NDP budget update raises spending by $2.7 billion

Three new tax increases will raise a projected $1.8 billion over three years  

B.C.’s new NDP government will spend $2.7 billion more over three years than its predecessor Liberal government had planned to spend, but will be able to do so without deficit spending, thanks in part to $1.8 billion in additional revenue it plans to raise through tax hikes.

A $5 per tonne hike to the carbon tax alone will bring in an additional $1.2 billion over three years and will not be offset by decreases elsewhere because the NDP government has abandoned the revenue neutrality that the Liberal government applied to the carbon tax.

The government is projecting a $246 million surplus for the 2017-18 fiscal year, despite the $2.7 billion in increased spending.

The average British Columbian will pay less in Medical Service Plan premiums, taxes on electricity and bridge tolls, but higher gasoline taxes, thanks to an increase to carbon taxes.

High income earners will pay higher income taxes, and businesses will see corporate income taxes hiked 1%, while small business will see their taxes cut to 2% from 2.5%.

The updated three-year plan contains $14.6 billion in capital spending over three years but doesn’t including funding for the $3.5 billion George Massey tunnel replacement project.

In total, the government plans to raise $1.8 billion over three years through increased carbon, income and corporate taxes.

“We believe those at the top can pay a little bit more to be able to contribute to the services and programs that need to be provided for all British Columbians,” said Finance Minister Carole James in a pre-budget briefing Monday, September 11.

The budget update got mixed reviews from B.C.'s business leaders. The BC Chamber of Commerce gave the NDP government credit for sticking to a balanced budget, while the Business Council of B.C. (BCBC) voiced concerns that the budget is being balanced by increasing costs for business.

"We appreciate that the new government is taking steps to deliver on some needed commitments to improve affordability and address the cost of living pressures facing many BC families," said BCBC CEO Greg D'Avignon. "That said, we are concerned about the added costs being imposed on employers and the business sector generally who ultimately support and create the high wage jobs and investments that enable trade, and support prosperity for both the kitchen and boardroom tables."
The Vancouver Board of Trade's biggest concerns are not what is in Monday's budget update, but rather what is yet to come in the first full budget in February. As the board of trade points out, “many of the NDP’s expensive election commitments remain unfunded and unannounced.” That includes its commitments to $10 a day child care, and the full cost implications of removing tolls on bridges.

The update presented Monday is not a full-blown budget, but an update to the budget handed down by the previous Liberal government in February. The NDP will file its first full budget in February.

The budget update contains little new money for childcare. Despite a $10 per day childcare program promised by the NDP in the election campaign, the budget contains only $20 million in new money for childcare. Also missing from the budget is a $400 renter’s rebate that was promised.

“We said all along we’re not going to be able to do everything overnight,” James said, when asked to defend some of the NDP promises that are missing from the budget update.

She said her government remains committed to both $10 a day childcare and a $400 renter’s rebate, but suggested her government doesn’t have the support of the BC Green Party on those two policies yet.

“Those are both commitments that we made during the election campaign and ... they’re also part of the discussion that we’re having with the Greens around where we may have a difference of opinion around how we’re implementing programs and services,” James said.

“This was a unique political time in British Columbia’s history, and I think no one expected we’d be doing a budget in September.”

The budget continues many of the commitments made in the Liberal budget, with a few tweaks. For example, whereas the Liberal government also provided for a cut to MSP premiums, it would have been income based; the NDP opted for a simpler across-the-board cut for all British Columbians.

MSP premiums will be halved starting in January 2018. The government has no date yet for when they will be phased out altogether.

As for PST on electricity, it will be halved this fall, to 3.5% from 7%, and eliminated entirely by April 2019.

Key line items included in the $1.8 billion in new operational spending over three years in James’ first budget:

•$674 million for affordable housing;

•$681 million in increased spending for the K-12 public school system;

•$603 million for health care;

•$506 million to cover cost of fighting wildfires;

•$472 million in increasing social assistance rates;

•$479 million to eliminate bridge tolls; and

•$322 million to deal with the fentanyl crisis.

New spending initiatives of note include:

•$208 million over four years for the construction of 1,700 new units of affordable housing;

•$291 million for 2,000 modular units for the homeless;

•$681 million over three years to reduce class sizes in public schools and the hiring of 3,500 additional teachers;

•$603 million for the base budget of the Ministry of Health, nearly half of which ($265 million) will be earmarked for the opioid crisis;

•$25 million over three years to set up the new Ministry of Mental Health and Addictions and $32 million for additional policing to crack down on the fentanyl drug trade.

While British Columbians will pay less for MSP premiums and see their power bills slightly reduced, when the PST starts coming off their BC Hydro bills, the $5 per tonne hike to the carbon tax in April 2018 will result in higher prices at the gas pumps.

However, the government will provide a carbon tax credit for low and middle income citizens, to a maximum of $135 per adult, and $40 per child.

Asked why the government has abandoned carbon tax neutrality, James said: “Ending the revenue neutrality means that we can use those resources for green initiatives – to put more investment into transit, to be able to give people the choice to be able to change their behaviour.”

The updated budget projects expenditures of $51.9 billion in 2017-18, $52.4 billion in revenue, a surplus of $246 million, and a $300 million contingency.

The government is working with a conservative GDP growth forecast of 2.9% – up from the even more conservative figure of 2.1% used in the budget in February. That bump is based on real GDP growth rates of 3.6% in 2016.