Economists say Ottawa’s budget has less room for B.C., despite Doerkson calling it encouraging

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British Columbia premier-designate Lorne Doerkson said he is a fan of this week’s federal budget, calling it “encouraging and ambitious,” while two economists cautioned that it may not serve as a practical template for B.C.

Marc Lee, a senior economist with the Canadian Centre for Policy Alternatives, said B.C. faces greater urgency than Liberal Prime Minister Mark Carney’s government in addressing deficit problems. Lee said that although federal and provincial deficit-to-GDP ratios are about the same, B.C. “can’t continue to run large deficits” year after year.

Lee said Ottawa has “a lot more room, the license to do things, partly because it is the federal government,” while B.C. has less room to reduce spending because it has primary responsibility for health, education and other social services—cuts that would be noticeable to residents.

Doerkson, whose Conservatives toppled the NDP government in last month’s provincial election, praised the federal budget’s focus on resource industries and growth-oriented tax measures. He said the Conservatives are “committed to growing B.C.’s economy,” and told reporters the province would “be looking to improve our revenue from forestry, LNG and certainly we’ll be contemplating all of that going forward.”

Asked whether the federal budget was an “approximation” of what his provincial budget would look like, Doerkson reiterated the Conservatives’ commitment to growth rather than mapping federal measures directly onto B.C.’s plans.

The Conservatives have promised to cut this year’s forecasted deficit of almost $14 billion through economic growth without new taxes, a target that Jairo Yunis, policy director at the Business Council of B.C., said is constrained by campaign-trail commitments, last year’s public sector wage settlements and rising debt-servicing costs.

Yunis said those rising debt-related costs are the fastest-growing budget line item and that B.C. has more “direct program spending” than Ottawa. He also pointed out that the province’s public sector has grown by 44 per cent since 2019, compared with three per cent growth for the private sector.

In addition to spending pressures, Yunis said Doerkson’s government would need to improve regulation and permitting to stimulate growth and revenue. He said B.C.’s next finance minister will face real challenges, adding, “I don’t envy the next finance minister.”

Yunis highlighted Ottawa’s “productivity mega deduction,” which allows companies to immediately and fully expense eligible assets such as machinery, calling it “arguably the most important pro-growth tax change Ottawa has made in years.” Doerkson specifically praised the measure and said it would align with his party’s plan to exempt some machinery, equipment and business software from the Provincial Sales Tax for three years.

Doerkson said the federal and provincial tax measures could “supercharge investment in this province and create jobs right here.” Lee, however, said the Provincial Sales Tax exemption would be “hugely beneficial” to the oil and gas industry but would push B.C. in the “wrong direction” on climate change.

Lee also warned that cuts to public services could trigger a recession and said he was not sure tax changes would generate additional revenue, arguing politicians had mostly “pushed all the buttons” around growth. Yunis said he was more optimistic, while still acknowledging that difficulties ahead remain for B.C.