Budget 2019 delivers some promising program spending but little to address B.C.'s deteriorating competitiveness

The 2019 provincial Budget is a bit of a ho-hum document that contained no major surprises. As expected, it introduces additional program spending to help fulfill the government’s commitment to expand and strengthen social supports for families and lower income households. What is concerning is the absence of significant new measures or announcements to help address growing competitiveness challenges in the province. The government continues to run small operating surpluses over the course of the updated three-year fiscal plan. There is a stepped-up pace of borrowing to fund capital projects, which adds to the accumulated net debt. However, the net debt-to-GDP ratio remains manageable and at the lower end among the provinces.

The Business Council believes that policy-makers are underplaying the need to improve the competitive environment. The Budget overlooks the impact of rising business costs, an inability to advance major projects, and uncertainty for investors and firms looking to expand. At the same time, Budget 2019 bakes in higher future costs, many of which do not fully materialize for some time due to the time required to implement programs or because they are phased in. Having said that, the near-term spending increases outlined over the three-year fiscal plan are sizable.

REPORT HIGHLIGHTS

• Finance Minister Carole James tabled a budget outlining modest surpluses over the next three fiscal years. There is some degree of cushion built into the projections.
• The government is putting more resources into a variety of program areas, including child care, housing, anti-poverty initiatives and measures linked to the CleanBC plan. The result is that total program spending grows by 4.5% in 2019-2020, somewhat higher than the spending increases recorded over the past ten years.
• The Budget increases taxpayer-supported capital spending from $4.8 billion in 2018-19 to $6.3 billion in 2019-2020. Taxpayer-supported capital outlays rise further to $6.8 billion in fiscal 2020-21. Much of this increase is directed towards schools and hospitals, but there is also additional funding for transportation infrastructure.
• Another shortcoming is that the Budget offers nothing to help bolster the adoption of technology. The digital transformation continues to re-shape the economy and the labour market and governments and businesses are struggling to respond to the challenges and opportunities associated with accelerating technological change.
• The Business Council is concerned that policy-makers are underplaying signs of softening growth globally and in North America while program spending is rising.