BCBC In The News
BC Local News: Big federal deficit not alarming to Business Council of B.C.'s Finlayson
Critics are worrying too much about the federal government's large projected budget deficit of nearly $30 billion this year, according to a spokesman for the Business Council of British Columbia.
Executive vice-president Jock Finlayson said aggressive stimulus spending is justified given the "feeble" national economy, particularly in oil- and commodity-producing areas, even if that seems out of step with what's needed in B.C.
"I don't find the fact that they're going to be running a sizable deficit for the next year or two particularly alarming on its own," he said.
Finlayson noted $30 billion is equivalent to only 1.5 per cent of Canada's overall economy, measured by its GDP (gross domestic product).
"As long as economic growth is 1.5 or two per cent we'll actually see the debt-to-GDP ratio remain stable (at around 31 per cent) or even inch down a bit," he said.
The U.S. and U.K. are running much larger budget deficits as a share of their economies, he added.
Finlayson is less enamoured of the federal projections for continued big deficits stretching out five years, adding he'd like to see Ottawa wrestle them down towards a balanced budget sooner.
Otherwise, he said, the federal Liberals could be surprised by other economic trouble, such as a recession in the U.S. or a faster-than-expected climb in interest rates.
"If those kinds of scenarios unfolded then we could end up stuck with chronic deficits at the federal level rather than shrinking deficits."
The federal strategy is geared to address the sharp downturn that accompanied the collapse of oil and other commodity markets in other provinces.
That's translated into not just greatly reduced spending by oil and gas companies, but also pipeline, engineering and environmental services companies that do associated work, along with waves of layoffs and rising unemployment.
"This epic downturn in commodity markets is reverberating through a lot of different industries that are part of the resource supply chain."
Business in Vancouver: Budget 2016: Tech sector 'relieved' after Liberals ditch stock option tax plan
[Excerpt] By the time the federal budget came out March 22, the Liberals’ plan to retool stock-option taxation had been dropped entirely after tech leaders complained the plan would make it harder to recruit talent.
Jock Finlayson, chief policy officer at the Business Council of B.C., said the decision aligns with the Liberal government’s efforts to move the economy away from its dependency on natural resources.
“If they’re serious about that, the last thing they should be doing is making it less attractive for highly skilled people to come and work in Canada,” he said.
But Finlayson said he doesn’t think the decision to drop the plan from this first budget means the Liberals won’t retool stock-option taxes further down the road.
“I’m sure this is going to continue to be reviewed as part of this top-to-bottom reassessment of tax expenditures.”
Exchange Rates UK News: Investors are eagerly awaiting the Federal Budget, as this could provoke significant Canadian Dollar volatility as the government announces their fiscal stimulus measures.
With the Bank of Canada (BOC) essentially handing responsibility for boosting the economy to the Canadian government, the Liberal’s first Budget could see significant movement in Canadian Dollar exchange rates.
The government initially announced that they would run large deficits in order to increase public spending, although since then they have had to upwardly revise their deficit forecasts for the next two fiscal years by a considerable amount.
This is not the government’s fault, according to Chief Policy Officer for the Business Council of British Columbia, Jock Finlayson, who explains ‘the economy has deteriorated since they put the election platform together. When they talked about $10 billion deficits, now suddenly it’s much bigger than that, and that’s not the government’s fault.’
Business in Vancouver: Infrastructure promises and growing deficit loom large as federal budget nears
[Excerpt] It’s an example of the jockeying for infrastructure funding that’s expected as the Liberals, back in power for the first time in more than a decade, swap Conservative balanced budgets for stimulus spending and deficits.
Where that stimulus spending will be invested and how big the Liberals’ deficit will be are key issues B.C. economists and budget advocates will be watching for as the government presents its budget during the week of March 21.
“The economy has deteriorated since they put the election platform together,” said Jock Finlayson, chief policy officer at the Business Council of BC. “When they talked about $10 billion deficits, now suddenly it’s much bigger than that, and that’s not the government’s fault.”
In last October’s federal election, voters backed the Liberal plan to run annual $10 billion deficits to stimulate the country’s flagging economy – the opposite of the Conservatives’ insistence on balanced budgets and restrained spending. A centrepiece of the Liberal plan is spending billions on new infrastructure, with an emphasis on transit, attainable housing and child care.
But federal deficits are expected to soar as Canada’s economy worsens along with stalled global markets and a prolonged oil slump.
A February update showed a much gloomier picture than expected: 2016’s projected $3.9 billion deficit ballooning to $18 billion – and that’s before planned additional government spending is taken into account.
“We are comfortable with the government of Canada running budget deficits,” Finlayson said. “I get more concerned when I see things like a report from TD Bank (TSX:TD), which suggested that the federal government was going to run five years, based on certain assumptions, of $30-billion-a-year deficits. That is not something we’re recommending.”
Ivanova and Finlayson agree that, with borrowing rates at historic lows, it’s the right time for a major investment in Canada’s aging infrastructure. But it’s unclear whether the budget will show Canadians where the money will be spent.
“I don’t know if we’ll see infrastructure breakdown, or maybe a framework to guide decision-making,” Finlayson said.
“If so that’ll disappoint some people who are expecting to see a laundry list of very specific projects that are going to be funded for very specific sums of money.”
Vancouver Sun: Better use of data would improve health outcomes in B.C.
[Excerpt] Friday’s conference was the fourth Vancouver edition of CityAge’s Data Effect conference series, Cernetig said, which is aimed at creating a “national conversation” on how to use data that is now collected within health care “that respects privacy, but doesn’t let privacy stop the innovation.”
Cernetig, a former journalist and Vancouver Sun columnist, said CityAge launched the conferences four years ago based on a comment by former B.C. Health minister Colin Hansen that “health care data is a public resource that we’re not using and should be making better use of.”
The conference gathered 170 politicians, public officials, researchers and executives from public agencies and private-sector businesses in the health field to talk about data-based innovations that already exist in areas such as hospital design and personalized health care through gene sequencing.
“The problem is that there’s not enough acceleration on this in B.C.,” Cernetig said. “Other jurisdictions are moving more quickly.”
Some of the hesitance comes from concerns over privacy, but also fear of controversy over how data is used, said Andrew Wilkinson, minister of Advanced Education.
“We still have issue about data sets where we have to be very careful about how we do it to avoid, first of all, legislation, second scandal and thirdly privacy,” Wilkinson said.
Health care spending, at $18 billion a year in B.C., accounts for between 15 and 22 per cent of the provincial economy, but the province doesn’t have enough to show for it in terms of economic development, argued Greg D’Avignon, CEO of the Business Council of B.C.
“What’s the opportunity for government to look at health care as a revenue generator, not just a line item cost,” D’Avignon said.
B.C. is home to a significant body of groundbreaking health research, D’Avignon said, such as the genetic-sequencing work at the BC Cancer Agency (where D’Avignon is a board member), which has allowed oncologists to deliver personalized care.
“What’s the economic opportunity of that, in terms of new companies (or) new drugs that could be developed through trials here?”
Vancouver Sun, Barbara Yaffe: With retail sales booming in B.C., the PST is the gift that keeps on giving
Big mortgages and high rents be damned. British Columbians are shopping their hearts out.
The Business Council of B.C. highlighted the shopping spree recently, noting the total value of annual retail sales in B.C. has surpassed the $70-billion mark, reflecting a 6.8-per-cent surge last year.
“British Columbians have stepped up retail purchases over the past couple of years even as consumer spending in other provinces has generally downshifted,” the council observed.
Indeed, the uptick in B.C. residents’ buying last year was three times the increase nationally.
Ontarians, Canada’s second-most enthusiastic shoppers in 2015, contributed to a 4.2-per-cent increase in provincial retail sales. All other provinces experienced far more moderate gains, with sales actually dropping in both Alberta and Saskatchewan.
In part, B.C. retailers have been benefiting from a drop in cross-border shopping, the result of a weaker Canadian currency, says the business council’s chief economist Ken Peacock.
He notes that the retail sector is “a significant factor underpinning B.C.’s solid overall economic performance.”
To a large degree, an overheated real estate market is fuelling the retail sector. Sales of building materials and garden supplies in 2015 jumped 23 per cent, while furniture stores saw a 12-per-cent increase in sales.
British Columbians, taking advantage of low interest rates, were also out buying cars, with vehicle sales up 9.5 per cent, recording the strongest growth in at least a decade. Perhaps there is a message here for those opposing oil and gas pipelines, and bike-lane enthusiasts.
The shopping bonanza comes despite a broadly accepted notion that Lower Mainland residents — who make up 60 per cent of the provincial population — are feeling pinched by both high housing costs and big consumer debt burdens.
The New York Times: Does a Carbon Tax Work? Ask British Columbia
Ted Cruz says climate change is not happening. Donald Trump says he doesn’t believe in it. Marco Rubio, whose hometown, Miami, is projected to be largely underwater within the not too distant future as ice caps shrink and the sea level rises, argues that government efforts to combat it will “destroy our economy.”
But those views are not widely shared by conservatives elsewhere around the world. Indeed, not that long ago in a not too distant country, a right-leaning party that shares many of the antitax, pro-business beliefs of Republicans in the United States did exactly what its unbelieving candidates so fear.
Their experience shows that cutting carbon emissions enough to make a difference in preventing global warming remains a difficult challenge. But the most important takeaway for American skeptics is that the policy basically worked as advertised.
British Columbia’s economy did not collapse. In fact, the provincial economy grew faster than its neighbors’ even as its greenhouse gas emissions declined.
Perhaps most surprisingly, so did big business. And for good reason. As it turns out, a carbon tax is the most efficient, market-friendly instrument available in the quiver against climate change.
“We were not very happy when it was first announced,” said Jock A. Finlayson, head of policy at the Business Council of British Columbia. Now, “within the business community there is a sizable constituency saying this is O.K.”
Nobody in British Columbia is talking about going that far. But to hit its long-term target, the advisory panel concluded that the tax must start increasing again in 2018, at a rate of 10 Canadian dollars a ton a year, perhaps all the way to midcentury.
And that’s where the support from business starts to break down. If British Columbia were to proceed on its own without providing some form of protection to its energy intensive industries, Mr. Finlayson argued, they would simply lose markets to producers outside its borders that pay no carbon tax.
The advisory panel recommends unspecified adjustments to protect such trade-exposed industries. Still, the Business Council of British Columbia opposed an increase.
“Keep the B.C. carbon tax in place at the current level over the balance of the decade,” it recommended. “Post-2020, policy makers should review the tax in light of actions by other jurisdictions to narrow the existing gaps with B.C. in carbon pricing.”
British Columbia could do with some help from its neighbors. Four other provinces have carbon prices either pending or in place, though they are generally much lower. If more embraced a carbon tax, they would mitigate many of the concerns over competitiveness.
The new Canadian government, headed by Justin Trudeau, seems ready to come on board, imposing some pan-Canadian minimum price. If the United States embraced a carbon tax as part of a comprehensive overhaul of its tax system, the path would be much easier.
That, however, would require Republicans in Washington to recognize that the threat of climate change is not simply a left-wing fantasy. If they do, British Columbia underscores there is a market friendly way to do something about it.
Longview Daily News: Voter initiative seeks to put price on carbon
[Excerpt] In 2008, British Columbia imposed a tax of $7.40 a ton. The tax rose every year and was capped in 2012 it at $22.20 a ton (figures are in US dollars). To keep the measure revenue neutral, the provincial government also reduced corporate and income taxes. British Columbia now has the lowest personal income tax rate in Canada and one of the lowest corporate rates in North America, The Economist reported.
“It’s kind of a textbook case of how you can do a so-called environmental tax shift. Reforming the tax system with a view to reaching an environmental objective without growing government,” said Jock Finlayson, executive vice president and chief policy officer at the Business Council of British Columbia.
Like Washington, British Columbia gets most of its electricity from carbon-free hydropower. So perhaps the biggest impact of its carbon tax was declining fuel consumption, which fell 16 percent in the first six years of the tax. It leveled off after the tax was capped in 2012. (It’s hard, though, to filter out the tax’s impact from other factors that affect fuel usage and emissions, such as the recession and the natural gas boom, according to an analysis from Seattle-based Sightline Institute.)
Overall, greenhouse gas emissions in the province fell by about 6 percent between 2008 and 2011, but they started to creep up again in 2012. They still were 3.4 percent lower in 2013 than in 2008, according to data from the provincial government.
Opponents say the increasing emissions may show the tax doesn’t work. Proponents attribute the stall in progress to the fact that the tax itself isn’t increasing annually any more.
The carbon tax hasn’t appeared to hurt the province’s overall economy.
Between 2008 and 2013, British Columbia’s economy only slightly outpaced the rest of the country, with a real GDP growth rate of 0.5 percent compared to 0.3 percent nationally.
“We think it’s been a wash. It has neither helped nor hurt the overall performance of the B.C. economy,” Finlayson said.
Other energy-intensive industries also have seen costs rise.
“Their cost for producing a ton of pulp or paper or a board foot of timber has increased,” Finlayson said. “But the total effect has been relatively small because there are a lot other important things driving their business.”
Businesses with lower energy use won’t see the same costs.
“Either you come out ahead or behind, depending on the nature of your industry,” Finalyson said. “If you’re Microsoft, I think you’re likely to be coming out on the positive side of ledger. If your energy is relatively intensive in fossil fuels, you’re going to come out behind.”
Vancouver Sun, Barbara Yaffe: Urbanization trend in B.C. can only intensify
A weak currency and slumping global commodity prices are indirectly contributing to a rush on Lower Mainland real estate.
The two forces are aggravating a pre-existing situation of too many buyers and renters chasing too few housing units.
Of course, the lower the dollar drops, the more of a fire sale residential property here becomes for foreign investors. Even Vancouver’s detached houses are starting to look like bargain offerings.
Foreigners, particularly the Chinese, already were keen on Vancouver real estate before the dollar lost a third of its value. Real estate analysts say that more Europeans and Americans are also now looking to invest.
Another factor is a less obvious one. The recent decline in the value of commodities has been proving just as problematic on the housing front. It has prompted population movement from B.C. resource towns to larger urban centres, most notably Metro Vancouver.
This urbanization trend will continue through 2016, says Jock Finlayson, executive VP of the Business Council of B.C., citing the Vancouver region as the province’s “economic growth engine”.
“A growing population in the region, juxtaposed against a fixed supply of land, particularly developable land,” says Finlayson, “will tend to push up land values, which in turn will put sustained upward pressure on the prices of certain types of housing, especially single-family homes.
“So, it is fair to say that continued urbanization in the B.C. context, particularly in the case of Metro Vancouver, promises to exacerbate the affordability problem.”
Finlayson asserts that “it would be better for the province as a whole if population growth was more evenly distributed across regions, not only to ease the pressure on land prices in the Lower Mainland, but also to support long-term economic development in other regions.”
Business in Vancouver: Budget OK with business in B.C. even without tax reform
Given the pounding B.C.’s mining sector has taken, the Business Council of British Columbia (BCBC) had hoped to see some relief for the sector in last week’s provincial budget.
Specifically, it had hoped that B.C. miners would get a break on the provincial sales tax.
Mining and forestry already get a PST exemption on big-ticket machinery and equipment. But mines also spend an enormous amount of money on electricity, which is subject to the PST, and some B.C. mines are currently teetering on the brink of closure.
“We were sort of hoping there would be some little bit of relief for the mining industry, [and] other resource industries,” said BCBC chief economist Ken Peacock.
Instead, what the B.C. business community got was a promise of a new commission that will consider a range of tax reforms, although Finance Minister Mike de Jong made it clear that scrapping the PST and taking a second stab at a harmonized sales tax is not on the table.
Peacock is hoping that medical insurance premiums will also be part of that commission’s review. Medical Services Plan premiums will increase 4%, and for businesses that pay those premiums on behalf of employees, it’s essentially a tax increase.
Although disappointed with the absence of PST reforms, the BCBC generally praised last week’s budget. So did other industry associations, including the Association for Mineral Exploration British Columbia and the Truck Loggers Association.
Vancouver Sun: Commodity crash shrinks resources’ share of provincial revenue in new budget
[Excerpt] And while the budget forecasts improvements in revenue from some commodity sectors, such as forestry and natural gas, a big drop in anticipated revenue from the auctioning of drilling rights for natural gas has the resource sector edging further down as a proportion of the public purse.
That in itself is not a bad thing, said Jock Finlayson, executive vice-president of the Business Council of B.C., because it is a sign that the economy, and provincial budget, are more diversified and less reliant on commodity revenues. Commodity markets, he said, are more volatile and government has less control over them.
“Having said that, the decline in resource revenue is obviously noticeable and not welcome to the province,” Finlayson said.
Resource revenues from mining are even lower, expected to come in at $68 million for 2016/17, down from an anticipated $92 million for 2015/16.
“Mining and natural gas (are) absolutely terrible,” Finlayson said, “there’s no sugar coating it. (For mining) this is one of the worst global mining slumps in 100 years, according to JP Morgan.”
Revenue from forestry is expected to be $812 million, still off from 2005/06, when it accounted for just under $1.3 billion.
Finlayson said that B.C.’s economy is still growing (forecasts anticipate 2.7 per cent GDP growth in the coming year) despite the commodities crash, a sign of how much its economy has changed.
“When you’ve been around as long as I have, it really is quite striking that we could be doing reasonably well — not booming but certainly better than other provinces — in spite of one of the worst commodity environments in decades,” Finlayson said.
BC Business: 5 things you need to know about the budget
[Excerpt] 2. What B.C.’s business community thinks
The document earned an ‘A’ from the Vancouver Board of Trade, for its plan to hold in spending, pay down direct operating debt and a low debt-to-GDP ratio of 17.4 per cent. Meanwhile, the B.C. Business Council’s chief economist Ken Peacock also pointed out that the budget did little to address mounting cost pressures for business. “With the return to the PST, the highest carbon tax in North America, higher MSP premiums, a complex and costly regulatory environment, (especially for land-based and infrastructure industries,) and in some municipalities an unfair property tax burden, B.C. businesses are challenged by escalating costs,” he said. “The good news is that a solid fiscal framework and relatively positive economic outlook in 2016-17 have created a foundation to enable the province to take action to bolster B.C.’s competitive position over time.”
Vancouver Sun: Children don't pay MSP under new provincial budget
[Excerpt] The elimination of children's payments will not offset the rise in premiums and higher cost for couples without kids, said Ken Peacock, chief economist for the Business Council of B.C. Because of those increases, the cost to businesses who pay premiums on behalf of their employees will go up, he said. The rise in MSP premiums, along with rising electricity costs and property taxes make B.C. businesses less competitive, Peacock said.
MSP premiums have been going up regularly by four per cent each year, and the budget projects this will continue. MSP premiums do not cover the full cost of health care in B.C., which is projected at $19.6 billion of the province's $48.1-billion budget.
The Province: B.C. government to begin tracking citizenship of homebuyers
The government of British Columbia will collect new information on citizenship of homebuyers as one of several measures proposed in the 2016 budget to address housing affordability.
The government will also modestly raise property transfer taxes to three per cent on luxury homes and in turn exempt taxes on new homes that cost under $750,000.
The new housing tax exemption will be available to Canadian citizens or permanent residents on principal residences lived in for a full year. The exemption will be available to both first-time buyers and previous property owners, and will run in conjunction with Victoria’s existing first-time-buyer exemption on homes priced up to $475,000.
Ken Peacock, chief economist of B.C. Business Council, said the new housing tax exemption would likely not increase housing affordability.
“It is obviously directed at trying to approach building new homes and getting more supply on the market,” Peacock said. “I don’t think you’re going to see a dramatic change. I just don’t think you will get enough supply response (to lower prices).”
Vancouver Sun: B.C. budget offers help to buyers of new homes
Premier Christy Clark responded to intense public pressure to fix Metro Vancouver’s housing affordability crisis Tuesday with a budget that offered a tax break on new homes and the promise to start collecting data on foreign buyers.
But real estate, business and academic experts say the modest changes will do little to spur new construction, slow price hikes or help most buyers get into the market.
“It will probably be effective to some extent but I don’t think you’re going to see a dramatic change,” added Ken Peacock, B.C. Business Council’s chief economist. It would be “very difficult” for government to change the housing market prices, he said.
Energetic City: Alberta’s economic slowdown steering more people to B.C.: Business Council of B.C.
We now have data confirming that more people are moving to B.C. while there’s a dramatic reduction in the number headed to Alberta. [Ken Peacock explains.]
In this area, despite the increase in northeast regional unemployment resulting from the downturn in oil and gas industry activity, the situation is still better than it is in many areas across the border. [Ken Peacock speaks about increased availability of workers.]
Business in Vancouver: B.C. to be bright spot in 2016 as global economy struggles: BCBC
Soft growth in China is underscoring the forecast for a weak global economic outlook in 2016, but British Columbia could be poised to thrive over the next year, according to a Business Council of B.C. (BCBC) report released February 11.
While much of the rest of Canada is seeing a downturn this year, “B.C. is holding up surprisingly well,” the BCBC said in its report. The council expects the country to experience real GDP growth of 1% this year; in B.C., this number jumps to 2.8%. Prospects are similarly positive for 2017, with Canadian real GDP growth forecast at 2.1% and B.C.’s forecast at 3%.
“Against the backdrop of diverging growth prospects across the developed and emerging economies and substantial declines in the prices of many commodities, British Columbia is poised for another year of respectable economic performance in 2016,” the BCBC said in the report.
“The province’s economy is being held back by low prices for many commodities, but non-resource merchandise and service exports are kicking into gear, aided by the low Canadian dollar.”
CKNW: B.C. businesses feel pinch of struggling Alberta oil sector
[Excerpt] Alberta’s decline is also making waves in B.C.’s labour market.
Ken Peacock with the Business Council of B.C. sees it as good news, with the potential to help fill BC’s labour shortage.
He says the latest data shows BC is gaining a net inflow of more than 6,300 people per quarter from other provinces, while Alberta is seeing a sharp decrease to just 1,000 people moving there.
“A lot of that reason is due to Alberta. Fewer British Columbians moving to Alberta and more Albertans moving to British Columbia and that is further underscored by Alberta seeing a sizeable drop in the number of people coming into its province on a net basis.”
He says that means more skilled labour for big B.C. projects like Site C.
The Georgia Straight: Business groups weigh rate hike that would raise B.C.'s minimum-wage from the bottom of the country
B.C. business groups heaped praise on Jobs Minister Shirley Bond when she announced in March 2015 that B.C. was tying the minimum wage to the consumer price index (CPI).
Annual increases on the basis of a predictable economic indicator are preferred to larger, unpredictable changes implemented without warning, they said.
But less than a year since that announcement, the B.C. NDP and labour groups are suggesting the province do exactly what the peg to the CPI was intended to prevent. Last week, the Straightreported on calls for an increase to the minimum wage beyond a 20-cent rise based on the CPI.
“If the other provinces have moved in a way that wasn’t anticipated two or three years ago, then it would be understandable if B.C. wanted to take another look at it,” BCBC executive vice president Jock Finlayson told the Straight.
He explained that B.C.’s minimum wage of $10.45 an hour ranks near the bottom of the country’s 13 provinces and territories. (Last October, the Straight reported this situation is the result of a mistake that the government has since refused to acknowledge or redress.)
“B.C. has ended up at the low end of the spectrum on the statutory minimum, whereas the government had previously indicated they wanted to be in the middle,” Finlayson said. “So that’s an issue for them to sort out. But we have not historically been particularly anxious about small adjustments.”
To return B.C.’s minimum wage to the middle of the pack would take an additional increase of only 20 or 30 cents above a 20-cent increase scheduled for implementation this September, federal data shows.
Finlayson, a trained economist, cautioned against a large adjustment. But he described a 20- or 30-cent increase as “small” and an amount businesses could absorb without significantly disrupting the labour market.
Business in Vancouver: Influential Women in Business: Marcia Smith
Marcia Smith may work for B.C.’s largest mining company, but her background is in public relations, not mine management.
So when her boss, Don Lindsay, CEO of Teck Resources (TSX:TCK.B), assigned her to run one of the company’s B.C. coal mines for four months in 2013, it was more than a little daunting.
“It was terrifying and exhilarating and probably the best professional experience of my career,” said Smith, who is Teck’s senior vice-president of sustainability and external affairs.
The mining sector remains under-represented by women; by putting a woman in charge of Teck’s Line Creek coal mines, Lindsay was trying to prove a point.
“He did it because he wanted to send a message that a woman can do any job in this company,” Smith said. “I think it was a really powerful message for all of us at Teck.”
...She also sits on the executive committee of the Business Council of British Columbia and the executive committee for the Mining Association of Canada.
In addition to being recognized this year with an Influential Women in Business Award, Smith also made Women’s Executive Network’s 2015 Canada’s Most Powerful Women: Top 100 list.