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By Ben Eisen and Tegan Hill
In recent years, the British Columbia government has run large budget deficits and racked up massive amounts of debt. However, British Columbians may not be fully aware of the sheer scale of the damage and the speed at which the province is careening towards fiscal disaster. According to two recent reports, B.C. is on track to become one of the biggest debtor provinces in Canada.
Start with this year’s annual report from the Parliamentary Budget Office (PBO), a budget watchdog that delivers annual updates on the sustainability of government finances across Canada. Not that long ago, in the mid-2010s, B.C. was in the PBO’s top half of provinces in terms of long-term fiscal health.
This year’s report, published on Aug. 28, tells a very different story. B.C. has the least sustainable government finances among all provinces. Which means that unless the provincial government raises taxes, it must reduce spending substantially to avoid increasing the province’s debt burden relative to the size of its economy. Simply put, the government’s current approach to spending is unsustainable without future tax hikes or service cuts.
Meanwhile, British Columbians continue to pay a lot to merely finance the existing debt load. This fiscal year (2024-25), debt interest costs are more than $700 per person and are projected to rise to nearly $1,000 per person by 2026-27.
The Fraser Institute has just published a new report (co-authored by one of us) that tells a similar story. Even though B.C. was recently one of the least indebted provinces in Canada, it’s on track to become one of the highest-debt provinces by 2029-30. Five years ago, the B.C. government’s net debt was $9,175 per person. But if it continues on its current trajectory, five years from now that number could reach $36,909, which would be either the highest or near the highest in Canada.
This is a stunning reversal. Five years ago the notion that B.C. could approach the debt levels of Ontario, Quebec and the Maritime provinces would have seemed very unlikely. But today, the B.C. government’s per person debt has already caught up to New Brunswick and will likely surpass Prince Edward Island and Nova Scotia in a year or two. By the end of the decade, B.C. is on track to surpass Ontario and Quebec, provinces that have been famous for high debt loads for decades.
How did this happen?
Two words: spending growth. B.C.’s former status as a low-debt province was due to 15 years of spending restraint that produced mostly balanced budgets (outside of recessions) and minimal debt growth.
Since the change of government in 2017, however, the rate of spending growth has exploded and, no surprise, so have budget deficits. For instance, program spending grew by 6.6 per cent in 2017-18 and 7.8 per cent in 2018-19. After the pandemic, program spending grew by a staggering 14.2 per cent in 2022-23. It didn’t have to be this way. If the Horgan and Eby governments had simply maintained spending close to the rate of inflation plus population growth, as their predecessors did for many years, B.C. would be in a much different situation today.
It’s much harder to build a sandcastle than it is to kick it over. It took more than a decade of prudent management and hard decisions to establish B.C. as one of the most fiscally sound provinces in Canada. But it’s taken less than a decade of free spending to drive the province into large deficits, rack up mountains of debt and earn the unfortunate distinction of having the least sustainable finances in Canada.
Ben Eisen and Tegan Hill are analysts with the Fraser Institute. Eisen is co-author, with Joel Emes, of the new Fraser Institute report: British Columbia’s Descent into Debt.