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OPINION: B.C, budget does the right thing by prioritizing investment over austerity

BY ALEXANDER HEMINGWAY

Canadian Centre for Policy Alternatives

B.C.’s first budget under Premier David Eby includes substantial funding increases in housing, health care, income supports and cost of living tax credits.

It also allocates a record level of investment towards capital infrastructure. This not only represents much-needed progress towards meeting some of the big challenges facing our province, but also prudently continues to invest in the public good rather than cave to fear-mongering about deficits in light of the economic slowdown. 

The budget projects modest deficits over the next three years: $4.2 billion in 2023/24 and $3.8 billion and $3 billion in the subsequent two years. While these numbers sound big, they represent about one per cent of the provincial economy (or GDP) in 2023/24 and slightly less going forward.

Deficits are entirely appropriate with an economic slowdown underway. They are also far preferable to inadequate investment in critical public services and infrastructure, which leads to its own kind of deficits – social and environmental – as the Canadian Centre for Policy Alternatives has long argued (and as Premier Eby noted recently). 

An eventual return to budget balance should come via increased revenue, not by neglecting public investment, which would be costly to BC’s social and economic well-being in the long run.

Even with the spending increases in Budget 2023, provincial operating spending as a share of GDP has declined substantially from where it stood 25 years ago (in part a consequence of severe social spending cuts under the previous BC Liberal government). Spending by this measure had largely levelled off since the BC NDP came to power, with the exception of a temporary jump during the pandemic. With Budget 2023, it has inched back up relative to those pre-pandemic levels. Even so, if spending in 2023/24 returned to the levels of two decades ago (as a share of GDP), we’d have about another $5 billion available to invest in priority areas this year alone.

A return to those levels of public investment could be funded in part by more robust taxes on high incomes, corporations and wealthy landowners, with dual benefits of revenue and reducing inequality. 

Another positive shift in this budget is the reduced use of “fiscal padding” – the practice of building in large unallocated contingency funds that ultimately serve to hide available fiscal space and create a bias against badly needed public spending (though some of this remains).

British Columbia is facing big social and environmental challenges — sky high rents, health care under enormous strain, a toxic drugs crisis, climate disruption and the need to rebuild crucial but eroded public services (to name a few). BC has more than enough fiscal and economic capacity to meaningfully address these crises, and BC Budget 2023 rightly prioritizes badly needed investments over a return to austerity.

While this might not please corporate interest groups, it responds to what the rest of us need. A single budget won’t solve these problems overnight but it is an important shift in the right direction.

Alexander Hemingway is a senior economist at the Canadian Centre for Policy Alternatives, BC Office.

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