Economists warn B.C. premier-designate Lorne Doerkson may struggle to match Carney’s budget approach

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British Columbia premier-designate Lorne Doerkson said he is a fan of this week’s federal budget, praising it as “encouraging and ambitious” and pointing to its focus on resource industries and growth-oriented tax measures.

The remarks came after Doerkson and the Conservatives toppled the NDP government in British Columbia’s provincial election last month. Asked by reporters on Thursday whether the federal budget was an “approximation” of what his provincial budget would look like, Doerkson said the Conservatives are committed to growing B.C.’s economy.

Doerkson said his government would aim to improve revenue from “forestry, LNG and certainly… all of that going forward,” adding that its budget would be “very committed” to growth.

However, economists cautioned that B.C. may not be able to emulate Ottawa’s approach. Marc Lee, senior economist with the Canadian Centre for Policy Alternatives, said British Columbia cannot “continue to run large deficits” year after year, even though he said the federal and provincial deficit-to-GDP ratios are about the same.

Lee also said Ottawa has “a lot more room, the license to do things, partly because it is the federal government,” noting B.C.’s responsibilities for health, education and other social services mean it has less flexibility to reduce spending without residents noticing cuts.

Another economist, Jairo Yunis, policy director at the Business Council of B.C., said the Conservatives’ ability to mitigate what he called a “dire” fiscal situation could be constrained by campaign-trail commitments, last year’s public sector wage settlements, and rising debt-servicing costs, which he said are the fastest-growing budget line item.

Yunis said British Columbia has more “direct program spending” than Ottawa, and that the size of B.C.’s public sector has grown by 44 per cent since 2019, compared with three per cent for the private sector.

Both economists argued the province faces additional challenges in getting growth and revenue. Yunis said Doerkson’s government would need to work on regulation and permitting to stimulate economic growth and revenue.

Yunis highlighted productivity-focused measures included in the federal budget, including what he described as the productivity mega deduction, which he said allows companies to immediately and fully expense eligible assets such as machinery. Yunis called it “arguably the most important pro-growth tax change Ottawa has made in years.”

Doerkson specifically praised the federal measure and said it would dovetail with the Conservatives’ plan to exempt some machinery, equipment and business software from the Provincial Sales Tax for three years. He said, “Together, they can supercharge investment in this province and create jobs right here.”

Lee said the provincial sales tax exemption would be “hugely beneficial” to the oil and gas industry, but he added that it would push B.C. in the wrong direction on climate change.

Lee also said he was not sure tax changes would create more revenue, saying politicians had mostly “pushed all the buttons” around growth. He said he was more skeptical that the approach would be enough, warning that cuts to public services could trigger a recession.

Yunis, while more optimistic, said he did not envy the next finance minister’s job, citing the difficulties ahead for B.C. fiscal policy.