B.C. introduces election-year budget with relief for families, predicts highest deficit ever recorded

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The B.C. government rolled out its election-year budget with financial relief for families and businesses and record spending on health and education, which will be financed by what is expected to be the highest deficit the province has ever recorded.

Expanding on the string of measures announced in recent months designed to tackle the housing crisis, British Columbia will introduce a flipping tax on home sales, the first province to do so since the 1970s. The 20-per-cent penalty will layer on top of the new federal flipping tax but with a wider reach, capturing home sales within two years of purchase. The federal tax applies to homes sold within one year.

With a provincial election due no later than Oct. 19, the budget includes a number of measures designed to ease cost-of-living pressures on low- and middle-income families, as well as small businesses.

“Together, we can get through today’s challenges and build a brighter future,” Finance Minister Katrine Conroy said as she introduced her $89-billion spending plan. “This is not the time to cut services.”

The budget predicts a deficit peaking at $7.9-billion in 2024-2025, the highest ever, including the years of the pandemic. Third-quarter results for the fiscal year just ending record the deficit at $5.9-billion, compared with $4.2-billion forecast when that budget was delivered a year ago. Taxpayer-supported provincial debt will also soar over the three-year plan, from 2020-2021 at $59.8-billion to a projected $126.5-billion for 2026-2027. Total provincial debt, including Crown agencies, would add up to $165-billion in 2026-27.

The monthly B.C. Family Benefit will be increased, as a one-time measure, by 25 per cent in 2024. About 340,000 families will be eligible for the means-tested program, and a qualifying family of four will receive an annual benefit of $1,760.

More businesses will be excused from paying the employer health tax, as the exemption threshold rises from a payroll of $500,000, to $1-million.

Across the board, electricity customers will receive a 4.6-per-cent credit on their bills, starting in April. The majority of customers rely on the Crown corporation, BC Hydro, which has just had a 2.3-per-cent annual rate hike approved by its regulator. For individual families, the savings are expected to add up to about $100 over the year. For large industrial customers, however, the savings will be substantial – for an average mining operation, the credit will be worth more than $200,000.

Nidhi Joshi welcomed the tax credits and rebates to help low-income families, noting she and her husband are struggling to get by in the $1,600 one-bedroom apartment they share with their 11-month-old son Ved in Burnaby.

“That is amazing news, at least we can save something,” she said.

But Ms. Joshi has now finished her maternity leave and is unable to return to work because the family cannot find any child care for their son. She said she was disappointed the budget didn’t provide any considerable new funding for the government’s expansion of $10-a-day child-care spaces.

While the federal transfers for child care in B.C. will top $1-billion in the coming fiscal year, the province’s share is now slightly less, and set to flatten in the coming years.

The budget eschews spending cuts or tax hikes to offset near-stagnant economic growth, and the most notable new tax aims to curb rising real estate prices. “To those who just want to make a quick buck by flipping homes, things are about to get more difficult,” Ms. Conroy vowed.

The tax is expected to apply to only about 5,000 transactions annually.

Ms. Conroy outlined a capital spending plan of $43-billion over the next three years, and total provincial debt has doubled since the New Democratic Party formed government in 2017. The Finance Minister said the province’s debt load is favourable compared with other large provinces.

“Our debt burden remains manageable,” she said. The province’s interest costs as a percentage of government revenue are less than half of that paid by Ontario and Quebec, she said.

Kevin Falcon, leader of the BC United opposition, said he expects the province will see its vaunted triple-A credit rating downgraded as a result of the fiscal plan.

“This is the worst example of reckless spending I have ever seen in a government budget,” he told reporters. “At the same time we’re getting the worst outcomes we’ve ever seen in health care, in public safety, in drug overdose death rates, in housing affordability – in every area the provincial government is responsible for.”

Bridgitte Anderson, CEO of the Greater Vancouver Board of Trade, said the debt numbers are troubling. “We are concerned about what we are seeing for the future of our province when it comes to debt and deficit,” she said. “We know services need investment, but concerns remain about where the economic growth is going to come from.”

However, she said her members will be pleased with the relief offered in electricity costs, and in the health tax for small business.

Sussanne Skidmore, president of the BC Federation of Labour, welcomed the budget plan. “Now is not the time for tightening of the belt,” she said. “We’re happy to see the investments in the services people rely on – more investments in housing, health care and education.”

The budget also promises a growing commitment to countering the impacts of climate change after a devastating year of drought and wildfires in 2023. Resources for fighting forest fires will grow, along with support for people who are evacuated. The province is also boosting programs to reduce flood risks and improve drought resiliency.

With economic growth forecast at just 0.8 per cent, the province is looking to the natural gas sector to lift natural resource revenues, while forestry revenues continue to flag.

Ms. Conroy said the province will develop a plan to build a critical minerals strategy for the mining sector, seeking to cash in on growing demand for the raw materials needed for EV batteries. The mining industry – one of the big winners in Budget 2024, is getting a break on its carbon taxes on top of the relief on electricity costs, but Ms. Conroy declined to say whether the province will require mining companies to have provided sufficient bonds to pay for future cleanup costs.

Highlights from the B.C. budget:

Fiscal details:

• The budget predicts the highest deficit ever recorded in British Columbia, peaking at $7.9-billion in 2024-2025.
• Third quarterly results for 2023-2024 record the deficit at $5.9-billion, compared with the $4.2-billion deficit the NDP committed to when the budget was delivered a year ago.
• Taxpayer-supported provincial debt will also soar over the three-year plan, from 2020-2021 at $59.8-billion to a projected $126.5-billion for 2026-2027. Total provincial debt, including Crown agencies, would add up to $165-billion in 2026-27.
• There is no plan to bring the budget into balance over the three-year budget cycle. The Finance Minister says “now is not the time” for cuts to spending.
• The province projects economic growth in 2024 to be 0.8 per cent, which is higher than the average growth from private forecasters.

For families and individuals:

• The BC Family Benefit will be increased by a one-time 25-per-cent bonus over the year. The benefit will be income-tested and depends on the composition of the family. About 340,000 families will benefit from the initiative.
• A carbon tax credit will expand to cover 80 per cent of households by 2030. The credit could amount to $504 for individuals and up to $1,005 for a family of four.
• Every British Columbian household will save about $100 on electricity bills depending on power usage.
• Starting in April 2025, people will be able to access one cycle of in-vitro fertilization for free. Ontario and Quebec already offer this, while most other provinces offer a subsidy.
• An income-tested tax rebate for renters, amounting to $400, will be distributed for the first time in 2024. The rebate was first proposed by former premier John Horgan in 2017.

For business:

• The fee cuts on power bills will extend to all businesses. Commercial and industrial customers are expected to receive savings up to 4.6 per cent of their electricity consumption. For the average small business, the savings are expected to be $400 per year starting this year.
• The payroll threshold at which businesses must pay the employer health tax increases to $1-million from $500,000 starting this year.

New taxes:

• The introduction of the first modern provincial tax on sales of homes within two years of purchase, known as a flipping tax. There will be exemptions for divorce, death, illness and relocation for work. The federal Liberals have also announced a federal flipping tax, though that tax only applies to homes flipped within a year.