Monday, October 08, 2007

Debt Reduction should be BC's #1 priority

BC's 2008 budget priority should be legislated debt reduction.

To be sure, recent surpluses have allowed the government to reduce the debt. But it has been debt reduction by accident rather than design. In fact, the government is forecasting B.C.'s debt to increase by 20%, to almost $40 billion, by 2009/10.

Alberta legislated a debt reduction plan in 1995, stipulating that the province’s entire surplus would go to debt reduction. Predictably, the government came under tremendous pressure to abandon debt repayment and spend the surplus dollars. And while the government caved in part, a new Act passed in 1999 still required 75 per cent of all surplus dollars be put toward debt repayment. By 2004, the debt was essentially gone.

In B.C., we currently use about 7% of provincial tax revenues to fund the debt, to the tune of about $6 million dollars per day. Think about that, $6-million dollars a day that could go into health care, environmental protection, infrastructure development, or better yet, left in the pockets of taxpayers!

The government has brought B.C.'s debt back down to 2001 levels, and made good progress on tax reductions, but confused budgeting priorities could leave a legacy of debt to future generations. It is time to reorient priorities and create a legislated debt reduction plan.

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