BUDGETS FOR CANADA AND B.C.: BIG SPENDING, PERSISTENT DEFICITS AND RISING GOVERNMENT DEBT
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BUDGETS FOR CANADA AND B.C.: BIG SPENDING,
PERSISTENT DEFICITS AND RISING GOVERNMENT DEBT
FEDERAL AND B.C. BUDGETS 2021 ANALYSIS
April 2021 Ken Peacock Dr. David Williams Jock Finlayson
Chief Economist Vice President, Policy Senior Advisor
& Senior Vice President
FEDERAL & B.C. BUDGETS
2021 ANALYSIS
APRIL 22, 2021
BUDGETS FOR CANADA AND B.C.: BIG SPENDING,
PERSISTENT DEFICITS A ND RISING GOVERNMENT DEBT
H I G HL I G HTS
•A strong economic rebound in 2021 and 2022 underpins both the federal and B.C. budgets. The Federal
budget assumes Canadian real GDP will grow by 5.8% in 2021 and 4% in 2022. The B.C. budget projects the
provincial economy will grow by 4.9% this year and 4.3% in 2022. The more conservative projections for B.C.
are part of several steps that indicate a high degree of budgetary prudence in the face of uncertainty.
•The federal deficit in 2021/22 is projected to be nearly $155 billion, which is still a sizeable 6.4% of GDP. The
provincial deficit in 2021/22 is estimated to be $9.7 billion, which is 3.1% GDP. Neither budget provides a long
term plan to return to balance. Both budgets contain plentiful and wide-ranging spending increases aimed
at temporary pandemic related supports but also new non-temporary spending initiatives. Neither budget
contains broad or substantial tax increases.
•The federal budget’s highest profile initiative is the National Early Learning and Child Care Plan based on the
Quebec child care model. If implemented, the government expects it will boost Canadian real GDP by 0.05%
per annum over the next two decades. The federal government commits $30 billion over five years and
$8.3 billion annually thereafter to the plan. The provinces are to administer the program and match federal
funding on 50/50 basis.
•Both budgets feature active industrial policy around promoting innovation and the growth of technology-
producing companies. The federal budget is spending billions more to support the life sciences and
bio-manufacturing industry, clean technologies, the development of electric vehicles, the aerospace sector,
quantum computing, AI, genomics, and digital technologies, among others. B.C.’s budget also provides
funding for innovation, the technology sector and locally-based companies. The new InBC Investment
Corporation, first announced last summer, will be endowed with $500 million to invest in growing and
“anchoring” high-growth B.C. businesses.
•Both budgets also feature new spending towards a low-carbon future. The federal budget adds $17.6
billion in various spending measures to the $15 billion announced last year and the $14 billion promised for
public transit in February 2021. The B.C. budget allocates another $506 million over three years for further
initiatives under its CleanBC plan.
•Unfortunately, the province has done almost nothing to address mounting concerns that B.C.’s current
carbon pricing system puts our exporting industries at a competitive disadvantage because of the province’s
failure to mitigate the negative financial impact of the escalating carbon price on trade-exposed sectors.
The Business Council’s biggest disappointment is there is nothing that begins to address this failure in the
provincial budget.
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com
FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
CANADA AND B.C. TA BL E 1 : A F TE R A SW I F T R E COV E RY, C A N A DA ' S M E DI U M TERM
ECONOMIC OUTLOOK G R OW TH P R OS P E C TS D I M (RE AL GDP GROWT H , ANNUAL , C A N A DA )
The federal government’s 2021 Forecast
Source 2021 2022 2023 2024 2025
budget, tabled on April 19, expects date
Canada’s economy to grow by 5.8% Budget 2021 April 19 5.8 4.0 2.1 1.9 1.8
(after inflation) in 2021 and 4.0% in
2022, as the economy’s considerable Parliamentary Budget Office March 31 5.6 3.7 1.8 1.6 1.6
spare capacity goes back to work.
After this spurt, growth drops back Bank of Canada* April 21 6.5 3.7 3.2 1.0-3.0 1.2-3.2
to around or below 2% per annum
* Bank of Canada forecasts for 2024 and 2025 are the Bank's estimated range for potential output growth
thereafter (Table 1). Canadian real Source: Federal Budget 2021; PBO; Bank of Canada.
GDP will surpass its pre-pandemic
level later in 2021 (earlier than The federal budget’s economic conservative 4.9% in 2021. This is
previously expected), but the forecasts, which are based on an almost a full percentage point lower
recovery will not be strong enough average of private sector forecasts, than the national real GDP growth
to make up lost ground and return are around 0.2-0.3 percentage points rate assumed in the federal budget.
GDP to its pre-pandemic trajectory (pp) per annum more optimistic than
(i.e. the level of GDP that would have Unlike the federal budget, the
the Parliamentary Budget Office’s
occurred without the pandemic). province builds in an additional
(PBO) pre-budget forecasts (Table 1).
The near-term outlook is subject cushion by trimming the economic
In particular, they assume the
to uncertainty and unevenness growth rate assumption by a further
economy can sustainably grow (i.e.
across sectors, as the race between half percentage point relative to the
without causing excessive inflation)
the variant-driven third wave and average of private sector forecasts.
at just under 2% per annum, whereas
Canada’s vaccination program Conventionally, in past budgets, B.C.
the PBO’s estimates are closer to
continues. governments have “discounted” the
1½% per annum. If the PBO’s more private sector average by two- or
Key factors assisting Canada’s conservative outlook is correct (e.g. three-tenths of a percentage point.
near-term prospects are: buoyant because of the pandemic’s scarring The much larger “discount” for this
global commodity prices; a much effects on the economy), the budget, partly reflecting unusual
improved global and U.S. growth government debt/GDP ratio would uncertainty, coupled with the rapidly
outlook (reflecting the resilience be higher and decline more slowly improving global economic outlook,
of households and businesses than projected in Minister Freeland’s could result in actual provincial
during lockdowns, and the Biden budget. On the other hand, on revenues handily exceeding the
administration’s massive $1.9 Wednesday the Bank of Canada budget targets. Indeed, this is what
trillion fiscal stimulus package); revised up its forecasts for domestic we believe will happen as the 2021-
extraordinary ongoing domestic and foreign demand, as well as for 22 fiscal year unfolds.
monetary and fiscal policy stimuli; productivity growth and potential
and the extent to which vaccinations output growth, resulting in a stronger
allow the lifting of social restrictions outlook for GDP across 2021-25. FISCAL SETTING AND
(especially affecting high-contact The Bank’s more optimistic outlook OUTLOOK
service sectors). Canada’s GDP would imply a slightly lower track for
Federal Budget
growth is expected to fade below government debt/GDP than assumed
2% by 2024-25, which is considered in this week’s federal budget. The federal government tabled its
the economy’s long-run “top speed”. long-awaited budget on Monday,
As with the national economy, the
In contrast, the federal budget providing Canadians with a clearer
B.C. economy is expected to rebound
notes the “top speed” for Canada’s picture of federal finances. It has
in the near term. In B.C.’s case,
economy over 1970-2019 was been more than two years since
however, the average private sector
considerably higher and averaged the government tabled a budget
forecast for real GDP growth is a
2.7% per annum. and, in fact, there has not been a
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 2FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
budget in the life of the current
Parliament. At over 700 pages long, FIGURE 1: F E D E R A L DE F I C I TS P E R S I ST E V E N AS
COV I D S P E N D I N G U N W I N DS
Monday’s document is wide-ranging
and packed with an assortment of Canada government revenue and expenses, billions $
650
new spending, of which close to
600
half comes in the current fiscal year 550
Program
expenses
as temporary pandemic supports 500
for business and individuals. There 450
400
is also money to support reaching
350
Budgetary
lower carbon emission targets, to 300 revenues
foster industrial development in 250
2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26
targeted sectors, and a high-profile 0
announcement for childcare, all of
-100 -59.7 -51
which go beyond the near-term and
could be seen as positioning the -200 -154.7
government to go to the polls. -300
surplus / deficit, billions $
Consistent with past proclivities, new -400 -354.2
spending jumps sharply and is at the
Source: Federal Budget 2021.
high end of what the government
signalled in the Fall Economic
Statement. New spending measures
budget document does reference of the funding is aimed at making
this fiscal year alone amount to $49
the government’s commitment to structural changes in the economy.
billion (2% of GDP). Over the next
unwind COVID-related spending,
three years, the federal government Key sensitivities surrounding the
lower deficits, and slightly reduce
will spend an additional $101.4 billion medium-term federal fiscal outlook
the federal debt as a share of the
in “extra” stimulus. concern the assumption that
economy over the medium-term. But government borrowing costs will
There are a few minor and targeted as outlined in Monday’s document, remain ultra-low, the strength of
tax measures, but the new federal the federal debt-to-GDP ratio the near term economic recovery,
budget contained no broad-based jumped from 31% of GDP to 49% last and the economy’s medium-term
tax hikes. Revenue growth over fiscal year. It climbs further to 50.7% potential GDP growth rate.
the course of the fiscal plan results over the next couple of years before
mostly from the stronger-than- edging down marginally later in the
expected economic recovery. decade. B.C. Budget
Even with the improved economic In advance of the budget, the A day after the federal budget,
outlook and rising revenues, Parliamentary Budget Office B.C. Finance Minister Selina
generous spending increases mean and others questioned the need Robinson introduced the provincial
the government is looking at a for anything near $100 billion of government’s three-year fiscal plan
whopping deficit of $154.7 billion in additional stimulus given the much outlining sizable and widespread
2021/22. While down sharply from stronger global and Canadian spending increases in priority areas,
the record $354.2 billion deficit last economic outlook. Fortunately two successive record deficits, and
year, it is still a large shortfall at 6.4% upwards of half the additional federal notably higher debt levels. A boost
of GDP. In the following years, the stimulus spending occurs in the to public sector capital spending
deficit falls to $60 billion and then to current fiscal year, and thus is not (which in B.C. is normally financed
just over $50 billion, amounting to back-end loaded (as is often the case via borrowing) contributes to a large
2.3% and 1.9% of GDP respectively. with new federal spending measures) bump in the projected debt/GDP
The Trudeau government has no when the need for it would be even ratio in the next few years.
plan to balance the budget. The less clear. We note, too, that some
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 3FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
The provincial government expects
TA BL E 2 : PA N DE MI C A N D R E COV E RY CO N TI N G E N C I E S A L LO CAT I O NS
a deficit for this fiscal year of $9.7 F O R 2 02 1 /2 2 I N TH E B .C . B U D G E T
billion. At 3.1% of GDP this is a large
shortfall, but not dissimilar to other Category
National
Measures
Allocation*
provinces and half the comparable
federal proportion. The deficit for the Health and
$900 million Health-related COVID-19 management
Safety
fiscal year that just ended (2020/21)
is now pegged at $8.1 billion, much $265 million Temporary housing, meals and supports for vulnerable populations
lower than the $13.6 billion deficit Essential services including justice services, child care safety
projection made in the fall. The $225 million grants, agriculture/food security and potential increased demand
Supports for for income assistance
upside surprise mostly reflects
Businesses $195 million Small and Medium Sized Business Recovery Grant Program
higher-than-expected revenues and People
flowing from a rebounding B.C. $120 million Tourism and art sector supports
economy. $150 million Incresaed Employment Incentive tax credit
$100 million B.C. Recovery Benefit
Commendably, the budget embodies
a significant amount of cushion $100 million Skills training and youth employment initiatives
Preparing for
and flexibility. For the current fiscal Recovery $100 milliion
Community infrastructure programs, BC 150 Community Grants
and CleanBC recovery investments
year (2021/22), the government has
allotted $3.2 billion for pandemic Unallocated $1.1 billion Reserve for unanticipated urgent health or recovery measures
and recovery related contingencies. Total $3.25 billion
This money may not be spent. As * Notional allocations are based on current forecasts, with any changes communicated in Quarterly Reports.
shown in the table below, roughly Source: B.C. Budget 2021.
one third of the contingency funding
is unallocated. Another layer of F IG U R E 2 : B .C . P R OJ E C TS D E F I C I TS OV E R B U DG E T P L A N N I NG HO RI ZO N
budgetary prudence comes from
B.C. government revenue and expenses, millions $
a $1 billion forecast allowance, to 75,000
cushion against the risk of downside 70,000 Planned expenditures
(including contingency
adjustments to economic growth. 65,000 spending)
Considering the budget is already 60,000
Revenues
55,000
based on a GDP projection fully 0.5
50,000 Expenditures with no
percentage points lower than the contingency spending
45,000
average of private sector forecasters
40,000
(unlike the federal budget), we do 2012
/ 13
2013
/ 14
2014
/ 15
2015
/ 16
2016
/ 17
2017
/ 18
2018
/ 19
2019
/ 20
2020/21
updated
2021/22
Budget
2022/23
plan
2023/24
plan
forecast estimate
not expect the forecast allowance 2,000
will be used. 0
-2,000
Notably, the B.C. budget does not -4,000
-6,000 -4,323
contain a plan to return to balance. -5,484
-8,000
The document acknowledges -10,000
surplus / deficit, millions $ -8,144
-9,698
this shortcoming, citing the Source: Federal Budget 2021.
“unprecedented level of uncertainty
resulting from the ongoing impacts provincial spending surged by an contingencies) declines slightly in
of the pandemic.” The government unprecedented 17%, due mostly fiscal 2021/22.
does, however, hint at a potential to unexpected pandemic related
timeline when it says “preliminary The revenue side of the B.C. budget
outlays. As vaccinations increase,
analysis indicates getting back to is interesting. As the above figure
the virus retreats, and the need for
balanced budgets within a range of shows, in fiscal 2020/21 total revenue
supports eases, provincial spending
seven to nine years.” held up surprisingly well. The large
(inclusive of the loosely allocated deficit in 2020/21 was driven mostly
In the fiscal year that just concluded,
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 4FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
TABLE 3: B.C. A N N UA L R EV EN U E A N D EX P E N S E , 2 02 1 / 1 3 TO 2 02 3/24
Updated Budget Plan Plan
2012/ 2013/ 2014/ 2015/ 2016/ 2017/ 2018/ 2019/
forecast estimate 2022/ 2023/
13 14 15 16 17 18 19 20
2020/21 2021/22 23 24
Revenue 42,057 43,715 46,099 47,601 51,449 52,020 57,128 59,326 60,967 58,929 63,286 65,074
% change 0.6 3.9 5.5 3.3 8.1 1.1 9.8 3.8 2.8 -3.3 7.4 2.8
Expense (incl. contingencies) 43,204 43,401 44,439 46,791 48,683 51,706 55,593 58,823 69,111 67,627 68,020 68,997
% change 2.8 0.5 2.4 5.3 4.0 6.2 7.5 5.8 17.5 -2.1 0.6 1.4
Forecast allowance - - - - - - - - - -1,000 -750 -400
Deficit -1,147 314 1,660 810 2,766 314 1,535 503 -8,144 -9,698 -5,484 -4,323
Share of nominal GDP (%) -0.5 0.1 0.7 0.3 1.0 0.1 0.5 -0.1 -2.8 -3.1 -1.7 -1.3
Source: B.C. Budget 2021.
by additional COVID-19 spending. But F IG U R E 3 : B .C . D E BT LOA D R I S E S S H A R P LY 2 02 1 /2 2
the chief reason provincial revenue
was higher than expected last year Tax-payer supported debt to nominal GDP, % Tax-payer supported debt per capita, $
28 20,000
was a nearly $4 billion injection 26.9
26 18,000
of unplanned federal pandemic 25.0
24 16,000
funding. Without the additional 22.8
22 14,000
federal transfer, B.C. government
12,000
20
revenues would have fallen last year. 20.3
17.2 10,000
The assumed winding down of the 18
8,000
federal pandemic-related transfers 16
15.0 6,000
is the reason provincial revenue falls 14
4,000
14.4
this fiscal year. 12
2,000
10
While the pandemic prompted an 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
/15 /16 /17 /18 /19 /20 /21 /22 /23 /24
unprecedented spending response est. plan plan
/15 /16 /17 /18 /19 /20 /21 /22 /23 /24
est. plan plan
which translated into the 17% jump Source: B.C. Budget 2021 and previous B.C. budgets.
in provincial expenditures in fiscal
2020/21, we note the cumulative
spending increase over the four years projected to rise further. The result is growing capital investment drive
prior to the pandemic is larger than that, over the next three years, new the government’s overall debt levels
the spending increase spanning the taxpayer supported capital spending higher over the planning horizon.
pandemic and what is proposed over totals $26.4 billion: the highest level Taxpayer-supported debt rises by
the next three years. ever. The three-year total in Budget $32.8 billion and reaches $92.7
2021 is $3.5 billion higher than the billion by 2023/24. B.C.’s taxpayer-
Provincial government capital
capital plan outlined in Budget 2020, supported debt-to-GDP ratio climbed
spending is slated to jump in the
due mostly to new investments in from 15% prior to the pandemic to
coming years. This fiscal year,
the areas of health, education and 20.3% in 2020/21 and rises to almost
taxpayer-supported capital spending
transportation, as well as revised 27% by 2023/24. B.C. will see one
rises to $8.5 billion, a level that is
timing for capital projects. of the biggest percentage point
twice what it was three years back.
increases in its debt-to-GDP ratio of
The next year, capital investment is New spending on programs and
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 5FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
any province. Thankfully, B.C. went Neither budget does enough National childcare initiative
into the COVID crisis in better fiscal to strengthen the foundations Turning to new initiatives, the highest
shape than most other provinces.
for economic prosperity and profile is a proposed National Early
higher productivity growth Learning and Child Care Plan, to
be jointly developed with and
BUDGET THEMES AND over the medium-term,
administered by the provinces. The
KEY MEASURES which will better enable the
federal government commits $30
Both budgets include new/ economy to shoulder the billion over five years and $8.3
expanded spending commitments associated high debt loads billion annually thereafter to the
that carry a sizable fiscal price tag and weather future economic plan. As envisaged by the Trudeau
but should produce benefits as
turbulence. government, the plan will be cost-
they are implemented. The federal shared with the provinces/territories
budget is more consequential in this on a 50/50 basis. The goal is to
respect. Neither budget, however, dramatically increase the number of
does enough to strengthen the eligible businesses and non-profit
regulated childcare spaces and work
foundations for economic prosperity organizations affected by COVID-
toward a standard $10/day cost per
and higher productivity growth over related restrictions. It will cover up
enrolled child for families within five
the medium-term, which will better to half of the cost of “incremental
years.
enable the economy to shoulder remuneration” for bringing back
laid-off workers or increasing hours Finance Minister Freeland argues
the associated high debt loads and
for current employees, up to $1,129 that more accessible and affordable
weather future economic turbulence.
per employee, from June 6 through childcare will produce economic
Pandemic supports continue dividends by increasing labour
November 20, 2021. Finally, the
As Canada and B.C. grapple with the federal government is providing force participation among parents
variant-driven third COVID-19 wave, additional weeks of benefits and – especially women – with young
government financial supports for enabling quicker and more flexible children. The federal budget
households and businesses are being access to Employment Insurance estimates that a fully operational
extended to the fall or, in some cases, benefits for workers facing COVID- national childcare system could
longer – a necessary step, in our view. related challenges, at a hefty extra increase real GDP growth in Canada
This accounts for a significant portion cost of $14.6 billion this year and by 0.05% per year over the next
of the $154 billion deficit the federal $4.2 billion in 2022-23. two decades. The childcare plan
government is forecasting for 2021- should at least partly cover its
B.C., for its part, is also maintaining
22 as well as the $9.7 billion shortfall associated fiscal costs by increasing
and in some cases extending its
B.C. is expecting. We support the economy’s productive capacity
more limited pandemic supports
the decision to continue to run via slightly higher labour force
for businesses and individuals and
substantial deficits in the short-term participation (noting that Canada’s
is setting aside additional funds
but would emphasize that this is not labour participation rate among
in the near-term to assist the
a sustainable fiscal strategy. The prime age women and men is already
hard-hit tourism, restaurant and
orderly winding down of pandemic- very high by international standards).
arts sectors. The province is also
related government spending is an What Ottawa has in mind is explicitly
allocating significant new funding
urgent task for 2022 and beyond. modelled on Quebec’s existing
for health care services – to deal
Ottawa is extending the Canada with the lingering COVID crisis, to child-care program. It will take
Emergency Wage Subsidy (CEWS) expand mental health and primary the form of a new, annual federal
and the Commercial Rent Subsidy care services, and to reduce surgical transfer to participating provinces.
programs until late September. backlogs in the wake of COVID- Ottawa will have to conclude bilateral
The federal government is also related disruptions. agreements with willing provinces in
launching a new, time-limited order to bring its vision to life in the
Canada Recovery Hiring Program for next few years.
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2021 ANALYSIS APRIL 22, 2021
We predict Quebec will happily agree Innovation, technology and business approach to distributing substantial
to have the federal government pick scaling sums of money across a plethora
up half of the cost of its existing of sectors, activities and industrial
Both the federal and B.C. budgets
childcare program. We believe policy objectives. If policy choice in
deploy active industrial policy
B.C. will be an “early mover” in a world of limited resources requires
with measures aimed at boosting
commencing negotiations with setting clear priorities and making
innovation and accelerating both
Ottawa to hammer out the details. In trade-offs, Minister Freeland’s
the growth of technology-producing
the meantime, the new B.C. budget inaugural budget falls short. It is
companies and the take-up of
earmarks a small sum to expand hard to discern, in the sprawling
advanced process technologies
subsidized childcare in the short- budget document, a coherent plan to
across the broad business sector.
term. Looking ahead, B.C. will need make Canada a more productive and
to earmark significant additional Here, the federal budget promises competitive economy as the country
ongoing funding – beyond the billions more to support the life emerges from the COVID shock.
amounts identified in the 2021 sciences and bio-manufacturing
B.C.’s budget offers its own collection
provincial budget – to secure its industry, clean technologies, the
of modest ideas to spur innovation,
share of the federal money available development of electric vehicles,
support the technology sector and
under the new National Early the aerospace sector, quantum
grow locally-based companies. Apart
Learning and Child Care Plan. It is computing, AI, genomics, and digital
from pandemic-related business
uncertain how many other provinces technologies, among others. A
support measures, the main item
will be keen to play ball with Ottawa portion of this will come from the
of note is the new InBC Investment
on childcare. Several are struggling Strategic Innovation Fund, which will
Corporation, first announced last
with deteriorating long term public receive another $7.2 billion over the
summer. Endowed with $500 million
finances due to the rising health care next seven years. Another slice will
financed via an agency loan, the
costs of their ageing populations. flow from federal funds set aside for
Corporation will establish a fund to
They may prefer to see Ottawa climate change and clean energy
invest in attracting and “anchoring”
address Canada’s worsening vertical (see below). The federal Industrial
high-growth B.C. businesses. It
fiscal imbalances by increasing Research Assistance Program (IRAP)
will operate at arm’s length from
Canada Health Transfers (CHT) or is in line for a $500 million top
government, but subject to certain
adjusting other federal transfers to up. Ottawa also intends to stump
criteria the province will define. We
the provinces, rather then embarking up additional cash to backstop
are hopeful that this initiative will
on a new permanent program for the venture capital industry and
foster the scaling of more B.C.-based
which they lack the fiscal capacity. leverage more private capital for VC
companies and, over time, lead to
Some provinces also have long- investments, with a focus on scaling
more mid-sized Canadian firms a larger cluster of corporate head
running political conflicts with the offices in the province.
Trudeau government which may (rather than on fostering start-ups).
complicate things. The federal government plans to Climate change and kick-starting the
devote $4 billion over four years to energy transition
help Canadian SMEs increase their The Trudeau and Horgan
use of digital tools and technologies governments are equally committed
and take advantage of e-commerce to activist agendas on the hot-
opportunities. This is important
The Trudeau and Horgan button issues of climate change and
inasmuch as Canadian businesses
governments are equally delivering a low-carbon future.
generally lag behind their peers in
committed to activist agendas top-performing advanced economy Ottawa continues to spend lavishly
on the hot-button issues of jurisdictions in technology use and – arguably, indiscriminately – in
this area. The 2021 federal budget
climate change and delivering adoption.
adds $17.6 billion in climate-
a low-carbon future. That said, the federal budget friendly spending to the $15 billion
embodies a rather scattershot
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 7FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
announced last year – and the $14 the province has done almost CONCLUSION
billion promised for public transit in nothing to address the business
As Canada struggles to endure its
February 2021. On climate and clean community’s concerns that B.C.’s
variant-driven third wave of COVID
energy, the federal government will current carbon pricing system puts
infections, governments are faced
be funding too many things to keep our natural resource, manufacturing
with a challenging and uncertain
track of – everything from rolling and transportation industries at a
environment. The most pressing task
out more EV charging stations to competitive disadvantage – both
is to deal squarely with the pandemic
helping to finance carbon capture globally and in North America –
and its continued economic and
and sequestration, reducing land-fill because of the province’s failure
social fallout. Both B.C. and the
methane emissions, manufacturing to mitigate the negative financial
federal government are doing this in
electric vehicles, helping GHG- impact of the escalating carbon
their 2021 budgets, and the Business
emitting sectors decarbonize, price on trade-exposed sectors. This
Council fully supports focusing on
subsidizing building retrofits, counts as the Business Council’s
the here-and-now issues posed by
expanding the production and use of biggest disappointment with the
the COVID crisis. At the same time,
cleaner fuels, procuring more low- new provincial budget. The irony
it is not too early to begin putting
carbon Canadian-made goods in the is that B.C.’s export goods have a
in place the building blocks for a
federal public sector, and much else lower carbon content than similar
post-pandemic world, particularly as
besides. goods produced by competing
the global economy looks poised to
jurisdictions, yet the province’s
A notable tax policy change is the grow robustly in the next 2-3 years.
carbon pricing system makes it
decision to cut in half the federal In addition, policymakers cannot
increasingly difficult for many
small business and corporate income ignore the mountain of new debt
large and mid-sized exporting and
tax rates for technology companies that the public sector has taken on
manufacturing businesses to justify
that produce zero-emission goods, during the last 14 months. In Canada,
deploying capital to operations
beginning in 2022 and extending grand political ambitions will soon
in British Columbia. Unless the
through 2029. Another climate- bump up against the hard reality of
government moves soon to tackle
related promise in Budget 2021 is limited fiscal resources and the need
this problem, the province will be at
Ottawa’s commitment to earmark to get back to sustainable budgetary
growing risk of de-industrialization
up to $35 million to create a Centre positions. This observation is
and disinvestment across a number
for Innovation and Clean Energy, especially relevant for the federal
of export-focused industrial sectors.
based in B.C. The B.C. government government, but it also applies to
previously announced its intention most of the provinces, including B.C.
to support such a Centre, whose
We judge that the federal and B.C.
mandate will be to commercialize
budgets score well in addressing
and scale-up the use of clean
ongoing COVID-related disruptions
technologies.
but are less successful in charting a
Turning to the B.C. budget, the realistic and feasible path to a more
NDP government has allocated It is not too early to begin prosperous future. For Canada as a
another $506 million over three putting in place the building whole, achieving a 2% or more real
years to roll out more initiatives GDP growth rate over the medium-
blocks for a post-pandemic
under its existing CleanBC plan. term will be very challenging without
world, particularly as the
Much of the new funding is to a marked improvement in the
support “cleaner” transportation by global economy looks poised
country’s serially underwhelming
increasing the market penetration to grow robustly in the next productivity growth performance.
of zero-emission vehicles and to 2-3 years. The content of the 2021 federal
reduce carbon emissions from budget suggests that stronger
the building stock. Unfortunately, productivity growth is relatively
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 8FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
low on the current list of national In contrast, the federal budget is
government priorities. There is little sprawling, unclear and frequently
in Minister Freeland’s budget that is difficult to understand. Spending
likely to boost productivity growth announcements are often re-
or encourage a sustained, stepped- announced and lumped together
up pace of business investment in over several years. Literally hundreds
a country where that is desperately of programmatic measures and
needed after several years in which spending commitments are splashed
Canada has fallen far behind peer throughout the more than 700 page
jurisdictions in non-housing capital document. Reading the federal
investment per worker. A similar budget conveys a sense that the
comment can be made about the B.C. government is budgeting by a jumble
budget, which in addition is notably of bullet points and flashy spending
light on measures to strengthen announcements rather than on the
the competitive position of the basis of a carefully thought-out and
province’s leading export industries. coherent plan.
For both B.C. and Canada, creating
an environment that supports
thriving and growing export-capable
industries is and will remain essential
to prosperity. It is not clear that CO-AUTHORED BY
policymakers understand this.
Finally, with the opportunity to
Ken Peacock
comment on both the federal and Senior Vice President
provincial budgets in the same & Chief Economist
publication we want to draw
some contrasts between the two David Williams, DPhil
documents. The production, layout
Vice President of Policy
and information contained in the
B.C. budget sets the standard. Our
provincial budget is transparent, Jock Finlayson
crisp and easy to understand. Senior Policy Advisor
Reading it, one gets a sense of
confidence. The budgetary forecasts
are integrated with economic
forecasts, and all the information
is well presented for anyone to
read. Although the provincial
budget did not delineate a specific
fiscal anchor, the document clearly
explained the reasons and provides
some indication of the path back to
balance.
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 9You can also read
