Despite surging revenues, B.C. Budget pencils in sizable operating deficits while delivering little to encourage stronger medium-term growth
On February 22, 2022, the Government of British Columbia released B.C. Budget 2022: Stronger Together. As noted in our initial response to the budget, the Business Council welcomes the Government’s plans to improve social supports, invest in clean growth, boost capital, advance reconciliation and increase opportunities for skills training. However, there is a worrisome lack of attention to encouraging investment, innovation and the scaling up of business to strengthen the economy, lift real wages and boost government revenues.The Business Council’s Chief Economist has completed a detailed analysis of key aspects of the provincial budget, including its fiscal and economic outlook. Unfortunately, the Budget missed the opportunity to outline a more refined framework of fiscal prudence and stability. Sound fiscal management and comparatively low debt levels have been have been advantages for B.C. Having weathered the pandemic, the government could have leveraged surging revenue growth to chart a course for fiscal stability, enriched program spending for households and individuals, and measures that deliver meaningful improvements to B.C.’s competitive position. For the most part, Budget 2022 falls short on these counts.Key takeaways:
The 2022 provincial Budget embodies a substantial amount of new program spending in priority areas.
The Budget plans for operating deficits over the next three years. But the government has left a substantial fiscal cushion in unallocated contingencies.
Both capital investment and the operating deficits will add to the debt. The provincial taxpayer-supported debt-to-GDP ratio rises steadily over the Budget horizon.
Budget 2022 contains a few measures aimed at encouraging investment and stronger economic growth, but the funding amounts are small and conflated with other policy objectives. There is little in this Budget to support business investment and scaling.
The Budget provides some funding to help improve the competitive position of B.C.’s energy-intensive trade-exposed industries. But the commitments to provide meaningful relief are vague and do not show up until the third year of the fiscal plan. Absent details and more immediate relief companies are more likely to postpone investment decisions relating to their B.C. operations. This is a major weakness of Budget 2022 in our view.
The Business Council is concerned that the new Budget bakes in higher spending levels and operating deficits at a time when the economy is operating close to capacity and government revenues are unusually elevated.
Unfortunately, this Budget does nothing to address competitiveness challenges or bolster the export sectors that generate wealth and prosperity. Appropriately, there is plenty of attention devoted to a clean economy, but there are no measures aimed at growing the economic pie and improving prosperity for all British Columbians more broadly.
