Business leaders offer mixed views on 2019 B.C. Budget

February 19, 2019

February 19, 2019 (Victoria, B.C.) - Today’s Budget points to higher program spending amid a slowing economy and an increasingly challenging environment for many B.C. companies. Some of the new spending commitments hold promise, but taken together will “bake in” a higher level of government costs on a going-forward basis. At the same time, the Budget contains little that will strengthen the province’s economic fundamentals or improve our competitive position over the medium-term.

The Business Council of British Columbia recognizes the government’s commitment to expand and strengthen social supports for families. The new Child Opportunity Benefit is the most important example. This initiative, along with several others announced in the Budget, are welcome. But the Business Council is concerned that policy-makers are underplaying signs of softening growth globally and in North America. Increasing costs, an inability to advance major projects, and significant uncertainty for investors and firms looking to expand are eroding confidence and overall competitiveness in Canada, and also in B.C. These trends pose a risk to the outlook for growth, particularly in export-driven sectors that play a vital role in sustaining high wage jobs, supporting local communities, and generating the revenues that governments rely on to pay for services.

“While government is putting more resources into a variety of worthwhile program areas, including child care, housing and anti-poverty initiatives, paying for this requires a competitive and growing economy. The Budget does not pay sufficient attention to the headwinds facing the economy due to slower global growth and rising tax and regulatory costs here at home. We wonder where future economic growth will come from to support the spending measures outlined in this Budget over time,” said Jock Finlayson, Executive Vice President and Chief Policy Officer of the Business Council. “British Columbia is not immune to the storm clouds darkening the global economy. In fact, despite several years of solid GDP growth and low unemployment, we are starting to see mixed economic signals in the province, with sluggish retail sales, increased outmigration to other provinces, and a major adjustment underway in housing markets.”

The global slowdown is evident in China and Europe, and it is expected to spread to North America over the course of 2019 and 2020. Canada’s economy is already feeling the effects of moderating housing markets, a protracted slump in the energy sector, overindebted households, and a business environment characterized by rising uncertainty and mounting regulatory complexity.

“We are mindful of the shaky state of investor confidence and the challenge of attracting new investment into the province as governments continue to impose new costs and regulatory burdens on business. The government has more work to do to ensure that B.C. remains an attractive place for investment and talent,” said Greg D’Avignon, the Business Council’s President and CEO.

The Budget acknowledges the enhanced capital cost allowances for new investments in certain categories of productive assets that Ottawa announced last fall.

“We support B.C’s decision to accept the federal government’s business tax measures. At a time when Canada is lagging the United States in capital formation and greenfield industrial development in many sectors, it is essential that our policy-makers continue to look for ways to improve the tax regime affecting new investment,” added D'Avignon.

Budget 2019 provides additional details on the government’s CleanBC initiative, including measures to accelerate the electrification of transportation, boost energy efficiency, and protect low-income households from the effects of the province’s escalating carbon tax.

“We support the main goals underlying CleanBC,” stated Mr. D’Avignon. “However, the government’s 2018 commitment to safeguard the competitiveness of B.C.’s trade-exposed industries amid a rising carbon tax and increasingly costly environmental and energy regulations has yet to materialize. We urge the government to take stronger action to address the deteriorating competitive position of the province’s leading export industries in the natural resource and manufacturing sectors, owing to the direction of climate and carbon policies.”

Mr. D’Avignon added: “B.C. must be realistic in setting climate policy objectives. As Environment Minister George Heyman observed last November, ‘Greenhouse gases do not respect provincial boundaries, or international boundaries for that matter.’ The biggest contribution our province can make to mitigating climate change is by selling our relatively low-carbon energy, resource, industrial and agricultural products in markets in Asia and elsewhere. In doing so, we can have a positive global impact while also supporting workers and communities in all regions of the province.”

The Business Council notes that creating and sustaining jobs is becoming more difficult with the new Employer’s Health Tax, rising CPP premiums, and a higher minimum wage. Individually, these policy initiatives are affordable for most employers. But taken together, they have added significantly to the overall payroll cost burden, particularly for smaller businesses.

“Policy-makers need to be alert to the risk that escalating payroll costs may dampen job growth and make it harder for young people and new immigrants to find employment,” stated Mr. Finlayson.

As the digital transformation continues to re-shape the economy and the labour market, governments and businesses are struggling to respond to the challenges and opportunities associated with accelerating technological change.

“The Business Council believes the province would benefit from a forward-looking innovation agenda that facilitates faster productivity growth across the economy and supports the scaling-up of innovative B.C. companies in the advanced technology sector and other industries,” stated Mr. Finlayson. “Based on this Budget, it is clear that there is still work to be done to make B.C. an innovation leader.”

The Budget includes a plan to run small operating surpluses and increase capital spending over the updated three-year fiscal plan.

“The Business Council agrees that operating deficits should be avoided when the economy is growing. We also agree with a higher capital budget to meet the health, education infrastructure needs of the province – especially since B.C. has the balance sheet to support it,” said Ken Peacock, the Council’s Chief Economist. “However, today’s budget is missing important investments in transportation and the movement of people and goods through and around the province, including the Massey Tunnel project. We are also troubled by the government’s preference for community benefit agreements, which are likely to raise long-term costs for both taxpayers and the users of infrastructure services.”

About the Business Council of British Columbia

Now in its 53rd year as the premier business organization in British Columbia, the Business Council of B.C. is a non-partisan organization made up of 250 leading companies, post-secondary institutions and industry associations from across B.C.'s diverse economy. The Council produces exceptional public policy research and advocacy in support of creating a competitive economy for the benefit of all British Columbians.


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