British Columbia’s finances began a transformation on Tuesday as the new NDP government moved to reshape the government’s role in the lives of its citizens, with massive investments in education, health care and affordable housing promised in the coming year.
After 16 years of Liberal budgets that were informed by fiscal prudence, the New Democrats signalled they intend to spend on British Columbians they say were neglected in that restraint. They will be assisted by a provincial economy that is stronger, by every key measure, than the Liberals predicted in February, as well as by income-tax hikes on the wealthiest British Columbians and an increase in corporate taxes.
However, the reckoning of some of the NDP’s biggest promises – a $10-a-day child-care program, the elimination of Medical Service Plan premiums and a $400 annual subsidy for renters – was left for another day. Paying to get those promises under way would have far exceeded this budget’s projected surplus and the relatively thin surpluses forecast for the next three years.
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“We can’t turn back the clock of 16 years overnight,” Finance Minister Carole James said.
Ms. James said the political turmoil that followed the May election left little time to overhaul the current year’s budget, and major changes will have to wait until next year, leaving time for consultation.
“I understand people’s impatience.”
The budget update is based on a fiscal plan the former BC Liberal government introduced in February. In addition to raising taxes on high-income earners and corporations, it unlocks more spending in classrooms, new money for affordable housing and housing for the homeless and additional resources to fight the fentanyl overdose crisis.
The NDP formed a minority government with support from the third-place BC Greens eight weeks ago. A disagreement between those two parties over the shape of the child-care program prompted Ms. James to sidestep the $10-a-day commitment, saying the details will be subject to negotiations with the Greens.
Ms. James arrived in the Finance Ministry at an auspicious time. While the NDP government in Alberta is struggling to stem a tide of red ink, Ms. James had plenty of breathing room, with economic growth exceeding projections and a robust surplus on the books.
Hard-hit by low oil prices, the Alberta government has already used half of its financial cushion in this fiscal year to keep its deficit down to $10.5-billion.
By contrast, Ms. James was able to boost spending by $1.7-billion this year without threatening her province’s projected surplus. While the Finance Minister acknowledged risks to the B.C. economy, including uncertainty surrounding the softwood-lumber dispute with the United States, the forecast shows better-than-expected revenues fuelled by strong growth in employment, retail sales, housing starts and energy exports.
The single-largest change in the current fiscal year is not as a result of an election promise, however. The budget includes an extra half-billion dollars for fighting wildfires as the province continues to cope with the worst fire season in its recorded history.
With some big-ticket spending promises yet to be accounted for, critics worry that the BC NDP government will have to raise taxes or slide into deficit to finance new programs in the future.
Liberal finance critic Shirley Bond said the public clearly wants more spending, but the NDP fiscal plan won’t create jobs or grow the economy. “If you are going in invest in programs – and there is no denying British Columbians want us to do more of that – we have to find ways to grow the economy.”
Jock Finlayson, chief economist for the Business Council of B.C., applauded the NDP’s cautious economic forecasting. “Over all, the fiscal framework is reasonable,” Mr. Finlayson said, but he added that the government’s “more activist approach” will mean more spending and could eventually lead to deficits if the province’s trade-dependent economy slows.
As promised in the election campaign, the B.C. government is increasing taxes on the wealthy. People making more than $150,000 a year will once again find themselves in a separate income bracket, which was introduced briefly and then rolled back by the Liberals. The increase will add about $200-million a year in revenue in the coming years.
The province’s corporate-income tax rate will rise to 12 per cent, from 11, putting B.C. in line with Alberta, Saskatchewan and Manitoba. But the government is also giving business a break on the provincial sales tax on electricity – a measure strongly supported by the business community. As well, the corporate-income tax rate for small businesses will be reduced to 2 per cent from the current rate of 2.5 per cent.
In her first budget speech in the House, Ms. James said the update will take the province on a different path that will reduce inequality and invest in public services while nurturing a sustainable economy.
“We have a real opportunity to do things differently… to carve new path where everyone benefits from our strong economy.”
Irene Lanzinger, president of the BC Federation of Labour, said she accepts that it may take longer than promised to reach some of the NDP’s election commitments.
“We are very committed to the $10-a-day daycare, but they have shown they are going in the right direction.”
Other major changes include:
- The public-education system will see an injection of $177-million this year, a boost the NDP says will help return class sizes to levels that existed before the Liberal government began imposing austerity measures in 2002;
- There is $145-million in new money for modular housing units for the homeless and $13-million for affordable rental housing this year. Those amounts are slated to increase in the next few years to a total of half a billion dollars for thousands of new units;
- An existing plan to cut health-care premiums by 50 per cent on Jan. 1, 2018, has been expanded, while the government studies how to eliminate the fees altogether.
The Liberals lost their majority in the provincial election last May. In a bid to hang on to power, the government of premier Christy Clark introduced a Throne Speech last June that offered many of the platform commitments made by both the NDP and the Greens, including child-care spending and hikes to social-assistance rates, which the Liberals had frozen for a decade.
However, the Liberal government fell on a vote of confidence, Ms. Clark has quit politics, and the new Liberal opposition has declared it will not be held to the promises made in that Throne Speech.