B.C.'s surplus this year has grown to $1.3 billion, and the government's operating debt has been eliminated for the first time in 40 years, B.C. Finance Minister Carole James said Monday, Nov. 26 in a second quarter budget update for 2018.
“Our economy’s strong,” James said. “And that’s why we’ve seen our surpluses strengthen, we’ve seen our debt-to-GDP ratio improve, and elimination… of the operating debt.”
Higher income and corporate taxes have added $1.7 billion to government coffers, of which $813 million is from increased personal tax revenue, and $842 million from corporate income tax revenue.
Revenue from taxes and royalties are down in certain sectors, however, including the forestry and the natural gas sectors, although revenue from mining is up.
A decline in revenue from forestry is partly the result of wildfires, which this year will cost the government $572 million in fire fighting costs.
Revenue from B.C.’s housing market is also down, but that is the result of deliberate attempts to cool an overheated market and tackle the real estate speculation that has driven Vancouver housing prices to unsustainable levels. Revenue from the property tax transfers is down $150 million.
New housing starts were down year-to-date, as were home sales. The NDP government is prepared to forego revenue from property transfers taxes in order to stabilize the market through tax measures aimed at curbing real estate speculation. Relying on revenue from real estate growth “is risky and unsustainable,” James said.
While the B.C. economy continues to fire on most cylinders, there are risks, one of them being continued revenue losses at ICBC. The Crown auto insurer is on track to post a $900 million loss this year. That follows a $1.3 billion loss in 2017, which taxpayers covered in the last budget when the government wrote off ICBC's deficit.
“These kinds of losses are the result of the last government completely ignoring the challenges at ICBC, and we’re going to correct them,” James vowed.
B.C. continues to lead the country in economic growth. B.C.’s economy grew by 3.8 per cent in 2017, according to Statistics Canada — a 1.5 per cent increase to the forecast used for the 2017 provincial budget. Going forward, James said her government will assume a conservative growth estimate of 2.4 per cent for 2019, and continues to build in sizeable contingencies into the budget
One of the biggest challenges for B.C.’s economy is a labour shortage. B.C. unemployment rate has been the lowest in the country for the last 15 months, James said.
“That represents real challenges for employers,” James said.
She added her government’s investment in child care and housing affordability are intended to help address the affordability issues that contribute to the inability of businesses to attract and maintain workers.