February 18, 2020 (Victoria, B.C.) – The Business Council of British Columbia welcomes the balanced budget aspect of the 2020 B.C. Budget tabled by the provincial government today. In addition to highlighting the downside risks to the economy, the Council says the government has yet to develop or implement a comprehensive agenda to build a more sustainable and competitive economy, one of the priorities highlighted in Finance Minister Carole James’ Budget Speech.
The Business Council recognizes the government’s commitment to expand and strengthen social supports for families, increase the supply of affordable rental housing, and make post-secondary education more accessible to students from low-and modest-income households. However, strong public services require a productive and innovative economy, and on this Budget 2020 disappoints. “This Budget will do little to encourage companies and entrepreneurs to invest and create jobs in B.C.,” stated Greg D’Avignon, the Business Council’s President and CEO. “We needed a Budget that recognizes the province is operating in an increasingly competitive and uncertain global economy and that we must up our game on productivity. This Budget falls short.”
“While government has prioritized a variety of worthwhile program areas, including childcare, housing affordability, education, and transit and transportation investments, paying for this requires a competitive and growing economy. The Budget does not pay sufficient attention to the storm clouds facing us due to slower global growth and escalating tax and regulatory costs at home,” stated Jock Finlayson, the Business Council’s Executive VP and Chief Policy Officer.
“In the Business Council’s latest B.C. Economic Review and Outlook, we forecast that B.C.’s economy will achieve relatively anemic 2.0% growth for this year. From 2000 to 2018, average annual economic growth stood at 2.7%; our current performance is nothing to get excited about,” stated Mr. Finlayson. “Over the past year, we have seen a softening in many key economic indicators, including retail sales, job growth, exports, and manufacturing shipments, along with a crisis in our largest export sector, forestry. Policymakers should be paying more attention to these negative economic signals.”
The risk presented by the novel coronavirus to the B.C. and Canadian economies is mounting and the economy’s exposure to this risk is higher than previously forecast; the impacts from the virus are expected to spread over the course of the first and second quarters of 2020 as exports and supply chains are disrupted and travel and tourism take a hit.
The Budget fails to address the eroding competitiveness of some of B.C.’s largest export industries due to the design of the province’s carbon pricing regime, rising property taxes, the PST system, and previous increases in the corporate income tax rate. “For more than a year, we have been working with the province to fashion a CleanBC Plan that both reduces emissions and keeps our natural resource, manufacturing and transportation industries competitive,” commented Mr. D’Avignon. “Unfortunately, Budget 2020 falls short of what we were expecting. Many of B.C.’s biggest export products and commodities have half the carbon intensity of competing jurisdictions, but these industries -- vital to middle class jobs in rural and urban regions -- are now operating at a unique global and North American competitive disadvantage. Regrettably, our collaboration with the province on this important policy file appears to have hit a wall. That is unfortunate, since with the right policies in place, B.C. has an opportunity to leverage our low-carbon exports to help deal with the challenge of global climate change and also contribute to innovation within the province.”
“Many of our members tell us that governments at all levels are continuing to pile on tax and regulatory costs, year after year,” said Mr. Finlayson. “Since 2013, the B.C. government has added more than $5 billion in incremental tax costs on B.C. businesses. On top of this are steep increases in property taxes on business and industry in many B.C. communities. These trends are making it harder to do business and to scale-up our companies. The government has much more work to do if it wants B.C. to remain an attractive place for investment, entrepreneurial ambition and top talent.”
The Council expressed strong opposition to the significant increase in top personal income tax rates announced in Budget 2020. The new top tax bracket will push the highest combined federal-provincial individual personal tax rate well above 50%. “Higher personal taxes on a small slice of the population will generate less incremental revenue than the government is forecasting, and undermine efforts to foster a more innovative, entrepreneurial economy,” noted Mr. Finlayson. “It also adds to the risk that, over time, more corporate headquarters and head office jobs will migrate out of B.C. to jurisdictions elsewhere.”
Budget 2020 includes a Backgrounder providing additional details on the government’s adoption of UNDRIP principles. “We support the goals underlying UNDRIP,” stated Mr. D’Avignon. “More certainty on the land base and greater clarity on the rights of Indigenous peoples are paramount if we are to create economic opportunity across the province. Now, policymakers must ensure that the financial resources, capacity and governance structures are in place to facilitate the successful implementation of UNDRIP in a way that works for all British Columbians.”
As the economy continues to transform and shape the labour market, B.C. and Canada face the challenge of improving on our mediocre record in the key areas of productivity and innovation.
“The Business Council believes the province would benefit from a forward-looking innovation agenda that leads to faster productivity growth across the economy and supports the scaling-up of more B.C. companies in the advanced technology sector and other industries,” stated Mr. Finlayson. “The government should seek to make B.C. an innovation leader. This includes using digital and other technologies to modernize and speed up regulatory decision-making in all areas of public policy.”
The Budget includes a plan to run small operating surpluses and increase capital spending over the updated fiscal plan. Taxpayer-supported debt will increase over the three-year fiscal plan, but it remains manageable as a share of GDP. “The Business Council is comfortable with the government’s fiscal targets and overall structure of the updated fiscal plan,” stated Mr. Finlayson. “However, with the construction sector already operating near full employment, we urge the government to carefully manage the timing of public sector capital projects to minimize the risk of rapidly escalating construction costs. For the same reason, we recommend that the province revisit its Community Benefit Agreements policy which is adding to the cost pressures on some public sector capital projects.”
“The Business Council agrees that operating deficits should be avoided when the economy is growing. But there are danger signals from outside the province that could negatively impact B.C.’s economy and public finances,” said Ken Peacock, the Council’s Chief Economist. “Reduced uncertainty in trade relations with the U.S. through the imminent signing of the USMCA will bring some stability to Canadian and B.C. exports. We need a strategy and investments to support transportation and the movement of people and goods through and around the province. This Budget takes steps in that direction, but more must be done over the medium-term to expand and modernize the transportation system.”
About the Business Council of British Columbia
Now in its 54th 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 and largest companies, post-secondary institutions and industry organizations 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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