Good morning. Wendy Cox in Vancouver this morning.
In April, 2021, the B.C. government brought in its first budget following a full year of the economic and social upheaval caused by the pandemic. The fiscal plan, driven by health spending at record heights and worldwide economic uncertainty, predicted an unprecedented deficit of $9.7-billion on a $64.3-billion budget.
Then finance minister Selina Robinson estimated it would take seven to eight years to return to a balanced budget.
Instead, when the books for 2021-22 were tallied, British Columbia ended the year with a $1.3-billion surplus.
Anyone concerned about the province’s debt and deficit situation might hope for a similar turnabout for the end of 2024-25.
In the budget released Thursday, Premier David Eby’s NDP expects to overspend by $7.9-billion on an $89.4-billion budget. If that deficit figure is realized, it would be the highest the province has recorded. And it would have done so without a seismic event such as a global pandemic.
Finance Minister Katrine Conroy dispensed with an estimation of when the books might return to balance. She noted repeatedly that “now is not the time,” with high interest rates, a housing crisis, a slower global economy and inflation, for spending cuts or dramatic tax increases.
Whenever is the right time isn’t soon. Budgets delivered in election years are definitely not the time to curtail offerings such as the two one-time rebates in this year’s budget. Electricity customers will receive a 4.6-per-cent credit on their bills, starting in April, though that return will be tempered by a 2.3-per-cent annual rate hike approved for BC Hydro. Still, for individual families, the savings are expected to add up to about $100 over the year. For large industrial customers, however, the savings will be substantial – for an average mining operation, the credit will be worth more than $200,000.
The monthly B.C. Family Benefit will be increased, as a one-time measure, by 25 per cent in 2024. About 340,000 families will be eligible for the means-tested program, and a qualifying family of four will receive an annual benefit of $1,760.
In other measures, more businesses will be excused from paying the employer health tax, as the exemption threshold rises, from a payroll of $500,000, to $1-million.
Resources for fighting forest fires will grow, along with support for people who are evacuated. The province is also boosting programs to reduce flood risks and improve drought resiliency.
Expanding on the string of initiatives announced in recent months designed to tackle the housing crisis, B.C. will be the first province since the 1970s to introduce a flipping tax on home sales. Beginning at the start of next year, this 20-per-cent penalty will apply to homes sold within a year and declines to zero for properties unloaded after two years. This levy, which provincial bureaucrats estimate will apply to less than 10,000 annual transactions, layers on top of the new federal flipping tax on units sold within a year.
This year’s budget deficit, followed by similar overspends in the next two years of $7.7-billion and $6.3-billion, will contribute to soaring debt. Provincial debt has doubled since the New Democratic Party formed government in 2017.
Kevin Falcon, leader of the BC United opposition, said he expects the province will see its vaunted triple-A credit rating downgraded as a result of the fiscal plan.
“This is the worst example of reckless spending I have ever seen in a government budget,” he told reporters. “At the same time we’re getting the worst outcomes we’ve ever seen in health care, in public safety, in drug overdose death rates, in housing affordability – in every area the provincial government is responsible for.”
Bridgitte Anderson, CEO of the Greater Vancouver Board of Trade, said the debt numbers are troubling. “We are concerned about what we are seeing for the future of our province when it comes to debt and deficit,” she said. “We know services need investment, but concerns remain about where the economic growth is going to come from.”
The Finance Minister said the province’s debt load is favourable compared with other large provinces.
“Our debt burden remains manageable,” she said. The province’s interest costs as a percentage of government revenue are less than half of that paid by Ontario and Quebec, she said.
This is the weekly Western Canada newsletter written by B.C. Editor Wendy Cox and Alberta Bureau Chief Mark Iype. 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.
Wendy Cox