The BC NDP released the provincial budget for 2024 last week, resulting in heavy criticism from the opposition.
The 2024/2025 deficit is projected to rise to $7.9 billion, up from $5.9 billion in the updated 2023/2024 forecast.
Taxpayer−funded three−year capital spending was almost doubled compared to the past three years, increasing to $43.3 billion, with big outlays on school, health and transport infrastructure.
.jpeg)
Among the perks that British Columbians are promised were an increase to the BC Family Benefit, a one-time electricity credit and an increase in the health tax payroll threshold for small and growing businesses.
However, Renee Merrifield, MP for Kelowna-Mission, says that if she had to give the 2024 budget a title, it would be “more taxes, more spending, less results,” adding that our economy is “careening towards recession.”
“That is an astronomical acceleration of our debt, and for what?” she adds.
Merrifield says the items such as the family benefit and the electricity credit are a “drop in the bucket” and ultimately won’t offset the carbon tax of your gas “going back and forth to soccer practice.”
Charles Schell, MBA PhD, is a professor of finance at Vancouver Island University (VIU). He calls the budget concerning due to a forecast of low growth over the next three years, putting BC’s growth levels below the national average. Most of BC’s primary industries, except for potentially natural gas, are expected to see revenues dropping over the next few years, according to Schell.
Although the average person will benefit from things like money back from BC Hydro, Schell says, “that comes with the knowledge that eventually the debt is going to be serviced over many years and the debt-to-GDP ratio is rising.”
The debt-to-GDP ratio has been “reasonable” in the past, and “BC has run surpluses for so many years that a long series of deficits will raise the debt-to-GDP ratio about 17.6% this year up to about 27.5% in the next three years.
“That is actually not an unusual number for a Canadian province, and if that was the limit now then that might be okay,” Schell says.
“However, we also see rising federal borrowing… Canada has a much higher debt-to-GDP ratio than other OECD countries. That was sustainable in the past because of growing populations and the fact that we were growing faster than other OECD countries, but we're not and we actually expect to be on the low side of growth for other developed countries.”
“In Canada, we don't just have provincial debt, we've got federal debt, we've got consumer debt—and the general idea is that it is okay to use debt if we're in certain conditions, like if we expect the economy to be growing and we need infrastructure and we have to build the infrastructure before we can have the growth,” he explains.
“But, if we're going to be borrowing in order to be safe, pay the bills and finance a holiday at Disneyland, then that doesn't have the same attraction because we're mortgaging the house to pay for lunch, and it just doesn't make any kind of fiscal sense.”
“So, to say that our economy is only expected to grow in real terms by about 0 .8%, it is definitely of concern while we're growing our debt at such a high rate.”
For Merrifield, there is particular concern for Kelowna’s economy, and nothing in the budget is cause for celebration.
Merrifield’s inbox has also been “inundated” with emails about the flipping tax, for example.
The tax will be introduced next year, and is designed to target speculators who are driving up housing costs. Profits from a home sale will be taxed 20% if sold within two years of purchase, with the revenue going into home building. People will be exempt if they face “unavoidable life changes” like death, divorce, job relocation or loss. The province says people who are adding to BC’s housing supply will also be exempt.
Between 2020 and 2022, an estimated 7% of residential home sales took place within two years of purchase.
Merrifield doesn’t expect the tax “to do a whole lot.”
“They're predicting that our housing starts are going down over the course of the next two years, and they're also predicting that housing prices are going up each year,” she says. “[Housing] is going to be less available and largely because this government doesn't know how to actually get housing built. What they're doing is just trying to tax and restrict a homeowner's usage of their building.”
