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

Terry Mazzei next to a truck after it was struck by lightning, with him inside, on Wednesday afternoon, June 9. He walked away from the incident without injury and the truck sustained only mild damage; a blown front tire and newly broken gas gauge. (Wendy Mazzei photo)
Nanoose Bay man walks away unscathed after lightning strike

VIDEO: ‘We like to think that his dad was watching over him’

This young fledgling white raven was spotted in the Coombs area on May 16. (Mike Yip photo)
Expert says 2 sets of parents producing rare white ravens in mid-Island area

One of the iconic birds is currently recovering at wildlife centre after being rescued

Flowers planted along Highway 19 in downtown Parksville. (Submitted photo)
City of Parksville plants more than 15,000 annual bedding plants

Residents encouraged to take flower photos and post to social media

New COVID-19 cases on Vancouver Island by local health area for the week of May 30-June 5. (B.C. Centre for Disease Control image)
COVID-19 cases drop again almost everywhere on Vancouver Island

Nanaimo had four new cases last week, down from 22 the week before

The Parksville Civic and Technology Centre. Offices will re-open to the general public on June 21. (PQB News file photo)
Parksville’s city hall offices to open again on June 21

Offices will resume pre-COVID hours of operation

t
How to tell if a call from ‘CRA’ is legitimate or a scam

Expert says it’s important to verify you really are dealing with the CRA before you give out any info

Prime Minister Justin Trudeau greets campers while visiting McDougall, Ont. on Thursday, July 19, 2018. THE CANADIAN PRESS/Frank Gunn
71% of B.C. men say they’d prefer to go camping with Trudeau: survey

Most British Columbians with plans to go camping outdoors say they’d prefer to go with Trudeau or Shania Twain

The courthouse in Nanaimo. (News Bulletin file)
Nanaimo man, already in jail, found guilty of sexual abuse of sons

Man previously sentenced for sexual interference involving girl in Nanaimo

Members of the Department of Fisheries and Oceans’ Marine Mammal Response Program rescued an adult humpback what that was entangled in commercial fishing gear in the waters off of Entrance Island on Thursday, June 10. (Photo courtesy Marine Mammal Response Program)
Rescuers free humpback ‘anchored’ down by prawn traps off Vancouver Island

Department of Fisheries and Oceans responders spend hours untangling whale

British Columbia-Yukon Community News Association’s 2021 Ma Murray Awards were handed out during a virtual ceremony on Friday, June 10. (Screen grab)
Black Press Media winners take gold at B.C. and Yukon journalism awards

Publications received nods in dozens of categories

Unofficial holidays: Here’s what people are celebrating for the week of June 13 to 19

Flag Day, Garbage Man Day, International Panic Day all coming up this week

Chilliwack cocaine trafficker Clayton Eheler seen with a tiger somewhere in Asia in 2014. Eheler was sentenced to nine years jail in 2018, but was released on bail in October 2020 pending his appeal of conviction.(Facebook)
Director of civil forfeiture seeks $140,000 from Fraser Valley drug dealer’s father-in-law

Clayton Eheler’s father-in-law Ray Morrissey caught with money in Fort St. John by B.C.’s gang unit

A Comox Valley shellfish operator pleaded guilty and was fined $10,000 in provincial court in Courtenay earlier this year. Record file photo
B.C. clam harvester fined $10,000 for Fisheries Act violations

Charges against three others were stayed in Courtenay Provincial Court

Frank Phillips receives a visit from his wife Rena at Nanaimo Seniors Village on their 61st wedding anniversary, March 31, 2020. Social visits have been allowed since COVID-19 vaccination has been offered in all care homes. (Nanaimo News Bulletin)
B.C. prepares mandatory vaccination for senior care homes

180 more cases of COVID-19 in B.C. Friday, one more death

Most Read