In an era where taxes have been demonized, BC’s green 2008 budget is newsworthy for its introduction of a new tax on greenhouse gas emissions. But there are some important shortcomings in the plan, and in the rush to green, there is little in the budget to address many other priorities.
A carbon tax is laudable in that it signals to businesses and consumers that the government is serious about climate change, and that prices for carbon-intensive goods and services are going to rise.
Over time, it is likely to influence decisions by businesses purchasing new capital equipment and consumers purchasing new vehicles, furnaces and appliances. But other complementary policies, such as regulations and hard caps on emissions, will also need to be introduced.
A major concern with carbon taxes is their impact on low-income families. The budget addresses this by recycling some of the carbon tax revenues into a low-income tax credit. This will piggyback on the GST credit, and is worth a maximum of $100 for adults and $30 for children.
This seems reasonable for the first couple of years, and may make many low-income families better off. But the tax credit is indexed to inflation, not to increases in the carbon tax. The carbon tax is set to triple by July 2012 to $30 per tonne, but the tax credit will only increase by about 6%. A few years down the road, we may have a system that punishes those who have contributed the least to climate change.
In addition to the carbon tax are $1 billion in expenditures over four years towards meeting BC’s climate action plan. A long list of items touted in press releases going back to the 2007 Throne Speech are now in the budget.
However, increasing subsidies to the oil and gas sector, and promotion of highway expansion through the Gateway program, stand in stark contradiction to the government’s climate action plan. These must be tackled head-on if BC is to meet its emission reduction targets.
A concern not addressed in this budget is the cost to public service bodies like hospitals, schools and universities, which are now obligated to become carbon neutral by 2010. The potential costs for schools and others are huge, yet remain unfunded by the province. Administrators are currently scrambling to get plans in place.
Masked behind the pages of green, however, is a status quo that leaves a lot to be desired. Increases in health and education are sufficient for services to keep moving along as they have been. But no major funding increases that would reduce class sizes or build out community health care were tabled. Similarly, no action has been taken to expand much-needed child care spaces.
One piece to keep an eye on is a special account in health care for so-called “patient-centred funding” pilots – meaning hospitals would be paid per procedure, rather than getting stable block funding. This move is likely to increase administrative costs, and it is not clear what this means for patients with complications that cost more than the “average” paid by the government. In the UK a variant of this model has been a disaster.
Social services, never a strong point with this government, again get the short straw. British Columbians are deeply concerned about abject poverty and homelessness in a wealthy province. With the 2010 Winter Games less than two years away, urgent action is needed. Yet, Budget 2008 allocates a weensy $33 million to keep shelters open 24-7, with no new money to actually house the homeless.
In contrast, the 2008/09 budget for the Olympics is about three times this amount. Sadly, there is no indication that BC will follow other provinces in developing a comprehensive anti-poverty plan.
This is a huge disappointment given that the government has lots of money tucked away between the pages. Even after accounting for $1 billion in contingencies built into the budget, there is much more available. Inexplicably, 2008/09 revenues are stated to fall by 2%, even though GDP growth is expected to remain relatively strong, at more than 4%. Expect the 2008 fiscal year to close with another whopping surplus of $3 billion or more – not the $50 million widely reported in the media.
All totaled, this budget takes an important step forward on climate change. But it is a shame the same vigor for targets and timelines cannot be brought to bear in areas like poverty reduction, homelessness, child care and education.
Marc Lee is Senior Economist in the BC Office of the Canadian Centre for Policy Alternatives.