Premier-designate Lorne Doerkson called this week’s federal budget “encouraging and ambitious,” while economists said B.C. has less fiscal room than Ottawa.
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Premier-designate Lorne Doerkson said he is a fan of this week’s federal budget, praising its focus on resource industries and growth-oriented tax measures, but two economists warned it may be difficult to emulate the approach provincially.
Marc Lee, a senior economist with the Canadian Centre for Policy Alternatives, said B.C. faces greater urgency than Liberal Prime Minister Mark Carney to address deficit problems. He said B.C. “can't continue to run large deficits” year after year even though the federal and provincial deficit-to-GDP ratios are about the same.
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 because it has primary responsibility for health, education and other social services and residents would notice cuts.
Doerkson, whose Conservatives toppled the NDP government in the provincial election last month, described the federal budget as “encouraging and ambitious,” and said the Conservatives are committed to growth in B.C. When asked by reporters on Thursday whether the federal budget was an “approximation” of what his provincial budget would look like, he said the party is focused on growing the province’s economy.
Doerkson said his government would look to improve revenue from forestry and LNG, and said it would “be contemplating all of that going forward.” He also praised Thursday’s budget measure aimed at investment in productivity by endorsing the federal “productivity mega deduction,” which allows companies to immediately and fully expense eligible assets such as machinery.
The Conservatives have promised to cut this year’s forecasted deficit of almost $14 billion through economic growth without new taxes, and Doerkson said his party’s plan would dovetail with that by exempting 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.”
Jairo Yunis, policy director at the Business Council of B.C., said the Conservatives’ ability to respond to what he called a “dire” fiscal situation could be constrained by campaign 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 B.C. has more “direct program spending” than Ottawa and noted 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. He argued that B.C. should take a “more rigorous and more principled approach to public spending.”
Yunis said the government would also need to work on regulation and permitting to stimulate economic growth and revenue. While he said the federal productivity mega deduction is “arguably the most important pro-growth tax change Ottawa has made in years,” Lee said B.C. would be pushed in the wrong direction on climate change by the exemption and that potential cuts to public services could trigger a recession. Lee also said he was “more skeptical” that tax changes would create more revenue, saying politicians had mostly “pushed all the buttons” around growth.
In Yunis’s view, Doerkson’s next finance minister faces significant challenges, with Yunis saying, “I don't envy the next finance minister.”
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