By Kevin Falcon
Minister of Finance
There’s an important story to tell about B.C.’s record of fiscal prudence that often gets lost in the daily political coverage. In a world filled with “who’s up and who’s down”, we need a clear perspective on what we’ve accomplished and how we measure up in the global economy.
I’ve just come back from meetings in North America’s financial centres. When I tell the B.C. story, investors are impressed by the turnaround in B.C.’s economy and provincial finances since 2001, and how that turnaround has helped us navigate the recent global economic turbulence.
This history is backed up by major credit rating agencies, which have just reported their annual assessments of B.C.’s performance and outlook. All three major agencies affirmed their credit ratings for the Province of B.C., including triple-A ratings-the highest possible-from Standard & Poor’s and Moody’s Investors Services.
At a time when governments around the world struggle with massive debt and deficits and are earning credit downgrades, B.C. stands out with a record of exceeding our budget targets in 10 out of 11 years.
The rating agencies cited B.C.’s record of fiscal discipline, coupled with one of the most competitive tax rates for residents and businesses in Canada, and the province’s shifting trade mix toward Asia rather than North America, as strengths of B.C.’s fiscal and economic performance.
Sometimes we forget that for many years British Columbia didn’t have a strong credit rating.
When we formed government in 2001, B.C. had just finished one of the worst decades of fiscal management, had received multiple downgrades, and was one of the least competitive provinces with high taxes and regulation.
We were elected to fix our economic situation, and we did. Our strong fiscal management received outside validation, and by November 2004 B.C. had received the first of seven credit rating upgrades.
Why should that matter to you? Because our triple-A credit rating saves taxpayers millions of dollars a year in government borrowing costs. Every dollar we don’t pay in interest is one we can invest in public services or in paying down debt.
A triple-A rating also sends a powerful message to investors looking for stability and certainty in an uncertain world. New investment is key to protecting and creating jobs in every region of the province, which in turn supports the public services British Columbians want.
How did we earn a triple-A credit rating? Just like any B.C. family would for its own finances, we focused on the fundamentals: reducing spending and paying down debt. We also looked at how we could best keep companies and investment in B.C.
We reduced the general corporate income tax rate five times, for a total reduction of almost 40 per cent since 2001. For small business owners and entrepreneurs we increased the small business threshold from $200,000 to $500,000. We reduced red tape by over 42 per cent to free up the private sector. For families, we reduced income taxes by 37 per cent. What’s more, we did it while protecting investment in health care, education and social services. The economy recovered and benefitted from increased trade and natural resources. And we used revenues from a strong economy to pay down debt.
We also made strategic investments with partners in projects like the Pacific Gateway, that are paying off in diversified trade, stronger market connections, and jobs for British Columbians.
The benefit of those investments to our province’s economy were underlined by Standard & Poor’s this week, when they highlighted the benefit of B.C.’s role as Canada’s gateway to Asia, giving our economy significant wealth and diversification, and shifting B.C.’s trade mix towards Asia to balance the effect of the slower North American economy.
Now more than ever, governments that manage their finances well are rewarded, and those that don’t are penalized. This is why our government remains committed to balancing the provincial budget in 2013-14 through continued fiscal discipline.
We’ve earned our triple-A credit rating through years of hard work. British Columbians can be proud of what we’ve accomplished together.
Connect with the Province of B.C. at www.gov.bc.ca/connect
