While B. C. Trebles Debt Since 1918

Our Pacific Coast province has $73,000,000 indebtedness, and $64,000,000 guarantees, on the shoulders of less than 600,000 persons

SCOTT I. DUTHIE March 15 1924

While B. C. Trebles Debt Since 1918

Our Pacific Coast province has $73,000,000 indebtedness, and $64,000,000 guarantees, on the shoulders of less than 600,000 persons

SCOTT I. DUTHIE March 15 1924

While B. C. Trebles Debt Since 1918

Grave condition of public finance in our provinces calls for serious attention.

SCOTT I. DUTHIE

THE orgy of governmental extravagance which has marked the last decade in Canada has raged

more wildly in British Columbia than in most of the provinces of the Dominion. The dictum of Sir Wilfrid Laurier that the twentieth century was to be the century of Canada, seems to have been capitalized to the utmost by enthusiastic legislators, and a boom which marked the

opening years of the century accepted as a standard condition for all time to come. Perhaps it was natural that in the West, where dreams, are supposed to be rosier than elsewhere, faith in the future should be more implicit, and action based on that faith marked by less caution and reserve.

The grave condition of public finance in British Columbia calls for more serious attention, because here there

has been no marked increase in population. Át the opening of the century the population was between 400,000 and 500,000 souls. The census of 1921 made it about 550,000. The per capita burden is therefore increasing a much greater rate than in provinces where the growth of population is more rapid. In spite of the almost static condition of its population, successive British Columbia governments have gone on increasing its public debt, ignoring the disparity between revenue and expenditure, and attempting only to balance the latter, not by economies, but by the further expansion of their large tax-imposing powers.

The staggering increase in the public debt during the last few years may be gathered from the following table:

LIABILITIES As at March 31,1917 :

Bonded Debt..-.......;_______$23,153,146.00

Current Liabilities____________ 2,412,723.27

Total......:..... $25,565,869.27

As at March 31, 1923: >

Bonded Debt....................$65,851,436.00

Temporary Loans, Treasury

Bills............. 3,103,000.00

Current Liabilities............ 4,361,253.76

’ Total..........................$73,315,689,76

Increase in six years......-......$47,749,820.49

This total of $73,315,689.76 is quite exclusive of a formidable group of guarantees granted by the province, as follows:

Canadian National Railway..;........... .$40,157,523.90

Pacific Great Eastern Railway............ 20,160,000.00

Vancouver District Sewerage Board.... 3,233,333.00

French’s Ore Reduction Co................. 40,000.00

Agricultural Credits Commission .......... 1,000,000.00

West Nicomen Dyking District........... 87,000.00

$64,677,856.90

There is a Sinking Fund investment on hand against the bonded indebtedness of $9,930,251.

But the short term bonds issued in 1920-21-22 fall due within the next three years. These amount to many millions and will have to be refunded, and there is no provision in the form of a sinking fund for their retirement. .

Seven Deficits, One Surplus "

'T'HE condition of the provincial debt is disconcerting *■ enough even were finances now being handled with a due regard to that condition and with a constant eye to the'reduction of the debt itself. Unfortunately the current account is as disturbing as is, the capital one. A statement of revenues and expenditures for the same six years (1917 to 1923) reveals the. following balance sheet;

EXPENDITURE

Year

Revenue

1916.. .:.... $6,291,693 $10,083,504

1917........ 6,906,783 9,531,740

1918.. ...... 8,882,846 -------

1919 ........ 10,931,279

1920 ........ 13,861,602

G. & S. Fund Int. P.G.E. Total Deficit

$316,016 $10,399,520 -$4,107,827 737,809 10,269,549 3,362,766

874,117 908,663 847,808

8,853,713

10,564,732

12,519,329,

9,727,830

11,473,395

13,367,137

1921 ........ 15,219,264

1922 ........ 16,987,868

1923 -------18,758,863

16,380,773

18,779,727

19,273,942

776,649

591,366

620,070

17,147,422

19,371,093

19,894,012

844,984

542,116

494,465

Surplus

1,928,158

2,383,225

1,135,149

Total................$14,304,225

The above sum represents, in its imposing total, the deficits pf the province spread over a term of eight

years and averaging álmost $1,800,000 each year during that time.

It is interesting to note also that these deficits are not due to a dwindling revenue but that, in spite of the small increase in the number of the residents, revenues

Our Pacific Coast province has $73,000,000 indebtedness, and $64,000,000 guarantees, on the shoulders of less than 600,000 persons

have been taken from them in the last year three times as great as eight years ago. This indicates that, with a strong disposition to increase expenditures, the resourcefulness of the authorities has been employed to the full in devising new forms of revenue.

A reference to the varied sources from which this revenue is derived will be made later.

The recklessness revealed in the foregoing table would

seem to be heading the province toward the same regrettable condition in which it was found when the government of the late Sir Richard McBride took office. Sir Richard was an indifferent financier, as later events revealed, but when he assumed office the banks had become so truculent in their demands that even a spendthrift would have been forced to economy. The province was financing on short notes of hand at the bank. Revenues were low. Times were far from good. Fortunately Sir Richard had a minister of finance, Capt. Tatlow, who in a remarkably short time not only restored a balance, but achieved a substantial surplus on each year’s account. Up to 1911 (from 1902) the provincial budgets told an almost unbroken story of favorable balances, as the attached table will show:

Revenue Expenditure 19023 ...........$2,044,630.35 $3,393,182.25 19034 ........... 2,638,200.68 2,862,749.09 19045.............. 2,920,461.71 2,302,416.84 19056 '........r. 3,044,442.49 2,328,126.27 19067.............. 4,444,593.81 2,849,479.97 19078.............. 5,979,054.96 3,686,708.76 19089.............. 4,664,500.99 3,741,143.44 190910 ........... 8,874,741.94. 6,382,963.27 1910-11............10,492,892.27 8,194,802.95

In 1907 Capt. Tatlow retired, over the railway commitments of the government, but the policy of surpluses persisted for several more years. In 1911 the government embarked on an expensive policy of road building, which threw the annual balances into the red column and which set a habit of deficits which has continued until to-day.

The financial statements from 1911 until 1916

previously quoted make disagreeable reading for the taxpayer. They

Revenue Expenditure 191112.................... $10,745,708.82 $11,189,024.35 191213.............!...... 12,510,215.08 15,412,322.02 191314.................... 10,479,258.74 15,762,912.48 191415.................... 7,974,496.46 11,942,667.00

(In above figures those for 1902-3 to 1907-8 are from July 1 to June 31. Those 1908-9 are from July 1 to March 31, nine months. Those from 1909-10 to 1918-19 are from April 1 to March 31).

Unlike the other western provinces British Columbia retains its own natural resources, and from these a large proportion of its revenue is

derived. In 1920, for. instance, the greatest individual source of revenue was the royalties, etc., derived from woods, forest and timber, amounting to $2,455,000. ^ In this connection the government is severely criticized because these timber revenues are credited to ordinary revenue instead of to capital assets. Last year there was appropriated from these sources for ordinary current expenditure the following:

Land sales............................ $ 299,386

Timber sales........................ 402,048

Timber royalties...............— 1,266,139

Reference has already been made to the great increase in expenditures. In this connection the per capita expenditure has increased from $15 to $35. The average of the other provinces was $12.54, and ranged all the way from Quebec’s $6 or $7 to the highest of the other provinces, Alberta, which Was about $23.

Criticism, too, is made regarding the distribution of this growing expenditure. The civil service continues to grow, and salary lists continue to advance* until the per capita expenditure on departmental salaries which was $2.25 eleven years ago has reached the figure of $5.70. The year 1911 has already been referred to as one of abnormal expenditures on public works, $3,395,164.56, or more than forty per cent, of the total expenditures being on that account. But making due allowance for the exceptional circumstances mentioned, the taxpayers feel that the figures of 1922 which show the cost of public works to be $2,642,175, or only 15.15 per cent, of the total expenditure, indicate that an undue proportion of the taxes is going to less productive lines.

How easily governments under the pressure of clamorous supporters may choose the easy but ruinous road rather than the sterner but more desirable path, is indicated in the experiences of B.C. In the year-1911 the government, flushed with buoyant revenues, made a feeble attempt to reduce taxes. Preliminary to this a taxation commission was appointed which advised, after hearing evidence, that several important steps be taken to ease the situation for the taxpayers. These were:

The abolition of the revenue or poll tax.

The abolition of the personal property tax.

The revision of the income tax so as to reduce the taxes on those with small incomes and readjust its incidence to those with larger incomes.

The exemption of improvements from the real estate tax.

That Ultimate Utopia

THE government accepted the report, and proceeded to act on the first recommendation, thereby foregoing revenue for the year amounting to $360,000. The minister of finance forecast the gradual adoption of the rest of this programme of reform, stating: “Our aim is as soon as possible, by easy stages, to reach a point where direct taxation will be eliminated and our revenues will be obtained from the natural resources of the province.”

Circumstances have proved the fallacy of the prediction. The natural resources, under changed conditions, yield less instead of more revenue; special taxes supply greater instead of less income. In 1912-13 timber royalties yielded $2,457,129, and land sales $2,344,596. Last year revenues under the first head had fallen to

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$1,266,139, and under the latter to $299,386. The special taxes which were to have been removed remain; new ones have been added. A great deal more than half of the revenues come from these taxes. Yet provincial expenditure goes on in seeming disregard of the fatal spread between income and outgo and the steady increase of public debt, to which the operation of the P.G.E.

railway alone makes staggering additions each year. The province is committed to the extent of about $45,000,000 on this account alone, with no immediate prospect of relief.

If there is any province of Canada to which the watchword of retrenchment and economy should come with particular force it is to British Columbia. ,