B.C.'s new Finance Minister Brenda Bailey is receiving competing advice as she prepares to deliver one of Premier David Eby's signature campaign promises: a tax cut of $1,000 per average household to help British Columbians pay the bills.
Marc Lee, senior economist with Canadian Centre for Policy Alternatives, B.C. Office, said B.C. faces "some really challenging waters" ahead as Bailey takes control of the provincial finances. They include a slowing economy, Donald Trump's "potentially large and unpredictable impacts on trade and migration" and labour issues tied to Ottawa's promise to roll back immigration.
While Lee acknowledged declining inflation, prices have remained high.
"Prices haven't actually come down for households, when they are buying food and housing in particular," he said as Bailey prepares to deliver the tax cut: first as a "grocery rebate" in 2025, then as a permanent reduction.
Lee said that affordability measure could potentially add almost $2 billion to the "already pretty high" provincial deficit of around $9 billion.
"I think it's fine to run that deficit, but if they can focus on something a bit more targeted to low-and-middle-income households, that would get the money into the hands of people, who need it most and it would lower the overall fiscal cost."
More broadly, Lee sees some political and financial wiggle room. While B.C. cannot control interest rates set by the Bank of Canada, or developments beyond its borders, key social and economic levers remain in provincial hands, he said.
"There is more that could be done to reduce inequality within the tax system, make it more efficient, more progressive," he said, pointing to the elements of B.C. Greens' platform. He also questioned concerns about the deficit — at least in the short run.
"We are only spending about four cents of every dollar of revenue on servicing interest," Lee said, adding that falling interest rates will also lower the cost of borrowing.
Lee said money spent on projects tied to things like transportation and transit, for example, might cost in the short run, but ultimately pay off through higher productivity, he said.
The Business Council of British Columbia, meanwhile, used the occasion of Bailey's appointment to release a report underscoring "the pressing need" to strengthen public finances.
Co-authors Ken Peacock, senior vice-president and chief economist, and David Williams, senior vice-president of policy, argue that current spending levels are not sustainable.
"Today, B.C. is running the largest deficit in the country relative to the size of its economy, has seen debt levels surge faster than any other comparable jurisdiction, and seen repeated credit rating downgrades that raise the cost of borrowing to fund the deficit," they wrote.
Peacock and Williams added that B.C.’s fiscal deterioration is the result of policy choices, specifically, the pace of spending.
"It is not being driven by external events or Canada's fiscal equalization arrangements," they wrote. "It is also at odds with where B.C. sits in the economic cycle: this is not an economy needing the government to stimulate demand."
The report notes the cost of servicing provincial debt now consumes an amount equivalent to half of B.C.’s K-12 school education budget, about $4.4 billion. They project this burden will cost each British Columbians about $600 annually.
"In our view, the government should commit to a fiscal anchor such as a plan to return, over a specified time-frame, to a balanced budget, return provincial debt to no more than 20 per cent of GDP (projected to be 28.8 per cent in 2026/27) or return debt servicing costs to no more than three to four of expenses (projected to be 6.3 per cent of expenses in 2026/27)," they wrote.
Bailey said Monday (Nov. 18) returning to a balanced budget will one of the first things on her agenda.
"But I also just want to note that this is a time when we have heard from British Columbians that the cost of living and affordability are issues that they are very much struggling with and this is not the time, where we should be putting costs onto people," she said. "So you will see us working on two things at the same time: helping people with affordability...rolling out a middle income tax benefit; but you will also see us make very significant moves to grow our economy."
Peter Milobar, Conservative Party of B.C. MLA for Kamloops Centre and finance critic, said he hopes Bailey doubles down on efforts to make B.C. more competitive for foreign investment by speeding up permitting in various resource sectors and housing. H'd also like to see reform in the tax system to make it more competitive.
He expressed concern Bailey's rhetoric echoes the rhetoric of her predecessor.
"(Katrine) Conroy would say, 'some people say it's time to cut, we are not going to do that.' They never actually say who those 'some people' are because no one has been talking about cuts. What we have been talking about all along is growing the economy."
Milobar also called on Bailey to provide some certainty about the timing and process of the promised middle-income tax cut.
"One would think that they would have to bring in a supplemental budget bill specifically dealing with this, because in the current budget there are no provisions for this type of expenditure, let alone this type of program," he said.
Waiting until the budget comes out next year, would completely defeat the purpose of the measure, he added.
