening ensued, although with a muted response from the public. The realities of the global economic crisis were more persuasive.

But now Mr. Bennett is on the hunt once again for ways to make the federal Conservatives look profligate by comparison.

The Tories are projecting that by 2015, they will have shrunk the federal government to its smallest size in 50 years.

The B.C. Liberals – a coalition party of the centre-right in British Columbia – would like to have similar bragging rights, and they have been making progress. When they took office, operating expenses of government were 22.3 per cent of the province's gross domestic product. In the last fiscal year, government spending compared to the provincial economy had crept down to 19.2 per cent.

But comparing the two levels of government isn't an easy trick, warns Jock Finlayson, the chief economist for the Business Council of B.C.

"It is easier to shrink the federal government, in a broad economic sense, than a provincial government," Mr. Finlayson said. That is because the provinces deliver more labour-intensive services, plus there is "the hard political reality that provinces typically are seen as more accountable for the kinds of things voters care about most." Cuts that are felt in health care, schools, roads and social services, for example, are much more likely to draw a mob of protesters to the lawns of the legislature.

Still, Helmut Pastrick, chief economist for Central 1 Credit Union, believes the province is heading into a tough new round of restraint.

He likes to measure government's performance by its operating expenses on a per capita basis. Once economic growth and population growth are taken out of the equation, spending is set to shrink this year, next year, and the year after that.

That will likely require the kinds of service cuts that will be felt by the public. "These austerity measures come at a social cost, some will argue," he said.

The two agencies brought into government on Tuesday are small in scope. The Provincial Capital Commission and the Pacific Carbon Trust will continue their work, their staff are likely to be absorbed into the direct civil service. They just lose their free-standing status.

But more cuts need to be made, and Mr. Bennett said Tuesday there are still tough measures ahead. "This is a modest start."

Justine Hunter reports on the B.C. legislature in Victoria.