When former B.C. NDP premier John Horgan first formed his government in 2017, one of his first appointments was naming trusted friend and one-time party leader, Carole James, as his finance minister.
Both Ms. James and Mr. Horgan were veteran political pragmatists. They understood better than most where the party’s political weaknesses lie and that one of the biggest concerns the public had was the NDP’s reputation for being spend-thrifts – lefties who hadn’t a clue about properly managing the province’s finances.
Indeed, after holding power for a decade in the 1990s, the NDP was run out of office amid the pervasive view it couldn’t run a candy store, let alone an entire province.
So under Mr. Horgan’s NDP government, the priority became sound fiscal management. Balanced budgets (with surpluses) became a priority. The party’s first budget in 2018 delivered a $1.5-billion surplus. Maintaining the high credit ratings inherited from the B.C. Liberals (now BC United) was important. In fact, the NDP went even further, using surplus funds to retire the remaining direct operating debt of the province.
It’s part of the reason Mr. Horgan’s approval ratings were often off the charts.
But that was then and this is now. David Eby took over as Premier in November, 2022, and quickly signalled a major policy shift: fiscal prudence and balanced budgets were no longer a priority. Now was the time to spend, spend, spend.
It’s a strategy that could be acted upon for only so long before it exacted a cost.
Right on cue, the credit rating agency S&P recently lowered B.C.’s rating to AA- minus from AA, and tagged the province with a negative outlook. Later, Moody’s Investment Service downgraded the province’s economic outlook to negative, from stable. Both agencies highlighted the province’s burgeoning debt situation.
Others are now also paying attention to what is happening in one of the country’s richest provinces.
In a recent piece for The Hub, Calgary economist Trevor Tombe looked at the growing debt situation in B.C. and concluded the province is playing with fiscal fire. Some of his numbers are worth noting: B.C.’s recent budget has a real per-person total expenditure increase of 1.8 per cent. Capital spending per person (adjusted for inflation) is also rising fast, by 27.1 per cent in 2023 and an anticipated increase of 19.5 per cent in 2024.
“Since Premier Eby took office in 2022, the province has borrowed heavily,” Mr. Tombe wrote. “From a modest surplus of $704-million in 2022, the deficit is now projected to exceed $7.9-billion in 2024, with similarly substantial deficits in the years to come.”
As a share of the province’s economy, he noted, B.C.’s debt is projected to increase to 28 per cent by 2026, from just 15 per cent in 2022.
“Simply put,” Mr. Tombe noted. “B.C.’s provincial debt is accumulating at a pace that cannot be sustained.”
The economist says that what is happening in B.C. is shocking, given that it wasn’t that long ago that the B.C. NDP was being hailed for its fiscal conservatism.
“I estimate that B.C.’s long-run fiscal future is now bleaker than any other, including Newfoundland and Labrador, which normally holds such a distinction,” Mr. Tombe wrote. “To stabilize B.C.’s debt trajectory, I estimate revenue must increase or expenditures must decrease by 4.8 per cent of GDP immediately and permanently.”
For the uninitiated, that is an absolutely enormous figure. To put it in perspective, notes Mr. Tombe, imagine raising the provincial sales tax to 22 per cent from seven. That’s what it would take for B.C. to underwrite its current rate of spending.
Of course, there is some important context to all this that I haven’t mentioned: an election that is scheduled to take place in the fall.
The Eby government seems to be using that tried-and-true pre-election formula: spend like drunken shoppers in an effort to entice more people to vote for you. It’s not quite Oprah Winfrey’s “And you get a car, and you get a car!” that made lucky folks in her audience howl with delight years ago, but we are talking about provincial largesse on a scale we haven’t seen in many years.
The NDP is benefiting from a split Opposition. The two parties trying to end the New Democrats’ reign – the hard-right Conservatives and centre-right BC United – are hurting one another. The rise of the Conservatives, in particular, is helping ensure the NDP will be returned to power.
Either way, Mr. Eby does not seem intent on following a war-worn dictum in politics: leave the place better than you found it. In fact, he’s creating problems that could take years to resolve.
Gary Mason