Back to top

BC has the fiscal room to make lives better

Investments are urgently needed in universal, affordable, high-quality child care, in affordable housing, on climate action commitments, on strengthening education and health care and on a comprehensive plan to reduce and eliminate poverty.

By Alex Hemingway, CCPA-BC’s Public Finance Policy Analyst

After analyzing the numbers, it’s clear that BC can make significant reinvestments in critical public services that British Columbians depend upon and want. 

Investments are urgently needed in universal, affordable, high-quality child care, in affordable housing, on climate action commitments, on strengthening education and health care and on a comprehensive plan to reduce and eliminate poverty. 

Some commentators question whether we can realistically afford such large public investments. What they far too frequently fail to ask is: what is the cost of inaction? 

BC’s shameful poverty levels come at enormous economic cost: our research shows between $8.1 billion and $9.2 billion annually in lost productivity. 

New public investment is the best way to reduce this economic waste. 

The government’s September budget update projects surpluses of at least $200 million annually over the next three years, contingency funds ranging from $300 to $600 million per year and at least $300 million per year for changes in forecasted GDP growth: approximately $1 billion annually over the next three years. 

The budget update cautiously forecasts revenue relative to GDP so the surpluses over these three years will be higher. A consistent feature of the BC budget process under the previous government was underestimating budget surpluses – often by well over $1 billion, meaning public investments were needlessly foregone. 

The Canadian Centre for Policy Alternatives (CCPA) rejects this overly cautious approach to budgeting, which focuses too narrowly on producing an operating surplus and making the books look good for media headlines. 

Fiscal health doesn’t mean a year-end budget surplus but the debt-to-GDP ratio (the debt relative to the economy’s annual income) and debt service costs (the debt interest payments relative to the size of the budget). 

BC’s debt-to-GDP ratio is a manageable 16.2 per cent for 2017/18 – one of the lowest in Canada. Debt servicing costs are at historic lows with just over five cents per dollar of operating spending servicing the debt, leaving ample room for needed public investments. 

There are critical needs to be met in BC and we can meet them. 

The province’s fiscal situation is bolstered by two welcome tax measures announced in the budget update: restoration of the top tax bracket on individual income above $150,000 to 16.8 per cent and a one percentage point increase to the general corporate income tax rate (from 11 to 12 per cent). This will raise a projected $579 million next year and make our tax system fairer. 

The 50-per-cent reduction in Medical Services Plan premiums—BC’s least fair tax—will reduce revenues by a projected $1.2 billion. As the government phases out MSP premiums, it should ensure that all forgone MSP revenue is fully replaced with fairer personal and business taxes. CCPA modeling shows we can replace every dollar so that a majority of BC households have a lower total tax bill and better-funded public services. 

We can afford to invest in critical public services. The question is if we can afford the continued cost of failing to act. 

Alex Hemingway is CCPA-BC’s Public Finance Policy Analyst. His work focuses on the state of BC’s public services, including education, health care, social services and regulation. He also investigates the taxation system and its relationship to inequality and the capacity of government to provide high-quality and accessible public services.