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Pandemic Drives BC to a $12.5-Billion Budget Deficit

Government revenues plunge, spending soars in response to impact of COVID-19.

Andrew MacLeod 14 Jul 2020TheTyee.ca

Andrew MacLeod is The Tyee's Legislative Bureau Chief in Victoria and the author of All Together Healthy (Douglas & McIntyre, 2018). Find him on Twitter or reach him at

The COVID-19 pandemic and the B.C. government’s response to it will result in a $12.5-billion deficit this year, Finance Minister Carole James said today.

The extra spending during the pandemic was essential to maintain services and supports people count on, James said while delivering an update on the province’s finances.

“When you see the volatility, it creates some real challenges,” James said. “The prospective numbers are staggering, but they’re not without hope.”

The province had 235,000 fewer jobs in June than in February, youth unemployment is at 29 per cent and more women than men are unemployed, James said. Consumer spending and home sales have dropped sharply and private sector economists were predicting a 5.4-per-cent drop in provincial GDP for 2020.

In February James presented a balanced budget for the fiscal year.

But the pandemic triggered an economic slowdown that slashed government revenues. Provincial sales tax revenue is now projected to be $1.3 billion below the budget forecasts, personal income tax revenue will be down $1 billion, corporate income tax revenue down $973 million and Crown corporation income down $882 million.

All together COVID-19 had reduced the government’s revenue expectations by $6.3 billion, not including the taxes it has deferred collecting.

The government has also increased spending, earmarking $5 billion to respond to the pandemic, plus another $762 million for business relief and tax measures, $500 million for the Climate Action Tax Credit and an extra $176 million to cover higher interest costs on the increased debt.

The pandemic changed everything globally and exposed underlying gaps in the economy and society, James said, adding “It hasn’t changed the priorities of our government.”

James said the focus has been on health and safety and supporting people and businesses through a very uncertain time. That’s the right thing to do, James said, and key to the economic recovery. It would be irresponsible to focus on restraining spending at this time, she said.

Asked if people coping with the pandemic’s effects are likely to care about the increased deficit, James said “I believe people care, but I believe they understand.”

BC Liberal opposition leader Andrew Wilkinson said the government’s approach is unsustainable and there appears to be no plan for the fall when federal spending stops and many businesses will be at risk of going bankrupt.

“It’s looking like a pretty dark Christmas and we see no plan from the NDP for recovery,” he said. “It’s a very scary fall and we’re just hearing from the NDP it’s business as usual.”

James has said since the beginning of the pandemic that it was causing a major shift in the province’s economy and the government’s finances.

The government has worked at getting the health response right so the province can cautiously restart, James said. “Everything we’re doing right now as government is focused on helping people, helping businesses and helping the economy recover.”

It’s impossible to predict how long the recovery will take, she said.

“I’ve said often I wish I had a crystal ball that could really tell us where things are going,” she said.

Events in other jurisdictions or a possible second wave of COVID-19 could affect B.C.’s recovery, James said. “There are so many pieces, so many risks ahead that continue to show the uncertainty of economic recovery.”

On June 24 James introduced Bill 18, the Economic Stabilization (COVID-19) Act, that among other measures allows the province to run budget deficits for the next three years.

Alex Hemingway, an economist and public finance policy analyst with the B.C. office of the Canadian Centre for Policy Alternatives, said the fiscal situation reflects the necessary and urgent public health measures taken to respond to the pandemic as well as the cost of investing in supports that will help people weather it.

“This is one of those situations where a deficit is a sign of doing the right thing both on an economic and a human level,” he said.

The government has been conservative in its estimates, but much still remains unknown about how the pandemic will progress and how it will affect B.C.’s economy and finances.

“It could swing wildly in either direction,” Hemingway said, adding the important thing is to invest in people to make sure households are in a healthy position as they continue through the pandemic.  [Tyee]

Read more: Coronavirus, BC Politics

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