B.C. government must tackle province’s fiscal mess

It's official—Premier David Eby's NDP will form the next government. It's also certain that the government will have a huge fiscal mess to clean up to avoid complete disaster.

British Columbia will run massive budget deficits in each of the next three fiscal years, including a projected $9.0 billion deficit in 2024/25. For perspective, after adjusting for inflation, that’s larger than B.C.’s deficit at the height of the pandemic in 2020.

Correspondingly, after factoring in long-term capital spending (e.g. highways and schools) the government’s projected net debt (total debt minus financial assets) will increase from $60.0 billion in 2022/23 to $126.8 billion in 2026/27—more than doubling over just five fiscal years. It’s no wonder the province received three credit downgrades in the last three years.

And just as British Columbians must pay interest on their mortgage or car loan, they must also pay interest on government debt. According to the government, debt interest payments will increase from a projected $500 per British Columbian in 2022/23 to nearly $1,000 per British Columbian by 2026/27, siphoning off taxpayer money that could have been used for important services such as health care and education, or even reduce taxes.

If B.C. continues on its current trajectory, it will quickly become one of the most indebted provincial governments in Canada. Having already passed New Brunswick, B.C. is projected to surpass the remaining Maritime provinces (in terms of net debt per person) within two years and Quebec and Ontario by 2029/30.

How did this happen?

Put simply, spending. Since 2017, the rate of government spending growth has exploded with per-person (inflation-adjusted) program spending in 2022/23 (the latest year of comparable data) reaching $14,275, its highest point ever. Indeed, if the Horgan and Eby governments had simply maintained spending close to the rate of inflation plus population growth, as their predecessors did for many years, B.C. would be in a much different situation today.

But B.C. isn’t doomed to this fiscal fate—there’s still time to turn things around. And fortunately, there are plenty of ways to rein in spending. For instance, the province spends billions of dollars annually on subsidies (a.k.a. corporate welfare) to select industries and businesses. Given the large body of research that shows these subsidies generally fail to generate widespread economic benefit, eliminating corporate welfare is an obvious place to start.

With the election over, the Eby government must tackle the province’s fiscal mess. Otherwise, B.C. will become one of the highest debt provinces in Canada—and British Columbians will pay the price.