British Columbia Premier John Horgan highlights a paragraph as Finance Minister Selina Robinson tables the budget in a speech in the legislative assembly at the provincial legislature in Victoria, Tuesday, April 20, 2021. THE CANADIAN PRESS/Chad Hipolito

British Columbia Premier John Horgan highlights a paragraph as Finance Minister Selina Robinson tables the budget in a speech in the legislative assembly at the provincial legislature in Victoria, Tuesday, April 20, 2021. THE CANADIAN PRESS/Chad Hipolito

FINLAYSON: 3 takeaways from the new B.C. budget

‘Perhaps most notable is what’s happened in the labour market since last spring’

The 2021 provincial budget tabled last month allows us to gain additional insight into how COVID-19 has affected the economy and the B.C. government’s finances. After digesting the economic and fiscal information presented in the budget, three main takeaways stood out for me.

The first is that our economy has staged an pretty decent revival from the COVID-driven carnage of last spring. For example, retail sales are 12 per cent above the level set in February 2020. Housing markets are on fire, with dramatic increases in sales activity and recent advances in housing starts.

Manufacturing shipments have jumped after a temporary drop in the first half of 2020. The province’s burgeoning advanced technology sector is booming. And the natural resource sector – consisting of forestry, energy, mining and agri-food – is benefitting from buoyant world commodity markets and making a vital contribution to the province’s ongoing economic recovery.

Perhaps most notable is what’s happened in the labour market since last spring. B.C. has recouped the bulk of the 400,000 jobs lost during the harrowing months of February-April 2020. By March 2021, total employment was higher than 13 months earlier.

However, last month saw a steep job decline, as the “circuit breaker” restrictions introduced by health authorities in March took a toll on industries like tourism, hospitality, accommodation, transportation, and arts and entertainment. Many workers in these industries are still furloughed.

Moreover, employment growth in the broad public sector has surged, partially offsetting weaker job growth across some parts of the private sector. There is still a way to go to get back to something resembling full employment in the business community.

Still, overall British Columbians can take comfort that a resilient economy managed to spring back to life once the first wave of COVID-19 had passed and has mostly stayed on a growth track since then.

A second important budget takeaway is the deterioration in the province’s financial health since 2019. This has two implications. First, the B.C. government, saddled with significantly more debt thanks to the pandemic, will have less scope to deal with future economic shocks. And second, once the pandemic is over, some combination of spending restraint and tax hikes likely will be required to repair the fiscal damage done by COVID-19.

The good news is that higher-than-expected revenues fueled by a rebounding economy enabled the government to run a smaller deficit in 2020-21 than many – including the Ministry of Finance — were forecasting.

Instead of the $13 billion gusher of red ink anticipated last fall, the shortfall came to $8.1 billion for the year ending March 31, 2021. On top that, the province borrowed another $6.3 billion to fund taxpayer-supported capital spending. Adding this to the operating deficit, B.C.’s total taxpayer-supported debt climbed by roughly $14 billion – a record amount of new debt — in 2020-21, lifting the net debt/GDP ratio a full five percentage points to 20.3 per cent.

Surprisingly, the Horgan government is projecting an even bigger operating deficit of $9.8 billion this year, along with another $8.5 billion in borrowing for taxpayer-supported capital projects – pushing the net debt/GDP ratio to 23 per cent by March 2022.

The decision to run another large deficit in part reflects the reality that the COVID public health crisis – and the associated economic disruption — is still with us. But the government has also given itself a fiscal cushion by including substantial forecast allowances and other contingencies in its budget projections. Given the multiple nasty surprises delivered by the virus over the past year, that seems prudent.

The final budget takeaway is that the province has more work to do to establish conditions that will support a strong, productive economy.

To be sure, a few measures unveiled in Budget 2021 should be positive for private sector investment and job creation going forward – including temporary sales tax exemptions for business purchases of machinery and equipment, additional funding for post-secondary education and training, and the creation of a new Crown agency with a mandate to invest in promising local companies.

But there is little in the budget that addresses the policy-driven barriers to investment in some of the province’s biggest export industries – advanced manufacturing, forestry, and mining.

Nor is there much focus on leveraging B.C.’s strengths in high technology industries like life sciences, biopharmaceuticals, and digital goods and services. Looking past the pandemic, B.C. policymakers will need to turn their attention to improving the province’s mediocre performance in the critical areas of productivity, innovation and competitiveness.

Jock Finlayson is a senior policy advisor with the B.C. business council.

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

Just Posted

People at the beach in front of Discovery Bay Resort on Tuesday, July 14. (Michael Rodriguez - Capital News)
Heat wave forecast for Okanagan-Shuswap

Tempertures are forecast to hit record breaking highs this week

FILE – Perry Bellegarde, National Chief of the Assembly of First Nations, takes part in an event on Parliament Hill in Ottawa on Tuesday, July 7, 2020. THE CANADIAN PRESS/Sean Kilpatrick
Indigenous Peoples Day must be a ‘call to action’, says Assembly of First Nations chief

Discovery of children at Kamloops residential school site must lead to change, Perry Bellegarde says

It's believed the Sacred Hearts church on PIB land burned Sunday night. (Aileen Mascasaet Maningas)
UDPATE: Two churches on band land in South Okanagan burn to the ground

Sacred Hearts church on Penticton Indian Band land was reduced to rubble

The Pierre family, an Indigenous family, once lived in what is now downtown Summerland. Today, Pierre Drive is named in honour of the family. (Photo courtesy of the Summerland Museum)
Pierre family played role in Summerland’s history

Downtown Summerland was once Penticton Indian Reserve #3

Jaimee Peters photo of a Willow Midwives helping with a birth. Willow closed its doors March 31 because of a shortage of midwives. (Contributed)
South Okanagan’s only midwifery to re-open this summer

Willow Community Midwives was forced to close because of a shortage of midwives

Marco Mendicino, Minister of Immigration, Refugees and Citizenship during a press conference in Ottawa on Thursday, May 13, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Canada to welcome 45,000 refugees this year, says immigration minister

Canada plans to increase persons admitted from 23,500 to 45,000 and expedite permanent residency applications

Tony Costa/ Facebook
UPDATE: Out-of-control fire burning above Peachland

The blaze sparked on Sunday and is believed to be lightning caused

Tl’etinqox-lead ceremony at the site of the former St. Joseph’s Mission in Williams Lake, B.C., June 18, 2021. (Angie Mindus photo - Williams Lake Tribune)
‘We are all one people’: Honouring residential school victims and survivors

Love, support and curiousity: Canadians urged to learn about residential schools and their impact

Indigenous rights and climate activists gathered outside Liberty Mutual’s office in Vancouver to pressure the insurance giant to stop covering Trans Mountain. (Photo by Andrew Larigakis)
Activists work to ensure Trans Mountain won’t get insurance

Global campaign urging insurance providers to stay away from Canadian pipeline project

In the first election with public money replacing corporate or union donations, B.C. Liberal leader Andrew Wilkinson, B.C. Greens leader Sonia Furstenau and B.C. NDP leader John Horgan take part in election debate at the University of B.C., Oct. 13, 2020. (THE CANADIAN PRESS)
B.C. MLAs ponder 2022 ‘sunset’ of subsidy for political parties

NDP, B.C. Fed call for increase, B.C. Liberals have no comment

Investigators use a bucket to help recover human remains at a home burned in the Camp fire, Thursday, Nov. 15, 2018, in Magalia, Calif. Many of the missing in the deadly Northern California wildfire are elderly residents in Magalia, a forested town of about 11,000 north of the destroyed town of Paradise. (AP Photo/John Locher)
‘Forever War’ with fire has California battling forests instead

Five of the state’s largest-ever blazes seared California last year, as authorities tackle prevention

Tokyo 2020 President Seiko Hashimoto and IOC President Thomas Bach, on a screen, speak during a five=party online meeting at Harumi Island Triton Square Tower Y in Tokyo Monday, June 21, 2021. The Tokyo Olympics will allow some local fans to attend when the games open in just over a month, Tokyo organizing committee officials and the IOC said on Monday. (Rodrigo Reyes Marin/Pool Photo via AP)
Tokyo Olympics to allow Japanese fans only, with strict limits

Organizers set a limit of 50% capacity — up to a maximum of 10,000 fans

The border crossing into the United States is seen during the COVID-19 pandemic in Lacolle, Que. on February 12, 2021. THE CANADIAN PRESS/Paul Chiasson
VIDEO: Border quarantine to soon lift for fully vaccinated Canadians

Eligible travellers must still take multiple COVID-19 tests

Most Read