The defeat of the harmonized sales tax has nearly tripled B.C.’s deficit forecast for the current fiscal year, doubled it for next year, and left a $458 million gap for 2013 when the B.C. Liberal government has committed to balance the budget and call an election, according to Finance Minister Kevin Falcon.
He revealed the latest projections in the province’s first quarter economic update Thursday. The ministry calculates that scrapping the HST will cost the provincial treasury $2.2 billion over three years, including $700 million less revenue once the old provincial sales tax is reinstated. Further revenue reductions are expected in later years before economic growth makes up the sales tax revenue.
The news shouldn’t be a surprise to anyone. One of the Liberals’ key arguments for British Columbians to endorse the HST was that, should we decide to reject it, the province’s books would be in sad shape.
The finance ministry now expects the deficit for 2011-12 to be $2.3 billion, up from $925 million in the spring budget. That is mainly due to borrowing to repay the federal government’s $1.6 billion HST transition fund.
The deficit for 2012-13 is doubled to $805 million, and another $458 million must be made up through cost reductions or extra revenue for the government to balance the books for 2013-14.
The HST reversal means the province’s total debt is expected to reach $62.3 billion in the next three years.
What is still particularly rankling about all this is the fact the Liberal government, when foisting the HST upon the province two years ago, said it would be revenue neutral for government.
And that leads us to the question: Was the $2.2 billion accounting error made in 2009 or 2011?