The B.C. government is earmarking more than $6 billion (most of that federal funding) to rebuild from the damage caused in 2021 from floods and fires, more money for climate change adaptation, and is anticipating the loss of $1 billion annually in forestry revenue by 2024, thanks largely to the government’s new old-growth logging policies.
Apart from the annual carbon tax hike, budget 2022 contains no major new taxes or tax increases, although the PST will be hiked for natural gas furnaces and exempted for electric heat pumps. The budget includes $9.3 billion in capital spending for 2022-23, and $27.4 million over three years.
Overall government operating spending will increase by $6.6 billion over three years. The budget includes $8 billion in capital spending over three years on transportation infrastructure, including a new eight-lane George Massey Tunnel project.
Business groups had hoped to see some relief for small and medium sized businesses in the form of things like tax breaks or decreases.
“We had hoped that the cost of doing business would go down in British Columbia to make it easier for businesses that are still struggling with the pandemic,” said Bridgitte Anderson, president of the Greater Vancouver Board of Trade (GVBOT).
“We really would have liked to see some measures that would have addressed competitiveness and driving economic growth and job creation, and the budget really lacks some details on that. Given that there’s nearly $5 billion set aside in contingency funds overall, it’s hard to know where those dollars are going to go exactly.”
The budget for 2022-23 is still very much in pandemic recovery mode, and sets aside a $3 billion “time limited” pandemic recovery contingency over three years. It also now includes billions for natural disaster recovery, prevention and climate change adaptation.
The budget allocates $1.5 billion for rebuilding infrastructure damaged by fire and floods, and $600 million for adaptation measures.
The $1.5 billion for disaster recovery is in addition to the $5 billion provided by the federal government. But whether that $6.5 billion will actually cover the cost of repairing highways, bridges and dikes damaged by November’s floods is unclear, as the government appears to still not know the full cost of flood damage and repairs.
There are no new significant new taxes increases or new taxes in the 2022-23 budget, apart from the usual annual increase of $5 per tonne to the carbon tax, which takes effect April 1. Carbon tax revenue is expected to grow by 5.2% annually over the next three years, and revenue from the Motor Fuel Tax will increase by about 1% annually over three years.
The government expects to see its revenues from forestry decline by nearly $1 billion over the next couple of years, from $1.8 billion for the current fiscal year to $1.1 billion in 2022-23, and $909 million by the 2024-25 fiscal year.
The decline in forestry sector revenue is in no small part due to the NDP government’s new forestry policies, notably a moratorium on old growth. The budget expects the annual allowable cut to decline from 45 million cubic metres in 2021 to just 38.5 million cubic metres by 2023 — a decline of 6.5 million cubic metres.
B.C.’s economy grew by 5% in 2021. GDP growth is expected to be 4% this year and 2.5% in 2023.
"Among the provinces, we are tied for the lowest unemployment rate and we have the fastest job growth since the start of the pandemic," B.C. Finance Minister Selina Robinson said in her budget address Tuesday. "In fact, more than 160,000 new jobs were created here last year."
The deficit for 2022-23 is projected to be $5.5 billion, and to decline to $3.2 billion by 2024-25.
The 2021-22 fiscal year is expected to end with $61.7 billion in government debt — $10 billion lower than forecasted in last year’s budget. The debt is expected to increase to $90.8 billion by fiscal 2024-25, pushing the debt-to-GDP ratio to 22.8%.
The deficit for 2021 was originally expected to be $9.7 billion, but as of the third quarter, the deficit for 2021 is now expected to come in at $483 million.
The budget focuses on both climate change mitigation and adaptation. There is, for example, new spending of $243 million for Emergency Management BC to make BC Wildfire Services a permanent, year-round operation, with more focus on proactive wildfire prevention. The budget also includes $83 million for disaster preparedness and adaptation.
Climate change mitigation also continues to be funded to the tune of $1 billion in additional money for CleanBC. That includes $348 million for “clean industry and innovation.”
Resource industries are increasingly affected by aboriginal rights and title issues. New bureaucracy is being created for the implementation of the government’s Declaration on the Rights of Indigenous People Act (DRIPA) through the creation of the new Declaration Act Secretariat.
The budget continues a PST exemption introduced in the last budget on the purchase of machinery and equipment, and the PST exemption is now being extended to green technology -- the purchase of heat pumps and used zero emission vehicles. The provincial motor fuel tax is being exempted for hydrogen burned in internal combustion engines.
“This will benefit companies like B.C.-based Hydra Energy, as it works to transition heavy-duty vehicles to hydrogen power,” Robinson said.
The PST will increase to 12% for “fossil fuel heating equipment” like natural gas furnaces. A low carbon fuel standard is being expanded and a new cap on emissions being implemented for natural gas utilities (i.e. FortisBC).
The budget forecasts “natural resource revenue” will decline by 17.9% in 2022-23 and 12.3% over two years. The decline is partly attributed to declining commodity prices.
Many of the commodities produced in B.C. — lumber, copper, metallurgical coal and natural gas — are, in fact, at or near record highs. The budget forecasts commodity prices to come down, however. Natural gas royalties are expected to generate $911 million for fiscal 2022-23, but then decline to just $580 million for the 2024-25 fiscal year.
Revenue from forestry is expected to decline by a 39.3% in 2022-23, due to lower Crown harvest volumes. The budget earmarks $185 million over three years to help workers and communities hurt by the NDP government’s old-growth policies, which will remove a significant volume of timber from the timber harvest base.
Natural gas royalties are expected to spike in 2022-23 by 21.6% due to higher natural gas prices, but expected to decline over the next two years.
Business sectors to receive targeted subsidies in the 2022-23 budget include:
- $195 million for life sciences;
- $18 million to expedite the mining regulatory process;
- $25 million for tourism sector; and
- $67 million for skills and job training
“It’s difficult to say if $25 million is enough,” said Walt Judas, CEO of the Tourism Industry of BC said at Tuesday’s budget lockup of the funding for the tourism industry.
“It may not be enough, depending on what happens this year. If we revert back to more measures or more restrictions and roll back some of the progress that we’ve made, then most definitely businesses are going to need help.”