February 28, 2023 (Victoria, B.C.) - The 2023 B.C. Budget outlines plans for large spending increases, the return of annual operating deficits, and a surge in provincial debt over the next three years. The economy and labour market are overheated and operating above capacity, and the Bank of Canada has raised interest rates to address runaway inflation. This is hardly a good time for the province to be running deficits and taking on large amounts of additional debt.
The Business Council is concerned that Budget 2023 includes no mention of getting back to fiscal balance nor a clear path to the type of sustained per capita economic growth that supports prosperity for families and businesses and sustains government revenues over time.
"We recognize the pressure to address challenges in the health care system, social services and rural communities, and also to deal with rising living costs for many British Columbians," said Ken Peacock, BCBC's Chief Economist. "However, government spending is set to advance at a record pace, which is likely to pose fiscal risks over the medium term. In addition, Budget 2023 contains no substantive measures aimed at driving long-term economic growth, improving business investment conditions, boosting productivity, or reducing business costs."
The Budget proposes substantial increases in capital spending. Investments in new hospitals, schools and transportation infrastructure are necessary, but the planned new investment comes when capital spending is already high, and project construction costs are escalating. We see a risk that higher capital spending in 2023-24 will aggravate construction sector inflation and result in more cost overruns on projects.
BCBC is particularly concerned over the competitiveness of the province’s leading export industries, which play an outsized role in underpinning B.C.’s prosperity. While we welcome efforts to address the natural resource permitting backlog, more work is required to address the increasing complexity and costs associated with British Columbia's government-mandated regulatory system, which is currently impeding both investment and meaningful economic reconciliation.
The Budget does signal the government’s intention to align B.C.’s carbon pricing system with the federal government’s system and develop a made-in-B.C. output-based pricing regime. We look forward to engaging with government officials on the details. For our members, the goal must be a revamped B.C. carbon pricing regime that matches the federal backstop system in the economic protection afforded to major export-oriented industries.
Unfortunately, this Budget does nothing to address or even acknowledge challenges stemming from high business taxes, levies and fees; and uncompetitive personal income tax rates for highly skilled workers and entrepreneurs. These are significant shortfalls.
We also note that the Budget 2023 provides additional funding for training – including short-term training courses – which should strengthen and build the talent and skills vital to B.C.’s current and future economic success.
"The bottom line is that Budget 2023 significantly expands the role, reach and cost of the public sector in the economy while offering little new to support the prosperity of businesses or families in British Columbia," concludes Mr. Peacock.
Both provincial government spending and the broader public sector payroll have seen exuberant increases in the last few years – a trend that will continue.
Considering that the private sector accounts for at least 75% of all economic activity (including jobs) in B.C., the Business Council does not believe British Columbians can expect much in the way of a sustainable and prosperous economy nor real per capita income growth against a backdrop of an ever-expanding public sector.
About the Business Council of B.C.
Now in its 56th year as the premier business organization in British Columbia, the Business Council of B.C. is a non-partisan organization made up of over 200 leading companies, post-secondary institutions and industry associations from across B.C.'s diversified economy and in every region of B.C. The Council produces exceptional public policy research and advocacy and convenes sectors, governments and Indigenous Nations in support of creating a competitive, sustainable and productive economy for the benefit of all British Columbians. For more information, visit www.bcbc.com.
In the coming days, the Business Council of B.C. will release a full analysis of BC Budget 2023.