B.C. Election Battle Royale

Make no mistake: this provincial election is all about pulling B.C. back from the financial precipice. Both Premier Christy Clark and Adrian Dix know it’s their way into office. In the coming weeks the gloves will come off as the hopefuls fight to show businesses how they’ll defend a fragile economy

There’s little mystery about the B.C. provincial election. It will take place May 14, 2013. The result is also predetermined—or has at least been narrowed down to two possibilities. Either the grim hordes of global socialism will re-establish a foothold in this province and enslave local enterprise under a yoke of state control, led by an unsmiling ideologue who bears a suspicious resemblance to Strelnikov, the fierce Bolshevik guerrilla from the movie Doctor Zhivago; or provincial voters will re-elect a feckless human weather vane who will continue a seemingly endless campaign of empty feel-good initiatives and aimless, opportunistic policy choices backed by taxpayer-funded propaganda. So the choice is, um, clear.

Nasty characterizations of NDP leader Adrian Dix and Lib- eral premier Christy Clark notwithstanding, B.C. elections have traditionally offered voters a distinct contrast. Our two main parties have tended to be strongly polarized between pro-business and pro-labour camps. Is it still true in 2013? When Premier Bill Vander Zalm headed the Social Credit party in the late 1980s the political divide was as clear as it’s ever been in this province. But more recently Vander Zalm has been better known for spearheading the successful referendum campaign against the HST—a campaign in which his comrades-in-arms were New Democrats and his opponents the ostensibly right-wing Liberal government. So Vander Zalm’s current political leanings may seem a little less obvious. 

But in fact Vander Zalm’s priorities haven’t changed. He’s still a small-government advocate. And he doesn’t hear either major party singing his favourite tune. “Nobody is talking about eliminating programs,” Vander Zalm says. “The differences aren’t as great as in the past. The NDP and the Liberals are both trying to occupy the middle ground. The Liberals have been no better than the NDP fiscally—maybe even worse. The Liberals loved mega projects, most being of some financial benefit to big business and of relatively less value to the average British Columbian. The Olympics, the highway to Whistler, the jumbo German ferries, another, bigger Convention Centre, a retractable roof on B.C. Place, new toll bridges and more. Unlike the NDP’s corporate and personal income taxes, the Liberals introduced the HST, the carbon tax, massive service fee increases for most everything and increased gas taxes, hidden toll on sea to sky and toll bridges.”

Vander Zalm also cites large advertising expenditures during the HST referendum, and more recently for the Jobs Plan. “They haven’t been open or transparent,” he says. “Things can only get better.”

Vander Zalm does believe that industry might be frightened by an NDP win. “Certain businesses might hold back—the mining industry, for example,” he says. “And the fate of the pipeline projects will send a signal.”

According to Bill Tieleman, political consultant and former NDP strategist, the HST fiasco has fundamentally altered the political landscape in B.C.—and not just for the Liberals: “It changed political discourse in this province, probably for a generation.” 

Unpopular as the tax itself was, the real impact of the HST fiasco was political. The Campbell government’s post-election reversal on the issue utterly destroyed the premier’s political credibility. “The HST was a political suicide note,” Tieleman says. “In the wake of that, provincial politicians are under tremendous scrutiny.”

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No Secret Deals

Adrian Dix, Tieleman believes, understands very well that in the current political climate it is no longer possible to present one agenda on the campaign trail and secretly prepare another one for government. “Adrian has done more outreach to business leaders than any NDP leader since Mike Harcourt,” he says. “And it’s no longer possible to be saying ‘okay’ to business while you’re secretly cutting deals with the B.C. Federation of Labour behind closed doors. Everyone’s going to go public with whatever you promised them. The fear of being double-crossed is enormous.

“Dix is not aiming for a Dave Barrett thing,” Tieleman continues. “Dix wants two terms. That means keeping good relations with business. He’ll be aiming for a no-surprises government, modelled on Gary Doer’s NDP government in Manitoba. Nothing too exciting. Progressive but not crazy.”

And what might that mean in specific terms? Tiele­man expects that Dix’s stated intention to return corporate taxes to 2008 levels is not likely to differ much from the Liberal plan. “The Liberals speculated about that before Dix did,” he says. 

But Tieleman feels an NDP government may raise Premier Campbell’s carbon tax. “That tax was designed to be revenue neutral, with corresponding cuts in personal income taxes,” Tieleman says. “Dix has spoken about using revenue generated by the carbon tax to fund transit and green programs. I think it’s unlikely that Dix would raise personal taxes. So his only other option if he wants to generate income from the tax is to raise it, maybe by a cent a litre. I’d say that’s a possibility.”

“As for the Liberals, they’ve been pressured to get rid of the carbon tax. They won’t raise it, but I can’t see them dropping it either. It’s their program.”
 
Christy Clark has struggled to balance the demands of the Liberal centre and right, trying to prevent the B.C. Conservatives from gaining a political foothold. But the NDP have their own balancing act and Tieleman thinks it could lead to headaches. “There is constant tension between the labour and environmental wings,” he says. “Not as bad as in the ’90s during the Clayoquot battle and the whole ‘War in the Woods.’ But it’s there.

“Coal is a big issue,” Tieleman believes. “Environmentalists are pushing to stop the export of coal, which puts them at odds with miners, longshoreman, steelworkers, port workers—anyone involved in the industry. And if you stop exporting coal you have to ask, ‘Which schools will you shut down? Which hospitals will you close, which fire stations?’ Because you need that revenue to fund social services. That’s a divide that will test an NDP premier.”

With Premier Clark conspicuously unenthused about the Northern Gateway project and Dix having little or no political incentive to support it, Tieleman agrees with the consensus that the pipeline is likely dead regardless of the election outcome. But the fate of other projects is less certain. The Kinder Morgan pipeline project is more interesting, he says: “Environmentalists want Dix to oppose it, but as of now he hasn’t said no.”

Even the controversial Prosperity Mine in the Chilcotin, Tieleman believes, is not necessarily dead under a Dix government, although it would take some serious attitude adjustment. The project, which in its current form would lead to the destruction of Fish Lake, met fierce opposition from local First Nations and even drew a rebuke from the Harper government. “Premier Clark was saying, ‘Hey Harper, don’t be such an environmentalist,’” Tieleman says. “For Prosperity to go ahead the Dix government would have to say, ‘Come back to us when you have a First Nations partner and a plan that they are comfortable with.’”

While Tieleman describes a political left that is struggling to contain high expectations, the business community is wondering just how worried they ought to be. Jock Finlayson, head of the Business Council of B.C., is a long-time observer of provincial affairs and says council members are nervous: “With the polls pointing to a possible NDP victory, many business people are wondering what this might mean for business and personal taxes, labour law, environmental legislation and regulation and the overall cost and size of government.”

Finlayson has taken note of the NDP leader’s overtures to the business community. But although Dix had not released a full party platform as of late January, Finlayson pointed to previous policy statements as points of concern. “Mr. Dix has signalled that the NDP would increase taxes on enterprises, entrepreneurs and highly skilled workers, which prompts concern among a fair number of our member companies,” Finlayson says. “A higher corporate tax rate, in particular, would compound the erosion of B.C.’s competitive position that is inevitable once the HST is replaced with the former provincial sales tax. Higher personal income taxes could dampen entrepreneurial activity and make it harder for B.C. firms to attract and retain top talent.”

He also notes that the NDP has indicated that they would introduce a new environmental bill of rights and move away from the concept of streamlined environmental assessments in which B.C. and the federal government work together to evaluate major projects. “This, too, makes us nervous because of the prospect of more red tape, increased litigation risk and longer delays in reaching decisions on significant new investments in natural resource industries and in building the infrastructure needed to support market access and business growth in the province.”

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Despite having no details as to what form this bill of rights might take, Finlayson has some predictions. “At a minimum, such legislation can be expected to foster more environment-related litigation, and to increase the likelihood that permits and approvals granted by provincial regulators would be contested and potentially overturned by the courts. For business and industry, an environmental bill of rights is likely to lead to greater uncertainty and increased costs.”

The Liberals, as any TV viewer knows, have centred their campaign on the B.C. Jobs Plan. The plan targets eight key industry sectors and emphasizes the importance of strengthening B.C.’s connections to rapidly growing Asia Pacific markets. “Our members are generally comfortable with the high-level priorities and specific actions being taken as part of the Jobs Plan,” Finlayson says. “But we will also wait to see what else is included in the B.C. Liberals’ election platform. My view is that the province has more work to do to build an innovation-driven economy and to ensure that the post-secondary education and training system is well aligned with the needs of employers and the growing demands for skills.”

Just as business is preparing for a possible political shift, the province’s political class seems resigned to a coming new order. Martyn Brown is a former deputy minister of tourism, trade and investment who spent 10 years as Premier Gordon Campbell’s chief of staff before shocking the Victoria political set with an e-book called Towards a New Government in British Columbia, which included some frank criticism of his own party’s failings. “Business prefers the Liberals,” Brown says. “There will be relief and surprise if they win. But they are anticipating an NDP victory.” And, he suggests, the mood is hardly one of panic.

“What business fears are large swings in policy,” Brown says. “They’re hoping for minimal uncertainty and instability. Dix has been moving heaven and earth to reassure business people that the changes will be modest.” Although Dix’s efforts have led to cautious optimism, “there will be skepticism until they see the results,” says Brown.

Dix has promised labour that he’ll make union certification simpler. Currently, if 45 per cent of workers sign certification cards it triggers a secret vote, with a threshold of 55 per cent needed for certification. Under the NDP plan, 55 per cent of the workforce signing certification cards would be enough to certify a union without a secret vote. But Brown suggests this is not actually a major concern for big business in B.C. “Our major resource industries—forestry, mining—are already unionized. Small business might be more concerned, but the economy won’t turn on it.”

What those industries really fear, Brown says, is a return to prescriptive regulations like the Forest Practices Code brought in by the NDP in the ’90s. “Under the Liberals, regulations were cut back 30 to 40 per cent,” Brown says. “The emphasis was shifted to outcomes, with tougher penalties for missing targets. What industry says is, ‘Don’t tell us how wide to dig a ditch—we know how to do that. Just tell us what you want the outcome to be.’

“The resource sector also hated the sales tax on machinery and equipment, which is a tax before you’ve made any profit. Dix says he won’t bring that back. He says he’s learned from the ’90s excesses.”

Those NDP reassurances have extended to most taxes, a fact that Brown says is helping calm the political right. “Under the Campbell government personal taxes were cut 37.5 per cent across the board,” Brown says. “Dix has said that he won’t roll that back—tax rates will remain the same for incomes under $150,000. The Liberals will of course be saying, ‘You can’t trust the NDP’ but I don’t think the business community is too worried about tax increases. They seem to believe Dix is sincere.”
As for corporate tax rate, although Dix has said he will raise it from 10 to 12 per cent, “When the Campbell government came in it was 16.5 per cent,” Brown says, “and Dix doesn’t plan to bring that back.” 

Brown identifies the Corporate Capital Tax as a particularly hated initiative brought in by the Harcourt government. Dix has said he will bring back the tax for financial institutions only, expecting to raise $100 million. “That’s a tax on profits at least,” Brown says.

Brown also points out that Christy Clark’s Liberals have also backtracked on the business tax issue. “They had made a commitment to reduce the small business tax rate from 2.5 per cent to zero,” he says. “They reversed that.” However, Brown does strenuously take issue with Vander Zalm’s contention that the Liberals have been free-spenders. “As someone who worked for Bill Vander Zalm’s government as caucus research director, I can tell you he was positively profligate by comparison to either Gordon Campbell or Christy Clark. Under Campbell, B.C.’s credit rating was repeatedly upgraded to Triple A status, the highest level possible. Along with Alberta, B.C. still has the best credit rating in Canada, despite the recent Moody’s warning about rising debt levels.”

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Internationally Brown sees little change in approach. “Both the NDP and the Liberals are committed to free trade and opening new markets,” Brown says, “such as expanding Asia Pacific ties. Dix supports the development of liquid natural gas in the northwest.”

In fact, Brown believes, many businesses may be more concerned with issues involving municipal government. “There seems to be a tax shift happening, from residential to business,” he says. “There are pressures on infrastructure. Even an NDP government won’t have much money to subsidize municipal government. Where will we experience new costs and pressures?”

Brown also points out that for the past two decades, local governments tended to find needed incremental revenues by increasing local property taxes disproportionately on businesses so as to minimize the political pressure they get for also raising residential property taxes. “The CFIB [Canadian Federation of Independent Business] put out a study last summer that found B.C. businesses still pay on average 2.78 times more than residential property taxpayers for the same value property—and much more than that in some municipalities,” he says. “While that gap has stopped growing in the last two years, it hasn’t been reversed as promised by local governments and the CFIB survey found that property taxes were now the number one concern of 69 per cent of its members. In the current political context, I think it very unlikely that many local governments will be wanting to place any more pressure on residential property taxpayers with even higher hikes than they have imposed.” Brown thinks that without incremental funding from senior governments that are themselves sinking in red ink, local governments will find it politically easier to do what they have done for so long—raise business property taxes.

Globe and Mail columnist Gary Mason, who covers B.C. politics nationally, believes the key to understanding the current NDP boss is the former NDP boss. “Dix’s mentor is still Glen Clark,” Mason says. “The shadow of Glen Clark is going to extend over the next NDP government.”

Liberal strategists might salivate over a remark like that. Yet Mason says that Glen Clark’s influence pulls in a very different direction now than it did when the former premier was in his political heyday. “Clark is now the number two man at Jim Pattison Group,” Mason says, “He would not want to see his protege making things difficult for his friends in the business community.

“Things have changed a lot for both men,” Mason continues. “They were both political outcasts for a while. Now Clark is arguably the second-most powerful businessman in the province and Dix is poised to become the next premier. Clark is going to be the major source of off-the-grid advice for Dix. And I think that’s a good thing. On monetary and business policy Clark will be warning Dix away from any radical tendencies.”

With a near-unanimous consensus that Dix’s first priority would be to placate the business community, it may seem that the labour movement has little to hope for from an NDP government. But according to Marjorie Griffin Cohen, professor of political economy at Simon Fraser University, that view overlooks the urgency of B.C. labour’s agenda. “There are labour issues the NDP will have to change,” she says.

“B.C.’s labour sector is underperforming,” Griffin Cohen adds. “B.C. women’s wages are $2,700 below the national average. There’s been a gutting of employment standards. B.C. unions are no longer covered by employment-standards regulations. That’s not a major issue for big unions because they do a good job for their members. But there are unions like the Christian Labour Association of Canada that negotiate deals that are below the set minimums. Their members are not protected on issues like minimum wages, vacation time and stat holidays.” 

Griffin Cohen also points to new provincial rules that made it easier to employ workers as young as 12 years old. “B.C. was the first jurisdiction to essentially promote the use of child labour,” she says. “The NDP will have to take action on at least some labour issues or they won’t look good.”

Griffin Cohen agrees that the NDP would be intent on preserving peace with the business community. But that cuts both ways, she believes. “If the NDP win big and there’s little support for the Liberals, business will have to deal with that. Business will need to be pragmatic, too. They’ll need government support. Resource industries can’t just pick up and leave.”

Pundits seem to agree on one point: any new government’s hands will be tied by factors beyond their control. “We’re just one small economy, a commodity producer,” says Tieleman. “You could shut down all of B.C.’s production—lumber, mining, everything—and the world would continue. We’re not the kings of the castle.”

“Governments in small, trade-dependent jurisdictions like British Columbia have limited policy flexibility,” Finlayson points out. “Many important factors influencing our economy are determined outside of B.C.’s borders—the U.S. housing market, China’s economic growth rate, global commodity prices, domestic interest rates, the value of the Canadian dollar and federal government policies.”

Finlayson also points out that provincial and state competition to attract business is increasingly fierce: “A small economy like B.C. can quickly find itself marginalized.”

Tieleman believes that such external pressures present more of a political challenge for the NDP than for the Liberals. “There are high expectations,” he says. “Child care, public transit, education, labour relations—there are a lot of people hoping to see improvements with an NDP government. With no money it’s going to be a real balancing act trying to keep all those constituencies happy.”

Our province has a reputation for political eccentricity—a reputation both leaders are desperate to avoid in 2013. Whatever the outcome on May 14 the next four years seem unlikely to eclipse the tales of premiers Amor de Cosmos, Dave Barrett or even Bill Vander Zalm. That’s probably good news for business—unless your business is show business.