In a pre-election budget that promises to leave more money in the pockets of British Columbians, the B.C. government attacked one of its most contentious and regressive fees – the Medical Services Plan premium that residents must pay to access health care.
The government says it will roll back the fee, as the highlight of the blueprint the Liberals will take into the election this spring. However the measure only reduces the premiums, rather than eliminating them, and the changes do not take effect until next January. British Columbia is the only province that has such fees and Finance Minister Mike de Jong told reporters on Tuesday that his government has felt the pressure from British Columbians who believe it is an unfair levy. Getting rid of it entirely, he added, will have to wait until the provincial coffers can live without it.
After two years of leading the country in economic growth, B.C.'s economy is expected to post more modest growth this year. The province's economy is in the midst of a shift, with resource revenues making up less than 7 per cent of the economy.
The real estate sector has been driving growth, particularly in 2016. Including spinoff activities such as construction and finance, real estate last year accounted for roughly 40 per cent of the province's GDP. That influence is expected to decline this year, however, as housing prices in the prime Metro Vancouver market settle down. B.C.'s property-transfer tax generated $2-billion in the fiscal year just ending, but is forecast to slide down to $1.5-billion in the coming year.
The real estate frenzy began to cool after the province introduced a 15-per-cent tax on foreign buyers in the Vancouver region this past summer, but Tuesday's budget projects that the foreign-buyer market will rebound over the next three years. Mr. de Jong said he is now watching key housing markets outside of Vancouver – particularly Victoria – to assess if the tax needs to be expanded to other regions.
With a provincial election set for May 9, the BC Liberal government promised to use this budget to "pay back" British Columbians after years of austerity measures.
"We are going to help British Columbians keep more of their hard-earned money," Mr. de Jong said in his budget speech.
Over all, the province is forecasting economic growth of 2.1 per cent in 2017, which would mean Ontario could edge B.C. out of the top spot, with expected 2.2-per-cent growth.
In addition to the cut to the premiums of the Medical Services Plan, the fiscal plan aims to address some of the province's acknowledged social-program deficits. The budget includes an additional $1.3-billion in spending for health care, education and child-welfare services. It also promises more money to add child-care spaces, a reduced interest rate for student loans and a rate increase for people with disabilities who are on income assistance.
However welfare rates continue to be frozen for the 11th year in a row.
Mr. de Jong said his government selected changes to the Medical Services Plan as the mechanism to reduce the tax burden and described the 50-per-cent cut as a "dramatic" measure.
"A significant number of British Columbians remain troubled by the fact that we have this premium that doesn't exist elsewhere in the country," Mr. de Jong said.
However, voters will not see a reduction in their household costs before election day, and half of people who qualify for lower rates don't see their MSP fees directly because they are covered in payroll or pension plans. It means that businesses that pay the premium for their employees will enjoy the savings. "A lot of employers will be happy to see that," said Jock Finlayson of the Business Council of B.C.
The premiums will remain unchanged until January, and the rate will only be reduced by a total of $200-million over the course of the budget year. When it is fully implemented, it will offer savings of as much as $900 a year for a family earning less than $120,000. Roughly two million British Columbians, in a province of 4.8 million people, will benefit from the change. Households earning more than $120,000 a year will continue to pay the same rate, and the remaining two million individuals do not pay any MSP premiums.
John Horgan, leader of the opposition NDP, said the MSP cut is too little and too late. "Here we are, after 16 years of neglect, 16 years of cutting budgets and reducing services to people, the BC Liberals want us to forget all that because they have found some money to plug all the holes."
Irene Lanzinger, head of the BC Federation of Labour, said the budget does little for working British Columbians. "It does nothing for the 500,000 people who are working below the poverty line," she said, and it does not do enough to restore what has been cut from public services over the past 16 years that the BC Liberals have been in power.
The $50.8-billion budget includes already-promised spending increases for housing affordability initiatives which are expected to be a central issue in the coming election campaign. But Mr. de Jong cautioned there are risks to the economy, particularly due to protectionist sentiments growing within Canada's biggest trading partner, the United States.
"We need to acknowledge we live in a world where economies continue to be fragile and unpredictable," Mr. de Jong said. British Columbia sends almost 54 per cent of its exports to the United States – meaning it is far less exposed to a shift in trade with the United States than Alberta or Ontario. But the renewal of the Canada-U.S. trade war over softwood lumber is of particular concern to B.C.'s forest sector, which accounts for 60 per cent of Canada's sales of softwood lumber to the United States.
There is also a potential cost pressure for education. The government is currently in negotiations with the B.C. Teachers' Federation to restore contract language as a result of a Supreme Court of Canada ruling. The government has provided $100-million in additional money to hire new teachers but that is based on an interim agreement with the teachers. "There is money within the budget to address the ongoing negotiations that are taking place," he said. "The cost will be determined by the negotiation."