VICTORIA — This week’s update on the provincial budget and economy was mostly discouraging, in contrast to earlier reports in the post-pandemic era.
B.C.’s rate of economic growth is expected to decline to less than one per cent next year.
The provincial share of income tax is running more than half a billion dollars behind expectations according to the Ministry of Finance.
Retail sales have faltered to a “modest” increase of just one per cent.
Natural gas royalties, still a mainstay of resource revenues, are off by more than $1 billion.
The ministry is forecasting a 14 per cent drop in housing starts, prompted by concerns about rising construction costs and the lingering impact of rising interest rates.
Bottom line: After last year’s remarkable turnaround in finances — the province racked up a $700 million surplus despite diverting hundreds of millions to one-time spending — the books are headed into the red.
The forecast is for a $6.7 billion deficit this year and a combined $7.3 billion over the next two years.
Still, Finance Minister Katrine Conroy showed little concern at the news conference following her release of the report on the first quarter (April to June) of the 2023-24 financial year.
“We’re well positioned to navigate our way through current and future challenges,” she told reporters on Wednesday. “Through prudent fiscal planning and a resilient, diverse economy, we are well positioned to weather the uncertainties ahead.”
So, no changes in taxes or spending to try to rein in the deficit?
“At this time, what we’re doing is we’re going to keep providing services to people as we have been since 2017,” the minister replied.
Program spending is up by two thirds, more than $30 billion, since the New Democrats took office. The current capital plan is a record $38 billion.
Yet Conroy “wouldn’t say we’re hemorrhaging money. What I would say is we’re investing in the people of the province. That’s what we’ve been committed to doing since 2017 and we’ll continue to do.”
Does she have a plan to balance the books?
“It is not our goal to balance,” replied Conroy. “ Eventually we will get there. But right now, it’s not the time to make cuts to people. Affordability is an issue. It’s not the right time to raise taxes and cut people’s services. The former government did that.”
The New Democrats have raised a tax or two during their time in office. But set that aside.
On the hypothetical budget- balancing plan, Conroy sounds a bit like the White Queen in Alice Through the Looking Glass: “The rule is jam tomorrow and jam yesterday but never jam today.”
What about her ministry’s forecast of a decline in housing starts — wouldn’t that raise doubts about the Housing Ministry’s talk of a surge in housing construction?
“I wouldn’t say dubious,” Conroy said of the forecast. “I would say it’s prudent.”
Shortly after she finished speaking, the premier’s office distributed a chart that showed the Finance Ministry had repeatedly underestimated housing starts in recent years. I don’t recall the last time the government moved to discredit one of the Finance Ministry’s quarterly reports an hour after its release.
By way of valid explanation for the deficit, Conroy pointed out that the record wildfire season blew an almost billion-dollar hole in the budget.
As well, the fiscal plan she introduced in the legislature back in February included $5.5 billion in contingency funding and a further $700 million in a forecast allowance.
Combined, those could pretty much wipe out that projected $6.7 billion deficit, no?
“Unfortunately, I don’t think so,” said Conroy. “We’re very early into the year. We have to make sure that we have those contingencies for things like caseloads, other emergencies that might happen.”
Perhaps the picture would brighten in the second quarterly report, due at the end of November. For now she is deeply in deficit territory.
Conroy’s was able to cite favourable comparisons between B.C. and other Canadian jurisdictions.
B.C. has a low debt-to-GDP ratio relative to other provinces. The interest burden is among the lowest in the country, at three cents per dollar of provincial revenue.
The New Democrats used to mock such statistics when the B.C. Liberals cited them. Nor did favourable numbers on debt, deficits, interest rates save the Liberals when they trotted them out in the 2017 election campaign and nevertheless lost their legislative majority.
The NDP era is more about expanding government and spending, spending, spending. It’s also one where debt, deficits and overruns appear to be of little concern to the public.
Witness what happened with the recent groundbreaking ceremony for the new Surrey hospital. The government announced in passing that the project was already $1.2 billion over budget and three years behind schedule — before the shovels went into the ground.
In earlier years, there was outrage over similar overruns on the Coquihalla Highway, the fast ferries, and the Vancouver Convention Centre expansion.
This time the public reaction was pretty much a big yawn.
No wonder Conroy can afford to be so complacent about the latest increase in the deficit.
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