1998 FRASER INSTITUTE CRITICAL ISSUES bulletin The Government of British Columbia,1991–1998 An Assessment of Performance and a Blueprint for Economic Recovery by Satinder Chera and Fazil Mihlar FRASER INSTITUTE CRITICAL ISSUES BULLETIN Critical Issues Bulletins The Fraser Institute Critical Issues Bulletins are published from time to time by The Fraser Institute is an independent Canadian economic The Fraser Institute (Vancouver, British Columbia, Canada) as and social research and educational organization. It has as its supplements to Fraser Forum, the Institute’s monthly periodi- objective the redirection of public attention to the role of cal. Critical Issues Bulletins are comprehensive studies of sin- competitive markets in providing for the well-being of Cana- gle issues of critical importance for public policy. dians. Where markets work, the Institute’s interest lies in try- ing to discover prospects for improvement. Where markets The authors have worked independently and opinions ex- do not work, its interest lies in finding the reasons. Where pressed by them are, therefore, their own, and do not neces- competitive markets have been replaced by government con- sarily reflect the opinions of the members or the trustees of trol, the interest of the Institute lies in documenting objec- The Fraser Institute. tively the nature of the improvement or deterioration resulting from government intervention. The work of the In- For additional copies of Critical Issues Bulletins, any of our stitute is assisted by an Editorial Advisory Board of interna- other publications, or a catalogue of the Institute’s publica- tionally renowned economists. The Fraser Institute is a tions, call our toll-free order line: 1–800–665–3558 or visit national, federally chartered, non-profit organization fi- our web site at http://www.fraserinstitute.ca. nanced by the sale of its publications and the tax-deductible contributions of its members, foundations, and other sup- For information about publications of The Fraser Institute and porters; it receives no government funding. about ordering, please contact Chris Howey To learn more about the Institute, please visit our web site via telephone: (604) 688–0221, ext. 580 at http://www.fraserinstitute.ca. via fax: (604) 688–8539 via e-mail: [email protected]. For information about membership in The Fraser Institute, please contact via mail to Copyright© 1998 by The Fraser Institute Sherry Stein, Director of Development Date of Issue: October 1998 The Fraser Institute, 4th Floor 1770 Burrard Street Printed in Canada Vancouver, BC, V6J 3M1 via telephone: (604) 688–0221, ext. 590 Canadian Publications Mail or via fax: (604) 688–8539. Sales Product Agreement #0087246 In Toronto, you may contact us toll-free ISSN 1480-3666 via telephone: (416) 363–6575 or via fax: (416) 601–7322. Editing and design: Kristin McCahon and The work of The Fraser Institute is assisted by an Editorial Ad- Lindsey Thomas Martin visory Board that includes Prof. Armen Alchian, Prof. Jean- Pierre Centi, Prof. Friedrich Schneider, Sir Alan Walters, Prof. Image for front cover copyright© J.M. Buchanan, Prof. Michael Parkin, Prof. L.B. Smith, and Prof. Todd Davidson, The Image Bank Edwin G. West. The Fraser Institute The BC Government, 1991–1998 1 Contents Main policy recommendations 2 Health care policy 29 Introduction 5 Education policy 34 Fiscal policy 11 Social policy 38 Taxation policy 16 Natural resources policy 42 Labour policy 19 Privatization policy 49 Industrial policy 23 Final Comments 52 Regulatory policy 26 References 55 About the authors SATINDER CHERA worked as a student intern at The Fraser Institute in the summer of 1998, where he collected data and wrote large parts of this publication. He is currently completing his B.A. (Hons.) in Political Science at the University of Toronto. He has also written a number of articles that have been published in the Fraser Institute’s Canadian Student Review. These include The Great Debate: How to Spend the Fiscal Surplus and Private Property Rights: A Solution for BC’s Faltering Forest Industry. FAZIL MIHLAR joined The Fraser Institute in 1994 and is now Director of Regulatory Studies. He is the author of several reports on the economic performance of provincial governments, and has written reports and articles on subjects ranging from labour- market policy to regulation. His latest publications include Regulatory Overkill: The Cost of Regulation in Canada (1996; Unions and Right-to Work Laws: The Global Evidence of their Impact on Employment (1997); and Debunking the Myths: A Review of the Canada-US Free Trade Agreement and the North American Free Trade Agreement (1998). He is also a coordinator of the Survey of Senior Investment Managers and the Centre for Economy in Government. His articles have appeared in several newspapers including The Globe and Mail, The Financial Post, The Calgary Herald and The Vancouver Sun. He holds a B.A. in Economics from Simon Fraser University, an M.A. in Public Administration from Carleton University, and a Marketing Diploma from the Chartered Institute of Marketing in London, England. Acknowledgments The authors wish to thank Jared Alexander, Jason Clemens, Jock Finlayson, Johanna Francis, and Michael Walker for their com- ments, suggestions, and criticisms. The authors, of course, take full responsibility for any errors and omissions and, as they have worked independently, their views do not necessarily represent the views of the trustees and members of The Fraser Institute. 2 Critical Issues Bulletin The Fraser Institute Policy recommendations (For a more detailed explanation of these proposals, please see the relevant sections in the main text.) Fiscal policy • reduce government expenditures by 10 percent over the next three years • enact a balanced budget law • legislate a debt-reduction plan • include the Summary Financial Statement in the Consolidated Revenue Fund as outlined in the annual budget document • stop providing loans and loan guarantees to business • stop guaranteeing the debts of Crown corporations Taxation policy • enact a 30 percent reduction in the basic provincial personal income tax over 3 years • enact a substantial cut in the top marginal tax rate • harmonize the provincial sales tax (PST) with the federal goods and services tax (GST) • cut the corporate income tax rate • eliminate the corporate capital tax •reduce payroll taxes. Labour policy • repeal the amendments made to the Industrial Relations Act and to the Employment Standards Act • implement Right-to-Work legislation • eliminate the minimum wage • repeal the recently introduced legislation permitting “sectoral bargaining” • repeal the Fair Wage Act. • reform the Workers’ Compensation Board Industrial policy • eliminate all direct and indirect subsidies to business • repeal the Northern Development Act • work toward reducing interprovincial trade barriers The Fraser Institute The BC Government, 1991–1998 3 Regulatory policy • implement a moratorium on new regulations • prioritize regulations based on risk assessment • implement a cost/benefit test • enact a “sunset review” clause in any new regulation Health care policy • take control of health care • implement a system of Medical Savings Accounts • eliminate Reference-Based Pricing Education policy • implement a School Voucher system • permit the establishment of Charter schools • publish an annual “report card” on schools in British Columbia Social Policy • implement a Basic Necessities Index to guide the setting of social assistance rates • reduce welfare benefits • implement a mandatory “personal employment strategy” to be completed by those receiving welfare • implement a Negative Income Tax to replace the current welfare system Natural resources policy • privatize forests currently owned and managed by the Crown • repeal the Forest Practices Code and the Forest Renewal Act • eliminate the minimum stumpage fee • eliminate the British Columbia Environmental Assessment Act • subject the setting aside of Crown land for parks and heritage sites to cost/benefit analysis Privatization policy • privatize major Crown corporations, including the Insurance Corporation of British Columbia, British Columbia Hydro, British Columbia Liquor Distribution Branch, British Columbia Railway Company, British Columbia Ferry Corporation, British Columbia Transit, the British Columbia Steamship Company, and Duke Point Development • contract-out public sector services through a competitive bidding process The Government of British Columbia,1991–1998 An Assessment of Performance and a Blueprint for Economic Recovery The Fraser Institute The BC Government, 1991–1998 5 Introduction Debating public policy shows that growth and prosperity are best realized when the citizens enjoy a high level of economic freedom. All too often, meaningful discussions on issues of public pol- Governments that are serious about creating jobs and icy are largely derailed by politics and ideology. It should economic prosperity for their citizens must first act to re- come as no surprise to most people that governments and po- structure their own operations and allow the efficient use of litical parties are, in most instances, more likely to be con- markets. Operationally, this requires that they: cerned with good politics rather than good public policy. Lost • lower levels of taxation in this framework of public policy discussions is the economic • balance budgets and eliminate public debts and social well-being of the people, who are handed simplis-