B.C. to be one of Canada’s most indebted provinces

Commentary
By Ben Eisen and Tegan Hill

As has been widely reported, the Eby government’s budget calls for a record $10.9 billion deficit this year with similar deficits in each of the next two years. Net debt (total debt minus financial assets) is forecasted to soar in nominal terms from $71.3 billion in 2023/24 to $155.3 billion in 2027/28.

This is the fastest period of debt accumulation in British Columbia history and the fastest currently taking place in Canada.

Oddly, the government parsed these cold hard numbers with strangely chipper commentary about the health and future of B.C.’s finances. In its summary of its fiscal plan, after presenting the data on upcoming debt growth, the government said that the province’s debt-to-GDP ratio—an important measure of government debt as a share of the economy—remains one of the lowest in Canada. It also promised that successive budgets would focus on “flattening” debt-to-GDP over time so B.C. remains one of the lowest debt provinces.

It’s impossible to take any of this spin seriously.

In reality, the gap between B.C.’s debt-to-GDP ratio and the higher-debt provinces has been shrinking in recent years and it’s unlikely B.C. will be one of the lowest-debt provinces for long.

The government’s own fiscal plan predicts its net debt-to-GDP ratio will climb from 17.4 percent at the end of 2023/24 to 32.1 percent in 2027/28—that’s a massive deterioration. It would also bring B.C. above the current debt-to-GDP level in both New Brunswick and Prince Edward Island (although it’s possible debt will also rise enough in P.E.I. to remain slightly more indebted than B.C.).

Clearly, B.C.’s forecasted position in 2027/28 is more accurately characterized as being in the middle of the pack than one of Canada’s low-debt provinces.

What’s more, B.C. is gaining ground on Canada’s heaviest debtors so quickly it will likely catch up with most of them in the next half-decade. The budget’s summary flatly asserts that future budgets will “flatten” growth debt in debt-to-GDP over time so B.C. remains less indebted than high debt provinces such as Ontario and Quebec.

But that’s hardly a worthy goal. The budget also overstates how much runway B.C. has before it catches up to those provinces.

Indeed, a recent analysis shows that if provincial governments across the country continue on a similar debt accumulation trajectory as they have been in recent years, B.C. will be more indebted than either Ontario or Quebec and one of the most indebted provinces in Canada within five years. This analysis squares with a recent report from the Parliamentary Budget Officer, which shows B.C. has the least sustainable finances in Canada.

Against these hard data and analyses (based soundly on current policies and recent historical trends), the Eby budget provides little more than handwaving reassurance that sometime in the future the government will quickly end its debt binge to avoid these outcomes. Vague promises of future discipline are a frequent hallmark of profligate governments. It would be unwise to put much stock in the promises contained in the new budget.

Debt is piling up in B.C. faster than anywhere else in Canada and, government spin aside, without major policy changes the province is on track to be one of the most indebted provinces in Canada inside a half decade.

Ben Eisen is a Senior Fellow while Tegan Hill is Director, Alberta Policy at the Fraser Institute.