The NDP provincial government is forecasting its 2024 budget to have a historic, record-breaking deficit of nearly $8-billion.
The total provincial debt will rise to $123.2 billion from $103.7 billion, the B.C. NDP government unveiled Thursday, Feb. 22. This includes estimated expenses at $89.4 billion and revenue at $81.5 billion.
The increase in debt means that just under 4 cents of every dollar of revenue will go toward interest to service that debt. This servicing cost is forecasted to hit 5.4 cent per dollar in 2026/27.
Finance Minister Katrine Conroy said Thursday that B.C. remains on “solid financial ground” with a strong, resilient economy, but framed her government’s policy measures as a necessary response to the difficult challenges facing working and middle-class families.
They will help B.C. get through a slowing economy, while building a greener one, she said.
Amid B.C.’s growing and aging population, the province is focusing on health-care spending and education, as well as housing.
“We cannot have a deficit of services,” she said, noting that it took B.C. a long time to rebuild the services cut during 16 years of government under the BC Liberals.
Conroy said this is not the time to cut service.
“We have to govern and we have a responsibility toward the people.”
She also pointed out that deficits are forecast to decline ($7.7 billion in 2025, $6.2 billion in 2026) but could not give a date when B.C. would return to a balanced budget.
The rising deficit and debt reflect higher spending in several areas, key among them health care and mental health, whose overall budget is rising to $32.9 million in 2024 from $28.7.
Government is also giving British Columbians a break on their hydro bills, but only for one year through a one-time affordability credit starting April 2024. Government predicts that households will save $100 over the year, while businesses stand to receive hundreds of thousands depending on their consumption.
Families will also see receive a year-long-bonus of 25 per cent on top of their monthly family benefit bonus. A family of four would receive as much as $3,563, up from $2,850 without the bonus.
British Columbians will also see a temporary increase in their quarterly climate action tax credit with a family of four receiving about $115 more starting July 2024.
Money for that increase will come from increases in the carbon tax, which will go up to $80 per tonne from $65 per tonne as of April 1.
Relief welcomed, but more needed
Rowan Burge, provincial director of the BC Poverty Reduction Coalition, welcomed the temporary relief, but also acknowledged that more structural changes are needed. Sussanne Skidmore of BC Federation of Labour welcomed the overall direction of the budget.
“It’s a sign that government is listening to British Columbians,” she said. “Times are tough right now,” she said.
Individuals looking to start a family will also get one round of in-vitro fertilization funding from the provincial government.
Most, but not all, businesses will get a break on the employers’ health tax, the annual tax employers pay on wages.
Businesses who pay up to $1 million in wages are now exempt from the tax, the previous threshold being $500,000. With this move, government responded to a long-standing concern from business groups, which have been critical of the tax specifically and rising regulations generally.
The budget also includes a flipping tax on the profits of properties sold within less than two years, which in the words of government is designed to “further crack down on speculators and those driving up the cost of housing.”
It will kick in on Jan. 1, 2025 with government tabling the necessary legislation this spring session.
It is expected to generate $43 million in the first full fiscal year of 2025/26 and many experts consider it to be the final, high-profile measure of government’s housing platform.
Thursday’s budget will likely confirm the fears of some economists, such as Ken Peacock of the Business Council of British Columbia, who have expressed concerns about B.C.’s mounting debt.
Carson Binda of the Canadian Taxpayers’ Federation echoed those concerns.
“This budget is absolutely master class in financial mismanagement and illiteracy from our finance minister,” Binda said, adding interest payments alone will cost taxpayers $4.1 billion. “That’s is more money than we are spending on all but three ministries.”
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Fiona Famluk, chief executive officer of the BC Chamber of Commerce, welcomed the relief on the EHT, but also expressed concerns about rising costs for business.
Revenue also growing
Revenues, meanwhile, are rising to $81.5 billion from $77.3 billion in 2023. While revenue from taxation rose to $49.2 billion from $46.2 billion, other key sources of revenue such as federal transfers stagnated for the most part.
They include revenues from natural resources, rising to $3.1 billion in 2024 from $3 billion, a reflection of difficulties in the forestry sector. But the budget also responds to industry demands for investments in mining.
The budget assumes soft economic growth through 2024 with real GDP growing at 0.8 per cent, down from 1 per cent in 2023.
This modest growth projection reflects what government calls the “impact of high interest rates” and the overall global economy, which has been slowing down.
Missing from the budget is a tax on wealth (rather than revenue) or windfall profits, a demand from BC Green Party Leader Sonia Furstenau and other economists, such as Alex Hemingway of the Canadian Centre for Policy Alternatives.
Hemingway said the budget is appropriate given the current state of economy, but reiterated his call to increase revenue through economic growth and other measures in the face of rising deficits and debt.
Hemingway also challenged Conroy’s argument that the choice was running deficits and cutting spending.
“That’s the wrong to look at it,” he said. “The question is are we going to run deficits or are we going to raise revenue in a way that reduces inequality and allows sustained investment in public services, which are badly needed.”