May 22, 2013

Big Numbers – Big Lies


The election results were disheartening; it was, as many have commented, a victory of style over substance. Hope for something unachievable (a debt free B.C. in fifteen years) and fear of a leader and party that does not exist (an untrustworthy Chavez of the north) won the day. It was not a great moment for B.C. whatever your political leanings.

My first post-election thoughts were to return to Mexico. Admittedly the politics there are more corrupt and the stakes far more severe, but the spirit of the people and the culture, not to mention the weather that is as relentlessly sunny as the campaign advertising was relentlessly annoying, would have been very therapeutic.

But instead, for reasons I can only attribute to a misdirected childhood, I decided to read the holy grail underpinning the Liberal campaign — the Ernst & Young and Grant Thorton consultant studies on the potential revenues to the B.C. government from LNG development in B.C. It was the big numbers in those reports that presumably led the Liberals to claim that a vote for them and their LNG plans was a vote for a debt free B.C in 15 years. “It was the choice BCers could make”.

Of course, there was nothing in the Ernst & Young and Grant Thorton studies that could lead one to conclude that LNG development would enable B.C. to be debt free in 15 years.

Firstly, both studies, in classic ‘economic impact’ consulting tradition, did not provide estimates of the incremental net revenues the government could expect. Their big numbers included, for example, the estimated income taxes paid by all of the workers directly or indirectly employed by the project, as if none of those workers would otherwise have been employed and paying taxes; and none would have been in-migrants, increasing the need and government expense for medical, school and other public services and infrastructure that they and their families would require.

Nor did the studies consider and net out the increased investment and debt, not to mention financial loss, that BC Hydro would incur if, as Premier Clark has indicated, it were to build Site C and other projects to supply the new LNG plants. And, needless to say, no offset costs or ‘debt’ of any sort was considered in respect of the GHG emissions the plants and related upstream gas production would cause.

But even more fundamentally, neither study provided forecasts of any kind. They both explicitly stated that their numbers were simply the product of a set of assumptions about growth, price spreads and other factors over which they had no confidence. As Ernst & Young stated: “The calculations of projected revenues are based on assumptions as set out in this report which may or may not materialize… the actual revenues that may be received by the Province from the LNG projects may differ significantly from these projections”.

Even more pointedly Grant Thorton stated: “The estimates are not forecasts and this report is not intended to attribute any probability that those impacts will occur or will not occur in the future”.

The reports provided big numbers. In the campaign they were used to advertise relentlessly a very big lie.


Topics: ,