By Allan Dowd
VICTORIA, British Columbia, Sept 1 (Reuters) - British Columbia said on Tuesday its projected budget deficit has grown to C$2.8 billion ($2.5 billion), more than five times what the Canadian province estimated in February.
The B.C. Liberal government also defend its recent decision to combine its sales tax with the federal government's, creating a new Harmonized Sales Tax. Supporters say it will stimulate growth by reducing business costs, but critics say it will raise consumer taxes.
The province will get C$1.6 billion from the federal government as part of the deal, including C$750 million this year. Finance Minister Colin Hansen denied that having the money was the reason he agreed to the change.
'As much as the C$1.6 billion is hugely beneficial at this time, it was not the motivating factor,' Hansen told reporters in Victoria.
To remain competitive with Ontario, Canada's most populous province, British Columbia had no choice to match Ontario and reach a tax deal with Ottawa, Hanson said .
The right-of-center Liberals, which once vowed not to run deficits, said in July that the deficit for the tax year that began in April would be substantially more than the C$500 million they originally projected.
ECONOMIC SLOWDOWN SLASHES REVENUES
Officials said they had to redo the budget because the global economic slowdown has cut expected revenues, including energy royalties, by C$1.2 billion. Some costs, including for fighting forest fires, are up by more than C$800 million.
The opposition New Democratic Party says the Liberals have lost the trust of voters, because they denied during the May election the deficit would increase.
British Columbia is the latest Canadian province to warn that its budget deficit for the 2009-2010 fiscal year will be much worse than forecast. Neighboring Alberta, also hit by falling energy revenues, warned last week its projected deficit had jumped by 50 percent to C$6.9 billion.
The British Columbia deficit for 2010-2011 is put at C$1.7 billion, up from February's C$245 million. The province sees C$945 million deficit for 2011-2012 instead of a balanced budget.
With capital spending at C$7.4 billion, including infrastructure spending, total debt will rise to C$42 billion and put the province's debt to GDP ratio at 22.4 percent.
The province expects its economy to contract 2.9 percent in 2009, but grow 1.9 percent in 2010, due in part to stimulus provided by next year's Winter Olympics in Vancouver.
Jock Finlayson, head of the Business Council of British Columbia, called the revised budget 'realistic' given the tough economy, but said the projected 1.9 percent 2010 growth rate could be low.
'It sounds like a big number, but there have had recessions that we come roaring out with growth of 3 or 4 percent a year,' he said.
(Reporting by Allan Dowd; editing by Janet Guttsman) Keywords: CANADA BRITISHCOLUMBIA/ (allan.dowd@thomsonreuters.com; 1+604 664 7314; Messaging: allan.dowd.reuters.com@reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
VICTORIA, British Columbia, Sept 1 (Reuters) - British Columbia said on Tuesday its projected budget deficit has grown to C$2.8 billion ($2.5 billion), more than five times what the Canadian province estimated in February.
The B.C. Liberal government also defend its recent decision to combine its sales tax with the federal government's, creating a new Harmonized Sales Tax. Supporters say it will stimulate growth by reducing business costs, but critics say it will raise consumer taxes.
The province will get C$1.6 billion from the federal government as part of the deal, including C$750 million this year. Finance Minister Colin Hansen denied that having the money was the reason he agreed to the change.
'As much as the C$1.6 billion is hugely beneficial at this time, it was not the motivating factor,' Hansen told reporters in Victoria.
To remain competitive with Ontario, Canada's most populous province, British Columbia had no choice to match Ontario and reach a tax deal with Ottawa, Hanson said .
The right-of-center Liberals, which once vowed not to run deficits, said in July that the deficit for the tax year that began in April would be substantially more than the C$500 million they originally projected.
ECONOMIC SLOWDOWN SLASHES REVENUES
Officials said they had to redo the budget because the global economic slowdown has cut expected revenues, including energy royalties, by C$1.2 billion. Some costs, including for fighting forest fires, are up by more than C$800 million.
The opposition New Democratic Party says the Liberals have lost the trust of voters, because they denied during the May election the deficit would increase.
British Columbia is the latest Canadian province to warn that its budget deficit for the 2009-2010 fiscal year will be much worse than forecast. Neighboring Alberta, also hit by falling energy revenues, warned last week its projected deficit had jumped by 50 percent to C$6.9 billion.
The British Columbia deficit for 2010-2011 is put at C$1.7 billion, up from February's C$245 million. The province sees C$945 million deficit for 2011-2012 instead of a balanced budget.
With capital spending at C$7.4 billion, including infrastructure spending, total debt will rise to C$42 billion and put the province's debt to GDP ratio at 22.4 percent.
The province expects its economy to contract 2.9 percent in 2009, but grow 1.9 percent in 2010, due in part to stimulus provided by next year's Winter Olympics in Vancouver.
Jock Finlayson, head of the Business Council of British Columbia, called the revised budget 'realistic' given the tough economy, but said the projected 1.9 percent 2010 growth rate could be low.
'It sounds like a big number, but there have had recessions that we come roaring out with growth of 3 or 4 percent a year,' he said.
(Reporting by Allan Dowd; editing by Janet Guttsman) Keywords: CANADA BRITISHCOLUMBIA/ (allan.dowd@thomsonreuters.com; 1+604 664 7314; Messaging: allan.dowd.reuters.com@reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.