[can.politics] NDP & ICBC

acton@ubc-cs.UUCP (Donald Acton) (10/25/85)

With respect to my statement that Stats Can reported a $460 dollar
deficit when the NDP left office in late 1975 (Dec 22nd to be exact)
<2675@watcgl.UUCP> jchapman@watcgl.UUCP writes:
>Well I won't take issue with Stats. Can. figures here.  I do remember
>the controversy at the time though  and as I recall the Socreds were
>claiming the NDP had left a debt of around $150million and the NDP
>claimed they left a surplus of $40million - it seemed to depend on
>which bookkeeping method used and whether startup costs of ICBC (later
>to become a profit making operation) were to be included.
>
The NDP's budget for 1975-76 estimated that there would be a surplus of
a half million dollars, not even close to the $40 million you claim. The next
budget, a Socred one, for 76-77 said that it appeared there was going to 
be a deficit of $560million for 75-76 which is $100 million more than it 
actually turned out to be. In the budget speech the Finance Minister said the 
discrepancy between the actual deficit and what was predicted a year 
earlier could be attributed to 1) a shortfall of >$220 million in
revenues and 2) an underestimation by more than $200 of expenses.

It is true that ICBC had a deficit in fiscal 75 but it was only $175 million,
hardly $460 million. ICBC was started in 73 so the initial startup costs 
to cover infrastructure would not appear in 75. However, the government 
placed restrictions on ICBC that forced it to keep its rates below
market value hence the deficit in 75. To cover this debt, and in the process
subsidize everyones insurance, the government gave ICBC the money it needed.
That money was gone and couldn't be spent on anything else so it is
rightfully an expense of the government's, even if it hadn't been originally
included in the 75 budget. When the Socreds gave $400 million to BC Rail a 
year or so ago they didn't claim that that didn't add to government 
expenses and I think the NDP would have been fully justified in screaming
at them if they had claimed it didn't add to the deficit. 

As for ICBC being a profit maker that is very debatable. When it does
make a profit it doesn't turn the money over to the government to use in 
general revenues. Instead, it rolls the profits over to the next year 
and uses them to minimize the inevitable increase in rates. When assessing
the success or failure of ICBC one should also keep in mind that unlike
private insurance companies it 1) pays no taxes on profits, 2) it pays
no municipal taxes, 3) it doesn't collect a premium tax for the government
on each policy (ie a sales tax on the insurance) and 4) it gets the 
revenues from fines levied due to points (keep in mind that in other 
provinces these fines go into general revenues). All of these measures are 
effectively subsidies to ICBC and they result in a reduction in government 
revenues that wouldn't occur if there was private insurance. In the 
book "On the Insurance Corporation of B.C.: Public Monopolies  and the 
Public Interest" it estimates that if ICBC didn't have these subsidies
its rates would have to be 35% higher. 

With reference to the governments of Ontario and BC John says:

>By no stretch of the imagination can either of those two governments be
>considered "socialist" - which was/is my point; your comment regarding
>socialists and spending was both inaccurate and unwarranted.

In my book these governments have racked up deficits because they insist
on pursuing socialist policies. They may not claim to be socialists but
when they buy oil companies, subsidize wine makers, start coal mines, and
engage in huge make work projects like EXPO 86 and the Coquahalla (sp?) Highway
then they certainly aren't free enterprisers. I must admit that the NDP 
aren't too happy with the spending in some of these areas but they have their
own idea of what a make work project is.

Donald Acton