If Claims are Correct, Bond Cancellation 'Good Idea'

If the provincial government's claims are correct, then its plans to cancel the B.C. Savings Bonds program is a good idea says Dr. Paul Schure of UVic's department of economics, who specializes in financial economics and the raising of capital. "The B.C. Ministry of Finance claims it can borrow more cheaply through other means and points out that the B.C. Savings Bonds plan is awkward because the amount of funds it attracts is pretty unpredictable. The latter objection is not so serious because they could simply change the method of selling the bonds, rather than cancelling the program altogether. The argument that the plan is expensive is more serious. However, it is difficult to see whether that is indeed true. The Ministry of Finance provides a spread sheet specifying the savings, but the sheet does not tell the tax payer what the alternative for the present plan is, and what interest they have paid on this 'alternative financing option.'" Schure says most governments use bond plans where they simply auction off the bonds. In this way governments can determine exactly how many bonds they sell, while the auction system guarantees a competitive price. "I hope this is the 'alternative financing option' the Ministry of Finance talks about. If it is, then it is probably a good idea to phase out the savings bonds. If not, the government should think about using a similar method to make provincial savings bonds more cost-effective."

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