But Budget 2021 misses investment attraction and policy actions required to fully participate in the global economic recovery already underway
April 20, 2021 (Vancouver) - The Business Council recognizes the extraordinary circumstances the province is facing and congratulates Minister Robinson on delivering a budget that continues to provide support for families and businesses amid the ongoing and unprecedented COVID-19 shock. The measures in the budget in the areas of child-care, reskilling, mental health, and funding to support businesses and people that are vulnerable as a result of the pandemic are especially welcome.
The Business Council, however, is disappointed that Budget 2021 does not address long-standing policy and tax structures that hold back investment and make it harder to advance potential job creating and carbon reducing innovations in B.C.’s high wage commodity and energy export sectors.
The Council notes that the stronger-than-expected economic recovery means the fiscal outlook for the province has improved. Even so, the government is planning for a larger operating deficit of $9.7 billion in 2021/22, slightly higher than last year’s historic deficit of $8.14 billion. This outlook is better than forecasters anticipated just a few months back. A continued recovery in government revenues as the economy strengthens sees the deficit fall to $4 billion over the three-year fiscal plan.
“There is a sizable amount of contingency funding in this budget to fight the pandemic” said Ken Peacock, Senior Vice President and Chief Economist of the Business Council of British Columbia. “This could be targeted to sectors of high potential or, if not spent, used to further reduce the deficit and large debt anticipated through this fiscal plan.”
While progress will be made to get closer toward a balanced operating budget, the province’s debt level rises significantly reaching a worrisome 26.9% of GDP in three years. A bigger debt burden means less fiscal flexibility and higher debt-servicing costs in the years ahead.
Overall, the Business Council is comfortable with the government’s approach to return to a balanced budget in a gradual manner. We also agree with the decision to steer clear of substantial tax increases, other than the already confirmed rise in the carbon tax. In subsequent budgets we hope to see a more detailed and convincing plan to return to balanced budget.
A strong and productive economy that attracts private investment is the best path to realize strengthened government revenues, lower deficits, higher wages and the resources to pay for the important social and education programs highlighted in today’s budget. One positive aspect in support of economic growth and the scaling of promising B.C. technology firms is the $500 million investment fund that will assist with growing innovative technology companies and keeping them headquartered in the province.
“Unfortunately, a significant omission in Budget 2021 is the government’s continued failure to follow through on a now urgent matter that previous budgets and throne speeches have referenced. This budget does not address the competitive disadvantage British Columbia’s energy-intensive, trade-exposed industries find themselves facing as the global economy picks up steam, “said Greg D’Avignon President and CEO of the Business Council of B.C. “The province’s failure to fix weaknesses in its carbon pricing regime will push investment, jobs and tax revenues to other jurisdictions – jurisdictions which, ironically, have higher carbon-intensity energy and other commodity producing industries than B.C. Our natural resource, manufacturing, and transportation industries remain at a global disadvantage under the province’s current carbon pricing system.”
“Through the pandemic, the provincial government did not have a spending problem, they had a revenue problem,” noted Mr. D’Avignon. “The recovery is already underway but the impact of the pandemic on B.C.’s economy has been a reminder of the value of private sector activity, from small businesses to large scale industrial projects, as creators of employment for British Columbians and revenues for government.”
Budget 2021 provides ongoing funding to manage and fight the virus and proposes additional spending for social supports. Of particular note, the budget announces significant funding for childcare. Coupled with the federal government’s childcare funding announcement in yesterday’s federal budget, the Council is hopeful that B.C. will soon see additional childcare spaces and support for low- and moderate-income families.
Apart from some sector specific support to hard hit industries, the Council is concerned there is little in the budget to foster sustainable economic growth, increasing business investment, and the development of a more productive, high-wage economy in the medium term. The Business Council is pleased to see the extension of the PST exemption for machinery and equipment. However, this is a temporary measure and thus will not provide the longer-term boost to investment that the economy needs.
About the Business Council of British Columbia
Now in its 55th 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.
Director, External and Digital Communications