Good morning. Wendy Cox in Vancouver today.
British Columbia’s latest fiscal update, delivered Friday, has shown a more-than $10-billion gap between the deficit the province had predicted and the surplus it is now expected to have.
Instead of a $5.5-billion deficit predicted with the introduction of the budget last February, the province is now expected to rake in a $5.7-billion surplus, largely on the coattails of higher income and corporate tax revenue. B.C.’s natural-resource sector has also outperformed fiscal expectations, Justine Hunter reports.
It’s part of a trend in Canada: Alberta has announced a projected surplus this year of more than $13-billion, which economist Trevor Tombe calculates to nearly $3,000 for every single Albertan. And earlier this month, Ottawa released its public accounts for 2021-22 which showed revenue came in 16-per-cent higher than originally forecast and the deficit was $80-billion, almost half what was predicted.
Economies rebounding with vigour after the pandemic have fuelled inflation but have also meant windfall revenues to governments of personal and corporate tax revenues.
The B.C. government is looking to ensure it spends the largesse, rather than allow the fiscal year to pass with a surplus, which would then have to go toward paying down the province’s debt, not a priority for the new government of Premier David Eby. Spending on one-time payments to help British Columbians offset inflationary effects on housing, food and transportation has made up the bulk of $2.2-billion in spending the government announced since the summer. Half of that has come in just the past week, since Mr. Eby was sworn in.
The bigger spend is one that will be baked in: $10.6-billion over three years to pay for contract enhancements with the public service.
The government has described its new deals as the most generous negotiating terms in a generation. In only one sector, the provincial government’s announcement of pay improvements aimed at recruiting and retaining family doctors – the package raises a full-time physician’s pay to at least $385,000 from $250,000 – as well as increases for other doctors, will cost $708-million by the end of the third year, the province confirmed in an e-mail to Justine.
With economists predicting a looming recession, Finance Minister Selina Robinson was asked whether such increases will end up getting the province into fiscal trouble later when times may not be so good.
“We know that we are growing, we are growing as a jurisdiction,” she noted.
She said more people in British Columbia are in higher income-tax brackets and “that too gives us a sense that we are in a strong fiscal position.”
Those extra people also are a ready source for increased income-tax revenue for the province.
In a column this week, Brent Sawchyn, chief executive officer of PC Urban Properties, a Vancouver-based real estate company, argued that governments’ increasing taxes of all sorts will eventually work against those same governments’ goals on housing.
“With increasing development cost charges, property taxes, municipal charges, utility costs and GST on new rental buildings, developers typically spend at least 15 per cent to 20 per cent of our total project budget on these government-level taxes. And with all the red tape, we face a four- to six-year pathway to deliver much-needed rental housing,” he wrote.
“The government of Canada needs to eliminate the GST on new rental buildings and provide forms of tax credits to help support us. The government can also provide low-interest loans. The province can freeze property taxes until our projects are completed and are occupied. And the cities we build in can stop charging [development cost charges] on new 100-per-cent rental buildings. In no jurisdiction in the world has affordable housing been solved without these types of incentives.”
This is the weekly Western Canada newsletter written by B.C. Editor Wendy Cox and Alberta Bureau Chief James Keller. If you’re reading this on the web, or it was forwarded to you from someone else, you can sign up for it and all Globe newsletters here.