Is government spending in Canada out of control?

Last month,  British Columbia voters in a historical referendum rejected the recently implemented HST (Harmonized Sales Tax) which combined the 7% provincial sales tax and 5% federal goods and services tax.   54% of the 1.6 million people who voted, opted to chuck the new tax, more for political than purely economic reasons.

There is stupidity and there is monumental stupidity.   Bringing in a new tax without consulting with people and without effectively selling it and providing incentives to adopt it is stupidity. Monumental stupidity is asking people to vote on a new tax.    Monumental stupidity is allowing a referendum question on an issue to be framed such that “yes” indicates rejection rather than support for the issue.   My only comfort is that by limiting the revenue that the HST would provide, perhaps the government will have to limit the growth of spending.   This could be the silver lining to the whole HST disaster.

British Columbia total government spending from 2001 to 2011 rose 80% , from $24 billion to $44 billion.   The growth in population was 12%.   From 2001-2011 cumulative inflation in Canada was 20-25%.    That means that the net spending increase outside of population growth and inflation was at least 43%.   This is nearly 50% over ten years.

It was worse with the federal government.  Federal government program spending grew from    $116 billion in 2001 to a projected $249 billion in 2011.  This is a 115% increase compared with 20-25% cumulative inflation and national growth in population of 15%.  That leaves a net growth in spending of 75%.  So much for arguments about government cutbacks the past decade.   These numbers are astounding. Revenues over the same period grew a meagre 42% (17% real growth).

One should also relate this to the economy via GDP figures and growth.  It’s not so bad then as average per capita GDP national and provincial British Columbia growth over the past decade has been about 3% annually , which translates into a 31.7% increase in provincial GDP and a 29,1% increase in national GDP  (from Statistics Canada 2000-2009).   If one buys into the argument that increased GDP should lead to increased government spending, not a given by any means, then provincial and federal government spending growth in excess of inflation,  population and economic growth (the last two of which are included in the per capita GDP figures) for the past decade are  are 23.3% for British Colombia (more reasonable) and the still rampant 61% for the federal government.

All of this neglects the stealth-like growth of municipal spending.   One recent report by the Canadian Federation of Independent Business claimed that between 2000 and 2008,  municipal spending in British Columbia was 59%.   Add another couple of years and it is probably close to the provincial growth numbers.   Amazing!   There are quite a lot of little political kingdoms being built and entrenched under the radar that will be hard to cut or slow in future years.

Beware.  Eventually somebody has to pay for all this and it won’t be the international multinational corporations the left loves to claim are not paying their fair share. And all this growth in spending is before the really significant cost pressures from the interplay of demographics and our public health care system hit the fan.