The Eby Government, in their new budget, increase spending by a surprising 7.8%, while they project revenue to decline 6.1%. The result in the coming fiscal year, will be a deficit projected at $4.2 billion.
This, at first blush, seems wildly irresponsible. However, the government has built in large provisions for contingencies. Keith Baldrey of Global B.C. informs that the government has established $5.5 billion for various contingency funds for program spending, and a $700 million cushion for lower revenues for the coming year. As well, the government has been “prudent as usual” and “lowballed” some revenue figures, says Baldrey, and has been cautious forecasting economic growth of only 0.2%. So, it appears, while the budget could remain $5.5 billion in deficit, a balanced budget or lower deficit is plausible.
The increased funding in 2023 is largely applied to policy areas that require urgent attention. The Budget will provide $450 million to build homes, $384 million to deal with homelessness and $200 million for mental health and addictions treatment. The budget also added funds to support renters and an affordability top-up for income assistance. Healthcare will receive an additional $2.3 billion in 2023.
That further investment and funding is required in most of these areas is undeniable. But the level of additional funding, with the exception of healthcare and mental health and addictions, is questionable. Significant inflationary pressures remain in the economy. With expansionary fiscal policy in BC and other jurisdictions, the Bank of Canada may need to further boost interest rates or to lengthen the period they are in place in order to subdue inflation. Further, to grow expenditures of governments by increasing debt is unsustainable. At some point, interest charges will crowd out program spending.
The Coalition for a Better Future recently released their 2023 Scorecard Report. It acknowledges that Canada is a laggard when it comes to growth and competitiveness. The scorecard has 21 metrics. The metrics tracked are national, but are largely reflected in the B.C. economy.
Lisa Raitt, former Deputy Prime Minister, is co-chair of the coalition. Raitt told John Ivison that the most important metrics are GDP per capita and a prosperity index comparing Canada to 167 other countries. She said, “In both cases we are dropping. That is of great concern.” Canada has not fully recovered the real GDP per capita recorded in 2019. B.C. is not doing much better. Indeed, the budget forecasts that it will decline a further 2% in 2023 and 0.4% in 2024 and recover by only 0.7% in 2025. Our prosperity is ebbing away. Canada, at 15th, is already down four places on the prosperity index in the last decade.
The Scorecard Report says it best, “There is only one way to produce higher wages and incomes in the long run for Canadian workers, and that’s to make our economy more productive.” Business spending on R&D, intellectual property and machinery and equipment are stagnant and well below our peers, the report says. There has been some modest progress in scaling companies, and there has been growth in the exports of small and medium-sized businesses in Canada. In B.C., however, exports as a percentage of GDP are falling. In short, to grow GDP per capita, Canada and B.C. must improve productivity growth.
The B.C. Budget clearly misses the mark. In fact, it does not seriously target a more productive economy and increased real income for B.C. residents. Raitt, in an interview with Michael Serapio, said that they hope that their report will help inform public policy makers where to deploy the tools they have. She said, “we are highlighting, you’ve got a big problem …. It’s impacting median wages.” Government must look at business investment seriously, and figure it out because other governments have, she advises. “We’re not … telling government and private business what to do.”
The Business Council of B.C. does not show the same reticence. Cheryl Muir provided a four-point outline for a more prosperous economy. First, the government must avoid excessive spending that will fuel inflation. Second, B.C. must expand exports of goods and services, which play an out-sized role in creating prosperity. We must ensure proposed capital projects proceed, as infrastructure is required to grow exports. Third, B.C. must improve innovation, capital investment and productivity. Fourth, B.C. needs a strategy to develop and retain the skilled workforce that will build the new economy.
Raitt noted that in the elections with which she was involved, “none talked about long-term growth.” She concluded, “We need a bigger vision and bigger thoughts about where this country is going long-term.” Raitt believes at least now we are talking about it. Well … the B.C. government, not so much.
Bruce W Uzelman
I grew up in Paradise Hill, a village in Northwestern Saskatchewan. I come from a large family. My parents instilled good values, but yet afforded us, my seven siblings and I, much freedom to do the things we wished to do. I spent my early years exploring the hills and forests and fields surrounding the village, a great way to come of age.
I attended the University of Saskatchewan in Saskatoon. I considered studying journalism at one point, but did not ultimately pursue that. However, I obtained a Bachelor of Arts, Advanced with majors in Economics and Political Science in 1982.