B.C. taxpayers desperately need new fiscal approach from their government

In British Columbia, the Eby government, which plans to run a $7.9 billion operating deficit this year, also plans to accumulate a mountain of new debt from spending on capital projects while burning through resource revenue that should be saved rather than spent. In short, the government is spending recklessly at the expense of future generations of British Columbians.

Let’s first look at non-renewable resource revenues, which include royalties from natural gas but exclude revenues from renewable sources such as forests.

If the Eby government cared about the wellbeing of taxpayers in the future, it would treat non-renewable resource revenue differently than tax revenue. Why? Because when it collects resource royalties, the government depletes an asset. The government should instead save those royalties so they generate a reliable stream of revenue over time in the form of investment returns. Unfortunately, the Eby government is simply spending the money faster than it comes in the door. And non-renewable resource revenues are masking the full impact of the government’s ongoing spending spree.

In short, the government is selling the family silver to supplement income, yet is still incurring big operating deficits.

These deficits, however, are only a small portion of the debt the government plans to incur in the years ahead. The operating budget only includes spending on day-to-day activities such as government worker salaries and debt interest payments. It excludes expenditures on long-term capital projects (e.g. highways and schools). Once we account for this spending, the government’s projected debt will more than double over just four years, rising from $60.7 billion in 2022/23 to $128.8 billion in 2026/27.

Of course, taxpayers will ultimately bear the burden of this debt. Debt interest payments are set to rise quickly in the years ahead. By 2026/27, each British Columbian will be responsible for nearly $1,000 in provincial government debt interest. That’s money unavailable for other priorities such as health care and education.

Clearly, B.C. needs a new path forward. The government should adopt a new fiscal framework based on spending restraint and investing non-renewable resource revenue in a provincial fund. The government could use earnings from the fund to help finance ongoing spending and keep taxes lower in the future.

According to a recent study, if the government simply froze spending at the historically high level in 2023/24 and kept the freeze in place up to 2026/27—while saving 100 per cent of non-renewable resource revenue—it could balance the budget by 2026/27. This stands in stark contrast to the government’s projected $6.3 billion deficit that year. This framework would generate substantial deposits into a savings fund, allowing the fund to reach $3.7 billion by 2026/27.

This fiscal framework would also cut projected debt accumulation by $22.5 billion over the next three years compared to the government’s current plan.

A fiscal framework based on spending restraint and saving, rather than spending resource revenue, can prevent the rapid debt accumulation now forecasted in the years ahead, put provincial finances on a sounder footing for the long term, and ensure lasting benefits from resource revenue. This would be a principled approach to the stewardship of public money and the province’s natural resources, that also protects the wellbeing of British Columbians in the future.