Record Deficit, Spending Maintained in BC’s Tariff Budget

On a day when the U.S. levied punishing tariffs on Canada, B.C. Finance Minister Brenda Bailey presented a budget that maintains spending on key services while running a large deficit.

“We’re in for tough times, but we’re standing strong for B.C.,” Bailey said. “At a time when the world is feeling uncertain and people are bracing for tariffs, our government is standing up for British Columbians.”

The budget includes a $10.9-billion deficit for the coming fiscal year and growing debt as expenses are expected to grow faster than revenue.

Normally the finance minister is centre stage on budget day, but Premier David Eby spoke ahead of Bailey’s budget speech at the Victoria Conference Centre to address U.S. President Donald Trump’s confirmation of tariffs of 10 per cent on energy imports and 25 per cent on all other goods from Canada and Mexico.

“We didn’t ask for this fight,” said Eby, “but I can tell you we’re not going to shrink from it.”

B.C. will use the limited market power it has to send a message, starting by immediately taking products from states that voted Republican off the shelves of provincial liquor stores, Eby said. “We understand who is attacking us. We understand where this is coming from.”

The B.C. government will also use procurement policies to prioritize B.C. and Canada, something it normally couldn’t do due to trade agreements, Eby said, adding that it’s clear those agreements no longer apply.

The province will also do what it can to grow the economy, including by accelerating major projects and working in partnership with business, labour and Indigenous groups, he said. He encouraged British Columbians to buy local and to avoid travel to the United States.

“We’re big enough to stand on our own two feet,” he said. “This is a moment to take an attack and turn it into a source of strength for our province and for Canada.... We’re going to pull together, we’re going to fight and we’re going to win.”

Despite the uncertainty, the budget largely stays the course on spending. It includes increases in spending of 5.1 per cent for social services, 4.6 per cent for health and 2.6 per cent for education.

It also shows a 15.7 per cent increase in the cost of debt servicing, which will this year add up to more than five cents of every dollar the province spends.

Bailey said that remains affordable.

“It is true this is not a budget that has splashy new announcements,” Bailey said, stressing that the goal was to maintain services and continue to build hospitals, schools and other infrastructure the province needs.

The government cancelled a promised grocery rebate of $500 for individuals and $1,000 for families, but announced there will be a $110 rebate to ICBC policy holders that should be sent in April and that will come out of the current year’s budget.

Auto insurance rates will be frozen for the year.

There’s an added $375 million over three years for rental supplements for seniors and lower income families. The 25,000 recipients of Shelter Aid for Elderly Renters, or SAFER, will see their grants rise by nearly 30 per cent, and the number of families eligible for the Rental Assistance Program, or RAP, will roughly double to 6,000. There are no similar rent assistance programs for individuals or for couples without kids.

Projected cost increases for income and disability assistance are due to increases in the caseload as rates will be frozen for the year.

There is $127 million a year “to support growth in demand for clients served by Community Living BC.”

And $90 million is earmarked to move people who are living in camps indoors and provide them with wraparound services.

Bailey said the budget was built on the assumption that Trump’s promised tariffs would go ahead and that the Canadian government would partially retaliate. It also assumes the Bank of Canada will make interest rate cuts and that the federal government will provide promised supports.

Overall, the province is predicting a cumulative loss of $43 billion in gross domestic product by the year 2029 and the loss of 45,000 jobs.

B.C.’s GDP is in the order of $400 billion a year and the province has a labour force of some 2.8 million people.

Despite the tariffs, the budget anticipates a 28.4 per cent jump in natural resource revenue “due to significant increases in natural gas prices as well as increases in lumber prices, stumpage rates, electricity prices and coal production volumes.”

The document shows carbon tax revenue growing by 14.1 per cent annually over the next three years so that it is in line with federal requirements, even though federal politicians have pledged to scrap the tax and the province has promised to follow suit.

This year’s budget does not include a forecast allowance, an amount that could be drawn down if revenues are lower than expected.

It does include $4 billion in each of the next three years for contingencies, meaning that five per cent of the budget is for spending that the government has not yet identified. “These reflect funding set aside for uncertain or unforeseen matters, future initiatives, caseload pressures, and new collective bargaining mandate costs,” the budget document said.

The documents show that the government, which has introduced a hiring freeze with some exceptions, expects the size of the public service to stop growing. It has set targets to reduce spending by $300 million in the first year of the plan and by $600 million in each of the two following years.

B.C. Conservative finance critic Peter Milobar said the government is talking a lot about the tariffs, but the issues with spending and lacklustre economic growth go back years. “This is not a deficit built on tariff issues.”

Action to reduce barriers to interprovincial trade are long overdue, Milobar said. “B.C.’s been nowhere on that file.”

He called the budget “uninspiring” and questioned whether it would affect the Green Party’s support for the government. “I think the Greens, especially heading into a leadership race, have a little soul-searching to do to start understanding what exactly they’re propping up with a blank cheque.”

The budget includes some of what’s in the government’s agreement with the Greens but fails to provide what’s needed to end poverty, encourage innovation or tackle climate change, said Rob Botterell, the MLA for Saanich North and the Islands, responding for the party.

“We need systemic change,” he said. “This is a standstill budget.... We’re looking for action this year. Not more planning, action.”

The budget was appropriate for challenging times, said Hermender Singh Kailley, secretary-treasurer for the BC Federation of Labour. “My overall take is that we’re happy the government didn’t introduce cuts and has shown a commitment to the public services that British Columbians are actually going to rely on more than ever.”

The B.C. director for the Canadian Taxpayers Federation, Carson Binda, said doubling the debt would burden families for generations with higher taxes and restricted spending. “This budget is a disaster for the British Columbians who are being abandoned by Premier David Eby.”

Alex Hemingway, a senior economist with the BC Society for Policy Solutions, said the government is right to avoid making cuts right now. “That would be disastrous with a trade war on our doorstep.”

It’s an appropriate time to run a deficit, added Hemingway. “That’s far preferable to cutting back on public services and infrastructure investment, which are really critical to sustaining our economy in the medium and long term.”

The government missed opportunities to increase funding for child care and housing, he said, two areas that contribute to economic growth and productivity.

Advocates for child care were disappointed in the lack of progress towards a long-promised universal $10-a-day program, said Sharon Gregson, spokesperson for the Coalition of Child Care Advocates of BC.

“It’s a lost opportunity to help B.C.’s economy,” said Gregson. “We know that when there’s going to be job creation we want parents with young kids to be able to go to work. That’s not going to happen in this budget. The provincial budget has flatlined.”

The communications manager for the BC Poverty Reduction Coalition, Sacia Burton, said she was pleased to see the small increases to the SAFER and RAP housing programs.

“We’re disappointed there’s once again no increase for assistance or disability rates,” she said. “Without at least indexing rates to inflation we’re noticing that people are not going to be able to meet their needs and the gulf continues to widen in terms of folks who are most economically vulnerable in our province.”