Analysis of the 2023 BC Budget

More to do to disrupt a legacy of generationally unfair budgets 

Premier Eby’s government released its first budget on February 28th. As Gen Squeeze’s pre-budget analysis showed, the Premier faces an uphill climb to improve the NDP’s track record on making BC work for all generations. The 2023 Budget has taken some first steps up this mountain, but there’s more distance to close. 

Spending is growing faster for older age groups than for younger 

The BC government chose to stick with the pattern of increasing investments for older British Columbians faster than for younger residents. Compared to two years ago, Budget 2023: 

  • Grows spending for those age 65+ 2.5 times faster than for those under age 45 ($3,100 compared to $1,300). 
  • Adds $7.4 billion in operating deficits. Over the next two years, this means an extra $2,500 in provincial debt per person under age 45. (Operating deficits exclude capital investments and debt.)

Revenue isn’t keeping pace with investment priorities

As a result of the above two trends, Budget 2023 doesn’t grow revenue as fast as it grows spending. This implies BC politicians believe they can only win elections if they offer British Columbians more investment without expecting residents to pay fully for the services we currently wish to use. So long as this doesn’t change, we leave larger, and growing, unpaid bills for younger residents and future generations to pay. That’s not a legacy of which we can be proud. We need our government to be honest with us about the costs we face to grow spending on the things we want. 

Interest payments on provincial debt are growing faster than spending on education

The trade-offs involved in running deficits are significant. Budget 2023 will increase debt servicing costs by $1.4 billion annually as of 2025-26. That’s 23% more than the entire annual budget increase for grade school (K-12). It’s 11% more than the entire increase for post-secondary education. That’s unfortunate, since it’s these young folks who will have to shoulder the debts we are leaving. 

Spending on medical care for the aging population is the major driver of deficits 

Budget 2023 increases medical care spending by an extra $5.4 billion by 2025-26. Most of this increase will support the medical needs of aging residents – the 20% of British Columbians age 65+ consume almost half of medical spending. 

Most British Columbians probably expected big new line items to deal with a medical system on fire. We all want our family and friends to have the medical care they need – especially at older ages, when our needs increase and become more complex. But where’s the conversation about whose likely to bear the brunt of these new costs? 

Research published in the Canadian Tax Journal and elsewhere shows that Baby Boomers came of age when just 5% of their tax dollars were directed to medical care for retirees. That was enough, because there were seven workers contributing tax dollars for every retiree. Today, there are fewer than four workers helping pay for the services retirees use – and without dramatic increases to immigration, soon there will be fewer than three. 

One result is that younger people today pay 10% of their tax dollars towards retirees’ medical care – twice the percentage Boomers paid. Young people are stepping up, and they’re doing so alongside far higher costs for things like post-secondary, housing and child care. And that’s before adding in costs for new medical services we want, like long-term care and pharmacare. Since today’s aging population won’t have a chance to contribute significant tax dollars towards such new investments, it’s high time to explore how else some may be able to contribute – i.e. by drawing on the housing wealth they’ve gained from rising prices. 

Government is spending more on medical care than on the things that will slow the flow of sickness into our clinics and hospitals

Compared to the $5.4 billion increase for medical care, Budget 2023 grows investments in social services (including child care) by $2.7 billion, grade school by $1.1 billion, and post-secondary education by $1.3 billion. Is that the right balance? Not according to the health science. 

Science confirms that governments are more likely to slow the flow of sickness into our clinics and hospitals by investing more urgently in the social supports that keep us well than in the medical care we use once we’re already ill. 

It’s great to see the Premier Eby’s first Budget making important investments where health begins – the conditions into which we are born, grow, live, work and age. It’s also encouraging that Premier Eby is closing the gap between social and medical care spending, compared to previous NDP governments. But there’s more to be done, because social investments are still falling behind medical care. Check out Get Well Canada to learn more about why medical care spending will never be enough on its own to put out the fire in our medical system. 

Budget 2023 stalls leadership on high quality, affordable child care

Budget 2023 didn’t inject any new provincial funds into child care, other than what the federal government already announced. That’s disappointing for a former leader among provinces in the movement for a $10aday child care system. 

The absence of new provincial funding is a particular challenge for improving wages in the child care sector – a key ingredient to attract the child care professionals required to expand the system rapidly to meet family needs. It’s especially surprising when contrasted with BC’s recent decision to find $150k more in compensation per family physician, billed as a critical measure to retain and recruit professionals in the medical system. 

Government is making progress on housing affordability… but still failing to acknowledge the role of our cultural addiction to high and rising home prices

In contrast to the hype, data show that average home prices continued to rise in 2022 by comparison with the previous year, even after adjusting for inflation. 

Housing isn’t something a new Premier can turn around in 100 days, even one who understands the depth of the challenges as a former housing minister. But Budget 2023 does include some good new housing measures: 

  • The BC Non-Profit Housing Association and Cooperative Housing Federation of BC refer to the $500 million received to protect rental housing as one of the most significant investments in their sector… ever. 
  • This investment comes on top of an additional $4.2 billion for new affordable housing that will be spread over 3 years between operating and capital costs. Among other things, this investment will double the number of units created through the Indigenous Housing Fund. 
  • The long-awaited renters’ rebate of $400/year (now called a Renter’s Tax Credit) will be available to households with incomes up to $60k, and phase out after income surpasses $80k. 
  • After 16 years, the Budget increases by $125/month the shelter allowance for those receiving social assistance (from $375 to $500). Anyone trying to pay rent in BC will know this is still low, but it’s a sizable increase by comparison with past policy. 

Alongside these measures, there’s room for greater ambition when it comes to housing. 

The Budget speech states: “For too long, the housing market worked well for investors, speculators and banks. But it did not work for everyday people.” While true for many young people and newcomers to BC who’ve been locked out of the housing market by out of control prices, this statement is wildly inaccurate for many everyday home owners who’ve gained big wealth from rising prices (Gen Squeeze’s Founder included). 

Fixing the housing system requires a more honest and nuanced discussion about how rising home prices have created winners (long time home owners) and losers (aspiring home owners). One way to kick off this dialogue is by asking why Budget 2023 plans to increase income taxes by 7% annually, and corporate taxes by 9% – but proposes a property tax increase of only by 6% annually (and the property transfer tax will go down). 

It’s time for a tax shift that will benefit the vast majority. We need to tax less things that we do want – like better incomes for middle and lower earners. We need to tax more things that we don’t want – like unhealthy home prices and pollution. 

BC remains a leader on pricing pollution

Consistent with the tax shift we need, Budget 2023 should be commended for continuing the important work of raising the price on pollution. BC is aligning its pollution pricing with the federal plan, which will see the price per tonne of carbon rise from $50 to $170 by 2030. The corresponding climate action tax credit will ensure that roughly 80% of residents receive more in a climate dividend paid for by the tax on pollution than they pay in the pollution tax. 

It’s important that the BC government isn’t trying to solve affordability challenges by ignoring our climate crisis. 

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