Former B.C. Premier W.A.C. Bennett once had a cabinet minister tell him he would treat taxpayers’ money as if it were his own. “Oh, no, you won’t,” Bennett said, “not as long as I’m premier. That money is tax money, it’s trust money, and I want 110 cents worth of value out of every dollar.”
That’s a philosophy the overpaid executives at the Insurance Corporation of British Columbia (ICBC) have clearly failed to embrace. That shouldn’t be a surprise—government monopolies are notoriously inefficient and expensive.
The B.C. government’s long awaited review of ICBC was like a horror movie for taxpayers, starring an age-old government problem: the bloated payroll.
Despite the fact the number of frontline union employees shrank slightly from 2007 to 2011, the number of managers at ICBC jumped 32 per cent—272 new manager jobs. These managers were some of the highest paid individuals in the public sector; senior management compensation has spiked 70 per cent since 2007, from $12.3 million to $20.9 million.
Five years ago, 14 ICBC employees made more than $200,000. Last year, 54 broke that threshold and the bank.
ICBC says it has frozen management pay in response to the review. That’s not good enough; an immediate 15 per cent, across-the-board wage rollback should occur. If managers balk at the cut, they should be firmly reminded that ICBC has been ordered to cut 135 management positions by June 2014, and those refusing rollbacks could be first on that list.
This bloating at ICBC all occurred during one of the worst recessions in history and, along with declining investment revenue and increased claim payouts, led to ICBC raising its basic insurance rates by 11.2 per cent this year.
The report says ICBC’s “culture of cost-containment and financial discipline has been lacking in recent years.” Sound familiar? ICBC’s problems are eerily similar to B.C. Hydro’s, where a review last August revealed a “gold standard” corporate culture, 99 per cent of employees cashing in on bonuses and rising debt.
The review revealed that ICBC uses the Canada Mortgage and Housing Corporation (CMHC), the federal government and the Alberta government to set their pay grades. Inexplicably, they don’t use the B.C. government or private insurance companies. This is another good reason for a Compensation Equity Act, which would force government to take tough negotiating stands with all public workers and bring their salaries and benefits back in line with those earned in the private sector.
The B.C. Liberal government’s philosophy of letting these Crown corporations operate as monopolies has proven unsuccessful. In lieu of real market forces and competition, the boards exert no fiscal control over senior staff, who inevitably inflate salaries, benefits and staffing levels. With no accountability or competition, ratepayers suffer the consequences of higher costs and reduced revenue to government.
Government monopolies like ICBC need to be constantly monitored by politicians. Better yet, get taxpayers out of the insurance business all together. Studies have consistently shown that drivers in provinces with strongly regulated, but competitive, auto insurance markets pay less for their insurance than we do in B.C. ICBC reduced its optional insurance rate—the only part of its business it has to compete for—this year by six per cent.
One thing is certain: a lot of work has to be done at ICBC before taxpayers can trust we’re getting 110 cents worth of value out of every dollar we pay them.
– Jordan Bateman, CTF