VICTORIA - The B.C. Liberal government delivered a tight provincial budget Tuesday, signalling it is headed into a year-long campaign to convince voters it is the party that can deliver fiscal responsibility while still doling out some modest goodies.
The budget promises the books will be balanced by the end of the next year, an effort to allow the party to head into the May 2013 provincial election with its record of managing the economy somewhat burnished after some bad years, including the disastrous repercussions of implementing and then backing out of the harmonized sales tax.
To get there, Finance Minister Kevin Falcon has promised to reduce the growth of health-care spending to 3.2 per cent by the end of 2015. That compares with an almost five per cent increase between 2010 and 2012 and a seven per cent increase in the three years prior to that.
He broadly hinted his government will turn away from its groundbreaking carbon tax, an environmental legacy of former premier Gordon Campbell that was approved by B.C. voters during the 2009 election when the Opposition New Democrats ran against it.
And he said a proposed tax cut for small businesses would not be implemented and larger businesses may have to pay higher corporate taxes if the economy doesn't improve.
The budget Falcon tabled forecasts a deficit of $968 million this year and a surplus of $154 million in 2013-2014.
The deficit for the budget that wraps up the current 2011-2012 fiscal year on March 31 is forecast to hit $2.5 billion, better than the $3.1 billion deficit Falcon projected last fall.
"Keeping British Columbia's fiscal house in order does mean some tough decisions in the short-term," Falcon said during his speech to members of the B.C. legislature. "But consider what's at stake here. It's our future -- the future of this province, and the future of our people."
He said the Opposition New Democrats are not taking heed of the economic turmoil around the world and plan to introduce tax-and-spend programs that will only increase the provincial debt.
"That's the wrong direction," said Falcon. "The lesson is clear: the tax, spend and borrow approach is not just wrong. It is potentially catastrophic."
But Falcon's budget does include tax increases, along with tax breaks aimed at the elderly and families.
He said medical services premiums will rise by four per cent -- about $5 a month for a family of three -- after three straight years of six-per-cent increases.
Falcon said the government's commitment to balance the budget has reached the point where he is prepared to raise business taxes, actions once considered unheard of for the free enterprise coalition.
The 2.5 per cent small business tax, promised to be eliminated as part of the failed attempt to win the HST referendum, will stay and only be reviewed when the books improve, he said.
Falcon said he is prepared to raise the general corporate income tax rate to 11 per cent from 10 per cent in April 2014 if the budget situation doesn't show signs of improvement.
"It underscores how serious we are about meeting our target and our requirement to balance the budget in 2013-2014," he said in a pre-budget briefing with reporters. "We've said we don't want to have to do it, but we've put it in (the budget). We felt it was important to signal to everyone they have to do their bit."
B.C. Business Council executive director Jock Finlayson said raising corporate taxes is not what businesses want to see from the Liberals, but he's prepared to stomach a temporary increase.
"It is not something my community is going to welcome," he said. "But in the grand scheme of things, it's a modest step."
The carbon tax was implemented in 2008 as part of a goal to reduce greenhouse gas emissions by one third by 2020
"We're proud in British Columbia that we were leaders," Falcon said.
But he added: "We had always anticipated that others would follow us down this path. That didn't happen. Because of that, we think now is the time to say no further increases (in the tax), and lets have an opportunity to have input from British Columbians."
Environmentalists said putting the carbon tax on hold is a step backwards for the province.
"We're missing an opportunity and a vision," said David Suzuki Foundation spokesman Ian Bruce.
Falcon introduced a series of family-oriented tax breaks aimed at new home buyers seniors and families with children.
First time, new, home buyers will be eligible for a bonus of up to $10,000. Seniors will be eligible for a home renovation tax credit of up to $1,000 and families will be eligible to tax credits for arts and sports programs for kids.
Iglika Ivanova, a B.C. Centre for Policy Alternatives spokeswoman, said the budget and tax credits do nothing to help the record numbers of B.C. families and seniors living in poverty.
