A strict cap on provincial spending and a sell-off of government land will help B.C. balance its books within two years, Finance Minister Kevin Falcon said Tuesday of his provincial budget.

Falcon unveiled his plan to kill the provincial deficit by 2013-14 by holding spending growth at two per cent, ruling out wage hikes for public workers, taxing small businesses and selling off surplus government land.

"This is the new reality for governments," said Falcon. "We have really started to bend down the growth in government expenditures."

The $43.8-billion budget freezes funding in most ministries, except health care, leading to criticism the Liberal government has turned its back on its most needy citizens, particularly at-risk children.

It's a harsh budget for vulnerable children and families, said representative for children and youth Mary Ellen Turpel-Lafond. "I thought there would be more of a compassionate and dedicated outreach for families that are struggling.

"I see it as a bit of a U-turn from the 'Families First' agenda."

The budget includes a deficit of $968 million in 2012-13, turning to a $154-million surplus the following year.

Growing health-care costs — now almost 42 per cent of total government spending — led Falcon to unveil another hike in Medical Services Plan premiums in 2013, costing families $60 more a year. The Medical Services Plan fee has risen more than 22 per cent over four years.

But it wasn't all cuts. The budget contained a bonus for new-home buyers (up to $10,000) and new tax credits for B.C. seniors' home renovations (up to $1,000 a year) and children's fitness and arts programs.

Opposition finance critic Bruce Ralston took shots at nearly every element of Falcon's budget, saying there was nothing to benefit "regular" British Columbians, who face another year of the harmonized sales tax.

The budget froze most education funding, except for a previously announced $165 million for special-needs students. Post-secondary institutions were told to cut travel and administration costs.

A funding boost for Community Living B.C., the agency that helps the developmentally disabled, was previously announced by the premier. The justice system, currently the focus of a sweeping review, got an extra $237 million over three years, but mostly for police and court staff added recently to address gangs and court backlogs.

Businesses were not exempt from the budgetary belt-tightening. The government backtracked from plans to eliminate the small business corporate tax, leaving it at 2.5 per cent.

"We're not too pleased to see our small- and medium-sized business members underwriting B.C.'s budget projections," said Shachi Kurl, spokeswoman for the Canadian Federation of Independent Business.

Falcon also said he'd increase the corporate tax rate by one percentage point, to 11 per cent, in 2014 if the economy hasn't recovered, to help balance the books.

Meanwhile, the government has launched a review of the carbon tax, which increased the price of gas at the pump. The tax is set to rise again in July 2012, but its future beyond that is uncertain.

The budget contained no layoffs for the civil service, which continues to shrink through attrition. Those workers, along with teachers and other public-service staff, won't be seeing raises any time soon, said Falcon.

The government's debt is set to rise 30 per cent over four years, peaking at $66 billion in 2014. For every dollar in revenue, the government will spend 4.2 cents servicing its debt.

rshaw@timescolonist.com

dspalding@timescolonist.com

B.C. budget 2012 hightlights

- $2.5-billion deficit this fiscal year, $968-million deficit next year

- Government revenue $43.1 billion in 2012-13

- Provincial debt $66.4 billion in 2014-15

- Health funding to increase to $17.3 billion by 2014-15

- School districts to get $4.7 billion a year for three years

- Surplus property sales to bring in $700 million over three years

- Medical Service Plan premiums to rise by four per cent

- Public service salary increases only if savings can be found

- First-time buyers of new homes get a bonus of up to $10,000

- HST rebate limit increases for new homes

- $1,000 renovation tax credit for seniors

- Provincial jet fuel tax eliminated for international flights

B.C. government's Budget 2012 website

(This story has been updated with corrected information)