Economy

Budget 2020: The economy must be vaccinated – BBC News

Published

5 years ago

March 10, 2020

Whether it’s “catching a cold” or “contagion”, chancellors have long used virology as an analogy to describe the impact of external events on our economy.

This time, at this moment, the virus and its impact is very real. In his first Budget, Rishi Sunak must swap his famous red Budget box for a medical kit of parts to vaccinate the economy from coronavirus.

There was no Budget in 2019 and it is difficult to convey just how extraordinary this first Budget of 2020 will be.

Even a fortnight ago, the plan was a Budget to launch a parliament of post-Brexit renewal. A significant shift in economic policy and primarily in tax-and-spend – fiscal policy – in order to provide a detailed long-term plan for infrastructure investment across the nation.

Now the focus is firmly on the short-term economic and health challenge of coronavirus.

Impact assessment

Firstly, the numbers in the Office for Budget Responsibility’s fiscal report are already out-of-date before the document is even published.

This is no fault of the authorities. Rarely can growth, borrowing, oil price, stock market and government borrowing cost forecasts have changed so rapidly and so close to a Budget event.

Coronavirus economics will be dealt with in a separate box, but the substance of the forecast is the world as it was a fortnight ago, rather than the one the chancellor faces on Wednesday. The numbers in the OBR book will represent a measure of normality, an aim, perhaps even a best-case scenario.

There will be an assessment of the potential impact on the economy. The OECD says there will be a 0.2% hit just from the global growth slowdown. As that gets higher, so will the justification for considerable firepower to keep the economy turning through a virus containment pause.

The response will need to be calibrated to the degree of disruption, but I expect the chancellor to outline the thinking behind the economic support: that however bad the virus gets here, and however much the economic cost of dealing with it, it will be temporary, and viable businesses should be given a bridge to the other side that helps them keep their employees, helps their cash flow, and enables them to thrive when things return to normal.

The plan needs to be comprehensive: hope for the best, but prepare for the worst.

Fiscal events

So expect significant funding for the health system, help for companies dealing with prolonged sickness absence, and joint guarantees with the Bank of England for banks to keep lending and extend overdrafts to people and to business.

The Treasury always ponders some forms of cut to VAT at times like this, because it’s “timely, temporary and targeted” – the quickest way to inject cash into people’s wallets. But the answer may equally come in the way in which retailers pay their VAT. Either way, public spending will be higher and tax receipts lower.

The Treasury does not want to lose sight of the medium and long term, however. It had already been decided that this Budget should be seen as part of a trilogy of “fiscal events” to deliver the government’s “levelling up” agenda: this Budget, the Autumn Budget and a Comprehensive Spending Review of departmental spending.

In fact, make that a four-parter. As I reported last week, the detailed plan on capital spending, the National Infrastructure Review, will be delayed for a month or two, to provide the chancellor a chance to review it, particularly as regards net zero commitments.

That is a difference that has emerged because of the change of chancellor. Sajid Javid was ready to publish this week. What we will get instead is the start of a process on infrastructure.

There will be some early allocations of capital investment. There will be the start of a review of the investment appraisal methodology, the Green Book, which many feel overly favours investment in London.

But we will also get an overall envelope on capital investment, showing the highest sustained capital investment since the 1970s, and above the long-run post-war investment average of 2.7% of GDP.

It will also be above not just the average, but peak net investment under New Labour. This is a huge amount of money.

‘Levelling up’

The signal from government borrowing markets is that they want governments with space to spend, to do so. But it was clear that under Sajid Javid’s fiscal rules, the 3% number was seen as a limit on investment, a maximum, rather than a target. If confirmed, that does appear to be more spending than planned by his predecessor.

It will be couched in terms of short-term stimulus and medium and long-term “levelling up”. On the latter, however, it is the start of a process that will last a few months more yet and might also be complicated by the coronavirus.

The main political point here will be to deliver, line by line, on the winning Conservative manifesto, especially for the “borrowed votes” in the Red Wall.

Indeed, I’m told that immediately after being appointed to Number 11, the new chancellor was advised to delay the Budget, but spent the weekend looking at what was required and decided to push ahead.

It will be a personal challenge. Any inhabitant of Number 11 needs to assert control of the public finances, to convince markets of their credibility.

The coronavirus means that departing from fiscal rules outlined by his predecessor just four months ago is less controversial than it was.

The election ended the need for austerity long-term. Coronavirus means the opposite of austerity short-term too.

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Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

Published

2 days ago

September 10, 2024

Anne Joseph

VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.

Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.

Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”

The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.

Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.

“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”

Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.

Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.

Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.

B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.

The election is expected to be called on Sept. 21, with the vote set for Oct. 19.

“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”

Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.

Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.

The premier said that now is not the time to reduce supports and services for people.

Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.

Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.

This report by The Canadian Press was first published Sept. 10, 2024.

Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.

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Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

Published

3 days ago

September 10, 2024

Anne Joseph

NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.

But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.

He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.

Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.

Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.

Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.

This report by The Canadian Press was first published Sept. 10, 2024.

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Economy

Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa

Published

3 days ago

September 10, 2024

Anne Joseph

HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.

Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.

The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.

Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”

Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.

Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.

This report by The Canadian Press was first published Sept. 10, 2024.

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