Good morning. Wendy Cox in Vancouver here.
Balanced budgets were the gold-standard for Canadian governments in the early 2000s: British Columbia worked to get one, then trumpeted that it had one, turning its fiscal performance into majority governments until 2017.
But the bright, shiny object is now as out of fashion as a Sunday-best hat and white gloves. Necessity made it so, first with the 2009 financial crisis and now, especially, with a global pandemic and the utter economic devastation it has wrought. The numbers this week are staggering.
First, on Monday, the federal government unveiled a budget aimed at bringing the country into recovery, but also ensuring it looks a bit different when we all get there. A national child-care program, discussed for 30 years, is now firmly on the table. New federal spending on affordable housing is planned, as well as extensions to many of the support payments aimed at getting businesses and individuals through the storm. The budget includes $135.2-billion in new spending over five years. The price for this coming fiscal year is a deficit of $354.2-billion.
The feds had no estimation on when the budget would be balanced. Writes Gary Mason: “There is a lot less in the budget about red ink and having fiscal anchors that give us some idea of what constitutes acceptable levels of debt and deficits in the future. ‘Anchors are what they are,’ said a senior government official when asked where it all stops. He said he was more concerned about anchors becoming straitjackets.”
Alberta’s budget, introduced in February, included an $18.2-billion deficit for 2021-22, which is second only to the province’s record $20.2-billion shortfall estimated in the current year. The UCP government also did not offer a timeline for when its books would be back in the black.
British Columbia introduced its budget on Tuesday and unlike Ottawa and Alberta, offered an estimate for balance: Seven to nine years.
As Justine Hunter reports, the document pledges to accelerate construction and repairs of schools, roads and hospitals, part of a job-creation and capital spending plan aimed at spurring a swift economic recovery from the impacts of the pandemic.
Health-care spending will be driven to record heights, and so will the deficit: $9.7-billion on a $64.3-billion budget. Finance Minister Selina Robinson said while the province’s health-care system is still struggling to meet the demands of the third wave of the pandemic, the budget forecasts the provincial economy will have recovered by 2022.
“The pandemic will end. When it does, B.C. will be ready for the opportunities that come with recovery,” Ms. Robinson said in her speech.
Employment is back at pre-pandemic levels, and revenues are being buoyed by strong commodity prices, retail and housing sales. But the recovery has been uneven.
Greg D’Avignon, president and chief executive officer of the Business Council of B.C., said the province has already lost about 2,300 businesses because of COVID-19, and many more are not expected to survive the third wave of the pandemic, which is hitting the tourism and hospitality sectors especially hard. As many as 50,000 businesses could fail, he said in an interview on Tuesday, adding that it was disappointing the provincial government didn’t have more measures to help businesses pivot to emerging opportunities and demands.
“The global economic recovery is already under way,” he said. “Nobody is waiting for British Columbia or Canada. We need to start to act now in order to participate in that growth opportunity, because we have a lot that the world wants, but we need to position ourselves to get on our front foot, to take advantage of the demand.”
The budget promises new money for training and job creation, but its grants program for small- and medium-sized businesses had a rocky start. Last spring, the government approved $345-million for pandemic relief, but just $150-milion has been distributed. The new budget offers only to finish distributing the promised grants, with no new cash.
Meanwhile, the housing markets of Toronto and Vancouver have skyrocketed during the pandemic. Ms. Robinson said the “incredible activity” surprised everyone.
Her government is relying on pending changes to Canada’s mortgage stress test to tamp down demand in its heated housing market, with the provincial budget opting out of any new real-estate taxes in favour of continuing to fund more supply.
Budget documents say low interest rates and wealthy remote workers looking for more space contributed to a 21-per-cent spike in home sales last year compared with the year prior, with 94,000 units changing hands. During that period, the average sale price of a home on Canada’s West Coast rose 10 per cent to $781,759. The budget predicts 4,000 more homes will be sold this calendar year compared with last before overall sales and winning bids decline slightly in 2022.
Ms. Robinson said her government isn’t going to intervene before that happens to try to slow prices during their current ascent, adding her government already targeted demand through its speculation and vacancy tax and school tax on homes worth more than $3-million, both introduced with the 2018 budget.
Jill Atkey, chief executive officer for the BC Non-Profit Housing Association, told reporter Mike Hager she was pleased Tuesday’s budget increases focus on building more homes, but investment in affordable housing will need to be scaled up significantly beginning next year if the government won’t take further measures to cool the market as prices rise.
“It’s safe to say affordability has worsened during the course of the pandemic and we’ve got so many more people priced out of home ownership – that puts tremendous pressure on the rental market,” she said.
This is the weekly Western Canada newsletter written by B.C. Editor Wendy Cox and Alberta Bureau Chief James Keller. If you’re reading this on the web, or it was forwarded to you from someone else, you can sign up for it and all Globe newsletters here. This is a new project and we’ll be experimenting as we go, so let us know what you think.
Wendy Cox
James Keller