The Harmonized Sales Tax catalyzed one of the most interesting political and policy debates in British Columbia’s history. While more will be written on the HST over time, the post-HST analysis has not provided a thorough discussion of the referendum process and outcome.

In the Winter/Spring 2013 issue of Inroads, John Richards raised the question of the merits of direct democracy in making tax policy – a bad idea in his view. On the opposite side, Richards’s colleague at Simon Fraser University, Doug McArthur, writing in Policy Options (November 2011), made a case for the referendum process: voters understood the HST well enough and the government “debacle” in introducing the HST justified the HST referendum and outcome. In McArthur’s view, this was an effective example of direct democracy.

As I see it, neither of them has it quite right. Both gloss over important process and outcome considerations that shine more light on a crucial question: Can there be sufficient “informed consent” among voters in questions of major tax policy reform to justify a limited use of direct democracy?

The debate around the HST has been framed in terms of dichotomies: Is direct democracy good or bad for tax policies? Should we have a value-added tax or not? Did the Campbell government deceive British Columbians before and after the 2009 election? To my mind, all of these dichotomies miss important questions of policy process and outcome.

For full disclosure, I worked for the provincial government until 2007, leaving as former Premier Campbell’s deputy chief of staff. I returned in October 2010, when I was tasked by the government with running what became the HST Information Office. The office had the uniquely challenging mandate of ensuring that the HST referendum went forward in a credible manner, while also ensuring that the government’s case for the HST was understood and potential changes to the initial HST were brought forward in a more publicly engaged (and acceptable) manner.

In my current role as vice-president of policy and communications at the B.C. Business Council, I will be undertaking a more comprehensive review of the HST experience, with a focus on ensuring that future provincial leaders, whether in government or in business, learn from the HST experience. However, I write here as an individual involved in the HST referendum process.

To begin, there is no question in my mind that opponents of the HST made legitimate use of the provincial initiative and recall legislation. The legislation provides a safety valve for a parliamentary system that allocates significant powers to the premier and cabinet. In a Westminster model, the threshold for the resort to direct democracy outside of election windows should be very high – which in B.C. it clearly is. The B.C. model is not built on the same premise as Switzerland or California, for example, where direct democracy initiatives are hard-wired (for better and worse) into the policymaking process.

The initiative proponents easily met the threshold of collecting the signatures of 10 per cent of the registered voters in each electoral district in 90 days. In a society that often tries very hard to avoid political engagement, their success spoke volumes about the irritation the HST stimulated among citizens.

The hard evidence is clear: there was no nefarious intent by the Campbell government to deceive voters during the 2009 election campaign and spring the HST on them once the election was over. Nonetheless the optics of introducing the HST, with no public engagement, two months after an election that made no mention of value-added taxation had an understandably negative effect on voters. While HST opponents consistently, and absurdly at points, overstated the government’s ham-fisted manner of introducing the HST, the outrage that ensued was spontaneous and widespread. The high threshold of the initiative process served as an appropriate check to ensure that the opposition was sufficiently extensive before a resort to direct democracy could be triggered.

There are a number of lessons to be drawn from this experience, some regarding the HST referendum itself and some of a more general nature. The first lesson is a rather obvious one. Major tax policy initiatives need some form of engagement with voters prior to introduction. This engagement can come in many forms: debate by a political party in an election (or prior), clear directional signals from government of a fiscal or tax competitiveness problem and a proposed tax as a solution, a formal budget consultation or innovative initiatives such as citizens’ assemblies.

The second lesson is less obvious, but important. Governments should not allow serious initiative processes to weave their way across the land without themselves engaging with the process. Admittedly, engagement by the governing party – and potentially the opposition parties – risks transforming the initiative into a rerun of the previous election. However, had the Campbell government engaged earlier with the initiative process, it could have proposed more meaningful changes to the HST and provided more neutral information (as opposed to the initial positive spin). While public anger would not have evaporated, many would have appreciated that the government was sensitive to the sense of outrage among a strong majority of voters. The government’s initial tone deaf, “this too shall pass” attitude was ultimately lethal to the HST – and the Premier.

On a more general level, here are some of the lessons that I see as worthy of mention:

  • Voters’ willingness to change their conclusion if the facts and information they receive align with their values and interests should not be underestimated. This, for me, is the most important lesson. Most observers fail to note that support for the HST polled well below 20 per cent at the time it came into effect in the summer of 2010, implying a gap between supporters and opponents of more than 60 points. Between that time and the referendum in the summer of 2011, support rose to 45 per cent, and the gap in the actual referendum was less than 10 points. While there were certainly flaws in the campaign waged by business and government through the HST Information Office, it seems fair to say that the proposed revisions to the HST and the provision of nonpartisan factual information by the office changed many minds. That some people may have voted without having a full command of the HST facts is disappointing, but ultimately to be expected in any such complex policy matter.
  • People matter. While the general public tends, with good reason at times, to look with scepticism at the so-called traditional elites in society (politicians, media, business leaders, union leaders), other societal institutions (academia and professional associations such as accountants and engineers) and social entrepreneurs need to be more engaged in helping society address conflict and in generating more informed policy discussions. There is no question that people who did get involved – those who sat on the HST Independent Review Panel, those at universities who hosted the HST referendum debates, others such as Stephen Owen who, at no cost to taxpayers, acted as a fairness coordinator for the HST referendum – all made a difference. Had the HST Information Office (i.e., the government) attempted to concoct pro-HST reports, stacked meetings and radio talk shows, disseminated highly biased information, or delivered reports that glossed over the HST’s flaws, voters would have seen through it and the referendum gap would have been far higher – assuming the government had survived intact to conduct the referendum.
  • Politics matters. Adrian Dix and the NDP clearly mounted a strong campaign that buttressed the anti-HST side, and herein is an important lesson. Outcomes of initiatives and referendums will, depending on the issue, turn to a degree on campaigns waged by political parties and engaged interests. This should not be ignored by those who place direct democracy on a pedestal. Direct democracy is part of a political process, not above or beneath it.

The HST has undoubtedly had a profound impact on how major new policies (not just taxes) will be brought forward in B.C. While I profoundly disagree with the referendum outcome, future leaders would be wise to see the HST referendum not as a debacle but as an important learning experience on which a better democracy could be built.