Expensive assistance programs and declining revenue, all linked to the COVID-19 pandemic, have contributed to turning the $227-million surplus that British Columbia predicted just five months ago into a projected $12.5-billion deficit, the provincial Finance Minister says.
But Carole James said Tuesday she is not looking at any measures, including tax hikes, to begin to trim the “staggering” deficit because the workers, families and others in British Columbia need the support programs now under way.
“This is not the time to be pulling back and to be cutting programs and services that are critical for economic recovery for people,” Ms. James told a news conference.
“In these kinds of times, looking at the balance [of the budget] over providing support for people and businesses while we’re in the middle of a pandemic, not knowing what can come, not knowing whether the second wave is coming, would be, frankly, irresponsible.”
She said the supports are critical to rebuilding the economy after what she called the province’s worst downturn in recent history.
Still, she said B.C.‘s NDP government will be watching its spending. “We will be looking, of course, to make sure that every cent we spend is spent wisely, is spent on the priorities we have had as government,” she said.
The government has spent at least $6.3-billion in support programs for individuals and businesses, and enacted hundreds of millions of dollars in other business relief and tax measures, as well as an increase in the climate action tax credit.
But according to Tuesday’s economic update, it is facing a $6.3-billion decrease in overall revenue, plus increasing debt servicing costs.
Elsewhere in the B.C. economy, the province had a 13-per-cent unemployment rate in June, up from 5 per cent in February. Between the two months, British Columbia has 235,100 fewer jobs.
Still, Ms. James noted unemployment is down from 13.4 per cent in May as more people have begun to work again as COVID-19 lockdown restrictions have eased, but job losses won’t reverse this year.
Also, retail sales are expected to decline by 15.9 per cent in 2020. And the province’s gross domestic product is seen declining 6.8 per cent in 2020 (though it could grow by 3.1 per cent in 2021).
According to the update, taxpayer supported debt may reach $61.9-billion at the end of 2020-21, up from a $49.2-billion projection in the provincial budget released in February before the pandemic lockdown began.
Ms. James said she is hard-pressed to come up with a clear assessment of the future.
“I cannot emphasize enough the challenges in preparing any kind of scenario right now. To present a possible outcome when you see the kind of volatility, it creates some real challenges,” she said.
“That’s why we have developed a scenario rather than a typical forecast, because of the unprecedented nature of COVID-19 and the uncertainty regarding the magnitude of the economic decline caused by the pandemic and the path to recovery, and what kind of path the recovery takes as well.”
In a statement, B.C. Liberal Leader Andrew Wilkinson said the deficit is not surprising, but it is a surprise that the NDP government has no economic recovery plan and insists there will be no change in government spending priorities laid out before the pandemic.
“This is simply unsustainable,” Mr. Wilkinson said.”People in every corner of B.C. have had to adjust to a new normal and adapt their household budgets so why is government pretending it’s business as usual?”
Bridgitte Anderson, the president and chief executive officer of the Greater Vancouver Board of Trade, said the update reveals the “stark reality” of the damage the pandemic has inflicted on every aspect of the economy.
Ms. Anderson said the NDP government should immediately release an economic-growth plan led by the private sector, focused on such priorities as fostering innovation, “upskilling” the work force, and flexible solutions for child care.
“The government should refrain from implementing measures that add administrative burden, red tape, or costs to struggling businesses,” Ms. Anderson said in her statement.
We have a weekly Western Canada newsletter written by our B.C. and Alberta bureau chiefs, providing a comprehensive package of the news you need to know about the region and its place in the issues facing Canada. Sign up today.