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FEDERAL & B.C. BUDGETS
2021 ANALYSIS
APRIL 22, 2021
BUDGETS FOR CANADA AND B.C.: BIG SPENDING,
SIGNIFICANT DEFICITS AND RISING GOVERNMENT DEBT
H I G HL I G HTS
•A strong economic rebound in 2021 and 2022 underpins both the federal and B.C. budgets. The Canadian
economy is forecast to grow 5.8% this year and 4% in 2022. The federal budget is built around these figures.
The B.C. economy is forecast to grow 4.9% this year and 4.3% in 2022. For Budgeting purposes, however, the
B.C. government uses lower growth projections, providing a substantial amount of budgetary prudence.
•Both budgets contain no broadly-based or substantial tax increases.
•The federal deficit in 2021/2022 is projected to be nearly $155 billion, which is still a sizeable 6.4% of GDP.
•The provincial deficit for this fiscal year is estimated to be $9.7 billion, which is 3.1% GDP.
•Both budgets contain plentiful and wide-ranging spending increases aimed at ongoing pandemic related
supports but also medium-term funding announcements.
•The federal budget’s boldest and highest profile spending proposal is the National Early Learning and Child
Care Plan, to be jointly developed with the provinces. The federal treasury will spend $30 billion over five
years and $8.3 billion annually thereafter. As envisaged by the Trudeau government, the plan will be cost-
shared with the provinces/territories on a 50/50 basis.
•Another priority reflected in both budgets is boosting innovation and accelerating the growth of
technology-producing companies. The federal budget is spending billions more to support the life sciences
and bio-manufacturing industry, clean technologies, the development of electric vehicles, the aerospace
sector, quantum computing, AI, genomics, and digital technologies, among others.
•B.C.’s budget also provides funding to spur innovation, support the technology sector and grow locally-
based companies. In this area the main item is the new InBC Investment Corporation, first announced last
summer. Endowed with $500 million financed via an agency loan, the Corporation will establish a fund to
invest in growing and “anchoring” high-growth B.C. businesses.
•The Trudeau and Horgan governments are equally committed to promises of delivering a low-carbon future.
The 2021 federal budget adds $17.6 billion in climate-friendly spending to the $15 billion announced last year –
and the $14 billion promised for public transit in February 2021.
•The B.C. budget allocates another $506 million over three years to roll out more initiatives under its existing
CleanBC plan. But unfortunately, the province has done almost nothing to address mounting concerns that
B.C.’s current carbon pricing system puts our exporting industries at a competitive disadvantage because
of the province’s failure to mitigate the negative financial impact of the escalating carbon price on trade-
exposed sectors. The Business Council’s biggest disappointment is there is nothing that begins to address
this failure in the new budget.
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.comFEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
CANADA AND B.C. TA BL E 1 : A F TE R A SW I F T R E COV E RY, C A N A DA ' S M E DI U M TERM
ECONOMIC OUTLOOK G R OW TH P R OS P E C TS D I M (RE AL GDP GROWT H , ANNUAL , C A N A DA )
The federal government’s 2021
Source Forecast date 2021 2022 2023 2024 2025
budget, tabled on April 19, expects
Canada’s economy to grow by 5.8% Budget 2021 April 19 5.8 4.0 2.1 1.9 1.8
(after inflation) in 2021 and 4.0% in
2022, as the economy’s considerable Parliamentary Budget Office March 31 5.6 3.7 1.8 1.6 1.6
spare capacity goes back to work.
Bank of Canada* April 21 6.5 3.7 3.2 1.0-3.0 1.2-3.2
After this spurt, growth drops back
to around or below 2% per annum
* Bank of Canada forecasts for 2024 and 2025 are the Bank's estimated range for potential output growth
thereafter (Table 1). Canadian real Source: Federal Budget 2021; PBO; Bank of Canada.
GDP will surpass its pre-pandemic
level later in 2021 (earlier than The federal budget’s economic is almost a full percentage point
previously expected), but the forecasts, which are based on an lower than the national growth rate
recovery will not be strong enough average of private sector forecasts, underpinning the federal budget.
to make up lost ground and return are around 0.2-0.3 percentage points Unlike the federal budget, the
GDP to its pre-pandemic trajectory (pp) per annum more optimistic than province builds in an additional
(i.e. the level of GDP that would have the Parliamentary Budget Office’s cushion by trimming the economic
occurred without the pandemic). (PBO) pre-budget forecasts (Table 1). growth rate assumption by a further
The near-term outlook is subject In particular, they assume the half percentage point relative to the
to uncertainty and unevenness economy can sustainably grow (i.e. average of private sector forecasts.
across sectors, as the race between without causing excessive inflation) Conventionally, in past budgets, B.C.
the variant-driven third wave and at just under 2% per annum, whereas governments have “discounted” the
Canada’s vaccination program the PBO’s estimates are closer to private sector average by two- or
continues. 1½% per annum. If the PBO’s more three-tenths of a percentage point.
conservative outlook is correct
Key factors assisting Canada’s The much larger “discount” for this
(e.g. because of the pandemic’s
near-term prospects are: buoyant budget, partly reflecting unusual
scarring effects on the economy),
global commodity prices; a much uncertainty, coupled with the rapidly
the government debt/GDP ratio
improved global and U.S. growth improving global economic outlook,
would be higher and decline more
outlook (reflecting the resilience could result in actual provincial
slowly than projected in the Minister
of households and businesses revenues handily exceeding the
Freeland’s budget. On the other
during lockdowns, and the Biden budget targets. Indeed, this is what
hand, the Bank of Canada today
administration’s massive $1.9 we believe will happen as the 2021-
revised up its forecasts for domestic
trillion fiscal stimulus package); 22 fiscal year unfolds.
and foreign demand, as well as for
extraordinary ongoing domestic
productivity growth and potential
monetary and fiscal policy stimuli;
and the extent to which vaccinations
output growth, resulting in a stronger FISCAL SETTING AND
allow the lifting of social restrictions
outlook for GDP across 2021-25. OUTLOOK
The Bank’s more optimistic outlook
(especially affecting high-contact Federal Budget
would imply a slightly lower track for
service sectors). Canada’s GDP
government debt/GDP than assumed The federal government tabled its
growth is expected to fade below 2%
in this week’s federal budget. long-awaited budget on Monday,
by 2024-25, which is considered the
providing Canadians with a clearer
economy’s long-run “top speed”. In As with the national economy,
picture of federal finances. It has
contrast, the federal budget notes the B.C. economy is expected to
been more than two years since
the average “top speed” for Canada’s rebound in the near term. In B.C.’s
the government tabled a budget
economy over 1970-2019 was case, however, the average private
and, in fact, there has not been a
considerably higher, in the vicinity of sector forecast for real GDP growth
budget in the life of the current
2.7%. is a conservative 4.9% in 2021. This
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 2FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
Parliament. At over 800 pages long,
Monday’s document is wide-ranging FIGURE 1: F E D E R A L DE F I C I TS P E R S I ST E V E N AS
and packed with an assortment COV I D S P E N D I N G U N W I N DS
of new spending, of which close
Canada government revenue and expenses, billions $
to half comes in the current fiscal 650
600
year as pandemic supports for Program
550 expenses
business and individuals continue. 500
Given the breadth of new spending, 450
however, there is also money to 400
350
support reaching lower carbon Budgetary
300 revenues
emission targets, to foster industrial 250
2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26
development in targeted sectors,
0
and a high-profile announcement
for childcare, all of which go beyond -100 -59.7 -51
the near-term and could be seen as -200 -154.7
positioning the government to go to -300
the polls. surplus / deficit, billions $
-400 -354.2
Consistent with past proclivities, new
spending jumps sharply and is at the Source: Federal Budget 2021.
high end of what the government
signalled in the Fall Economic
The Trudeau government has no when the need for it would be even
Statement. New spending measures
plan to balance the budget. The less clear. We note, too, that some
this fiscal year alone amount to $49
budget document does reference of the funding is aimed at making
billion (2% of GDP). Over the next
the government’s commitment to structural changes in the economy.
three years, the federal government
unwind COVID-related spending,
will spend an additional $101.4 billion Key risks surrounding the medium-
lower deficits, and slightly reduce
in “extra” stimulus. Some of this is to term federal fiscal outlook concern
the federal debt as a share of the
get through the final months of the the assumption that government
economy over the medium-term. But
COVID saga. borrowing costs will remain ultra-
as outlined in Monday’s document, low, the strong economic recovery
There are a few minor and targeted the federal debt-to-GDP ratio expected in the near term, and the
tax measures, but the new federal jumped from 31% of GDP to 49% last assumptions about the economy’s
budget contained no broad-based fiscal year. It climbs further to 50.7% tepid medium-term potential GDP
tax hikes. Revenue growth over over the next couple of years before growth rate.
the course of the fiscal plan results edging down marginally later in the
mostly from the stronger-than- decade.
expected economic recovery. BC Budget
In advance of the budget, the
Even with the improved economic Parliamentary Budget Office A day after the federal budget,
outlook and rising revenues, and others questioned the need Finance Minister Selina Robinson
generous spending increases mean for anything near $100 billion introduced the B.C. government’s
the government is looking at a of additional stimulus given an three-year fiscal plan outlining
whopping deficit of $154.7 billion in improving global and Canadian sizable and widespread spending
2021/22. While down sharply from economic outlook. Fortunately increases in priority areas, two
the record $354.2 billion deficit last upwards of half the additional federal successive record deficits, and
year, it is still a large shortfall at 6.4% stimulus spending occurs in the notably higher debt levels. A boost
of GDP. In the following years, the current fiscal year, and thus is not to public sector capital spending
deficit falls to $60 billion and then to back-end loaded (as is often the case (which in B.C. is normally financed
just over $50 billion, amounting to with new federal spending measures) via borrowing) contributes to a large
2.3% and 1.9% of GDP respectively.
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 3FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
bump in the projected debt/GDP
TA BL E 2 : PA N DE MI C A N D R E COV E RY CO N TI N G E N C I E S A L LO CAT I O NS
ratio in the next few years. F O R 2 02 1 /2 2
The provincial government expects
National
a deficit for this fiscal year of $9.7 Category
Allocation*
Measures
billion. At 3.1% of GDP this is a large
Health and Safety $900 million Health-related COVID-19 management
shortfall, but not dissimilar to other
$265 million Temporary housing, meals and supports for vulnerable populations
provinces and half the comparable
Essential services including justice services, child care safety grants, agriculture/
federal proportion. The deficit for the $225 million
food security and potential increased demand for income assistance
fiscal year that just ended (2020/21) Supports for
Businesses and $195 million Small and Medium Sized Business Recovery Grant Program
is now pegged at $8.1 billion, much People
$120 million Tourism and art sector supports
lower than the $13.6 billion deficit
$150 million Incresaed Employment Incentive tax credit
projection made in the fall. The
$100 million B.C. Recovery Benefit
upside surprise mostly reflects
$100 million Skills training and youth employment initiatives
higher-than-expected revenues
Preparing for
flowing from a rebounding B.C. Recovery $100 milliion
Community infrastructure programs, BC 150 Community Grants and
CleanBC recovery investments
economy.
Unallocated $1.1 billion Reserve for unanticipated urgent health or recovery measures
Commendably, the budget embodies
Total $3.25 billion
a significant amount of cushion
and flexibility. For the current fiscal * Notional allocations are based on current forecasts, with any changes communicated in Quarterly Reports.
Source: B.C. Budget 2021.
year (2021/22), the government has
allotted $3.2 billion for pandemic
F IG U R E 2 : B .C . P R OJ E C TS D E F I C I TS OV E R B U DG E T P L A N N I NG HO RI ZO N
and recovery related contingencies.
This money may not be spent. As B.C. government revenue and expenses, millions $
75,000
shown in the table below, roughly
70,000 Planned expenditures
one third of the contingency funding (including contingency
65,000 spending)
is unallocated. Another layer of 60,000
budgetary prudence comes from 55,000
Revenues
a $1 billion forecast allowance, to 50,000 Expenditures with no
contingency spending
cushion against the risk of downside 45,000
adjustments to economic growth. 40,000
2012 2013 2014 2015 2016 2017 2018 2019 2020/21 2021/22 2022/23 2023/24
Considering the budget is already / 13 / 14 / 15 / 16 / 17 / 18 / 19 / 20 updated
forecast
Budget
estimate
plan plan
2,000
based on a GDP projection fully 0.5
0
percentage points lower than the -2,000
average of private sector forecasters, -4,000
-6,000 -4,323
we do not expect the forecast -8,000
-5,484
allowance will be used. -10,000
surplus / deficit, millions $ -8,144
-9,698
Notably, the B.C. budget does not
Source: Federal Budget 2021.
contain a plan to return to balance.
The document acknowledges
this shortcoming, citing the In the fiscal year that just concluded, contingencies) declines slightly in
“unprecedented level of uncertainty provincial spending surged an fiscal 2021/22.
resulting from the ongoing impacts unprecedented 17%, due mostly The revenue side of the B.C. budget
of the pandemic.” The government to unexpected pandemic related is interesting. As the above figure
does, however, hint at a potential outlays. As vaccinations increase, shows, in fiscal 2020/21 total revenue
timeline when it says “preliminary the virus retreats, and the need for held up surprisingly well. The large
analysis indicates getting back to supports eases, provincial spending deficit in 2020/21 was driven mostly
balanced budgets within a range of (inclusive of the loosely allocated by additional COVID-19 spending. But
seven to nine years.”
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 4FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
TABLE 3: B.C. A N N UA L R EV EN U E A N D EX P E N S E , 2 02 1 / 1 3 TO 2 02 3/24
Updated Budget
Plan Plan
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 forecast estimate
2022/23 2023/24
2020/21 2021/22
Revenue 42,057 43,715 46,099 47,601 51,449 52,020 57,128 59,326 60,967 58,929 63,286 65,074
% change 0.6 3.9 5.5 3.3 8.1 1.1 9.8 3.8 2.8 -3.3 7.4 2.8
Expense (incl. contingencies) 43,204 43,401 44,439 46,791 48,683 51,706 55,593 58,823 69,111 67,627 68,020 68,997
% change 2.8 0.5 2.4 5.3 4.0 6.2 7.5 5.8 17.5 -2.1 0.6 1.4
Forecast allowance - - - - - - - - - -1,000 -750 -400
Deficit -1,147 314 1,660 810 2,766 314 1,535 503 -8,144 -9,698 -5,484 -4,323
Share of nominal GDP (%) -0.5 0.1 0.7 0.3 1.0 0.1 0.5 -0.1 -2.8 -3.1 -1.7 -1.3
Source: B.C. Budget 2021.
the chief reason provincial revenue F IG U R E 3 : B .C . D E BT LOA D R I S E S S H A R P LY
was higher than expected last year
was a nearly $4 billion injection Tax-payer supported debt to nominal GDP, % Tax-payer supported debt per capita, $
28 20,000
of unplanned federal pandemic 26.9
26 18,000
funding. Without the additional 25.0
24 16,000
federal transfer, B.C. government 22.8
22 14,000
revenues would have fallen last year.
12,000
20
The assumed winding down of the 20.3
17.2 10,000
18
federal pandemic-related transfers 8,000
16
is the reason provincial revenue falls 15.0 6,000
this fiscal year. 14
14.4 4,000
12
While the pandemic prompted an 2,000
10 0
unprecedented spending response 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
/15 /16 /17 /18 /19 /20 /21 /22 /23 /24 /15 /16 /17 /18 /19 /20 /21 /22 /23 /24
which translated into the 17% jump est. plan plan est. plan plan
in provincial expenditures in fiscal Source: B.C. Budget 2021 and previous B.C. budgets.
2020/21, we note the cumulative
spending increase over the four years
prior to the pandemic is larger than taxpayer supported capital spending horizon. Taxpayer-supported debt
the spending increase spanning the totals $26.4 billion: the highest level rises by $32.8 billion and reaches
pandemic and what is proposed over ever. The three-year total in Budget $92.7 billion by 2023/24. B.C.’s
the next three years. 2021 is $3.5 billion higher than the taxpayer-supported debt-to-GDP
capital plan outlined in Budget 2020, ratio climbed from 15% prior to the
Provincial government capital
due mostly to new investments in pandemic to 20.3% in 2020/21. The
spending is slated to jump in the
the areas of health, education and ratio continues to rise to almost
coming years. This fiscal year,
transportation, as well as revised 27% by 2023/24. B.C. will see one
taxpayer-supported capital spending
timing for capital projects. of the biggest percentage point
rises to $8.4 billion, a level that is
increases in its debt-to-GDP ratio of
twice what it was three years back. New spending on programs and
any province. Thankfully, B.C. went
The next year, capital investment is growing capital investment drive
into the COVID crisis in better fiscal
projected to rise further. The result is the government’s overall debt
shape than most other provinces.
that, over the next three years, new levels higher over the planning
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 5FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
Neither budget does enough related government spending is an $30 billion over five years and $8.3
to strengthen the foundations urgent task for 2022 and beyond. billion annually thereafter. This was
the highest profile item in the 2021
for economic prosperity and Ottawa is extending the Canada
federal budget. As envisaged by the
higher productivity over the Emergency Wage Subsidy (CEWS)
Trudeau government, the plan will
and the Commercial Rent Subsidy
medium-term, which will be cost-shared with the provinces/
programs until late September.
better enable the economy territories on a 50/50 basis. The
The federal government is also
to shoulder the associated launching a new, time-limited goal is to dramatically increase
debt loads and weather future the number of regulated childcare
Canada Recovery Hiring Program for
spaces and work toward a standard
economic shocks. eligible businesses and non-profit
$10/day cost per enrolled child for
organizations affected by COVID-
families within five years.
related restrictions. It will cover up
to half of the cost of “incremental Finance Minister Freeland argues
remuneration” for bringing back that more accessible and affordable
BUDGET THEMES AND
laid-off workers or increasing hours childcare will produce economic
KEY MEASURES
for current employees, up to $1,129 dividends by increasing labour
Both budgets include new/ per employee, from June 6 through force participation among parents
expanded spending commitments November 20, 2021. Finally, the – especially women – with young
that carry a sizable fiscal price tag federal government is providing children. The federal budget
but should produce benefits as additional weeks of benefits and estimates that a fully operational
they are implemented. The federal enabling quicker and more flexible national childcare system could
budget is more consequential in this access to Employment Insurance increase real GDP growth in Canada
respect. Neither budget, however, benefits for workers facing COVID- by 0.05% per year over the next
does enough to strengthen the related challenges, at a hefty extra two decades. The childcare plan
foundations for economic prosperity cost of $14.6 billion this year and should at least partly cover the
and higher productivity over the $4.2 billion in 2022-23. associated fiscal costs by increasing
medium-term, which will better the economy’s productive capacity
B.C., for its part, is also maintaining
enable the economy to shoulder the via slightly higher labour force
and in some cases extending its
associated debt loads and weather participation (noting that Canada’s
more limited pandemic supports
future economic shocks. labour participation rate among
for businesses and individuals and
Pandemic supports continue prime age workers is already very
is setting aside additional funds
high by international standards).
As Canada and B.C. grapple with the in the near-term to assist the
third wave of COVID-19, government hard-hit tourism, restaurant and What Ottawa has in mind is explicitly
financial supports for households arts sectors. The province is also modelled on Quebec’s existing
and businesses are being extended allocating significant new funding child-care program. It will take
to the fall or, in some cases, longer for health care services – to deal the form of a new, annual federal
– a necessary step, in our view. This with the lingering COVID crisis, to transfer to participating provinces.
accounts for a significant portion of expand mental health and primary Ottawa will have to conclude bilateral
the $154 billion deficit the federal care services, and to reduce surgical agreements with willing provinces in
government is forecasting for 2021- backlogs in the wake of COVID- order to bring its vision to life in the
22 as well as the $9.7 billion shortfall related disruptions. next few years.
B.C. is expecting. We support Affordable childcare We predict Quebec will happily agree
the decision to continue to run to have the federal government pick
Turning to new initiatives, the boldest
substantial deficits in the short-term up half of the cost of its existing
is a proposed National Early Learning
but would emphasize that this is not childcare program. We believe
and Child Care Plan, to be jointly
a sustainable fiscal strategy. The B.C. will be an “early mover” in
developed with the provinces – at
orderly winding down of pandemic- commencing negotiations with
a cost (to the federal treasury) of
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 6FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
Ottawa to hammer out the details. In portion of this will come from the hard to discern, in the compendious
the meantime, the new B.C. budget Strategic Innovation Fund, which will budget document, a coherent plan to
earmarks a small sum to expand receive another $7.2 billion over the make Canada a more productive and
subsidized childcare in the short- next seven years. Another slice will competitive economy as the country
term. Looking ahead, B.C. will need flow from federal funds set aside for emerges from the COVID shock.
to earmark significant additional climate change and clean energy B.C.’s budget offers its own collection
ongoing funding – beyond the (see below). The federal Industrial of modest ideas to spur innovation,
amounts identified in the 2021 Research Assistance Program (IRAP) support the technology sector and
provincial budget – to secure its is in line for a $500 million top grow locally-based companies. Apart
share of the federal money available up. Ottawa also intends to stump from pandemic-related business
under the new National Early up additional cash to backstop support measures, the main item
Learning and Child Care Plan. It is the venture capital industry and of note is the new InBC Investment
uncertain how many other provinces leverage more private capital for VC Corporation, first announced last
will be keen to play ball with Ottawa investments, with a focus on scaling summer. Endowed with $500 million
on childcare. Several are struggling more mid-sized Canadian firms financed via an agency loan, the
with deteriorating long term public (rather than on fostering start-ups). Corporation will establish a fund to
finances due to the rising health care The federal government plans to invest in attracting and “anchoring”
costs of their ageing populations. devote $4 billion over four years to high-growth B.C. businesses. It
They may prefer to see Ottawa help Canadian SMEs increase their will operate at arm’s length from
address Canada’s worsening vertical use of digital tools and technologies government, but subject to certain
fiscal imbalances by increasing and take advantage of e-commerce criteria the province will define. We
Canada Health Transfers (CHT) or opportunities. This is important are hopeful that this initiative will
adjusting other federal transfers to inasmuch as Canadian businesses foster the scaling of more B.C.-based
the provinces, rather then embarking generally lag behind their peers in companies and, over time, lead to
on a new permanent program for top-performing advanced economy a larger cluster of corporate head
which they lack the fiscal capacity. jurisdictions in technology use and offices in the province.
Some provinces also have long- adoption.
running political conflicts with the Climate change and kick-starting the
That said, the federal budget
Trudeau government which may energy transition
embodies a rather scattershot
complicate things. The Trudeau and Horgan
approach to distributing substantial
Innovation, technology and business sums of money across a plethora governments are equally committed
scaling of sectors, activities and industrial to activist agendas on the hot-
policy objectives. If policy choice in button issues of climate change and
Another stated priority reflected
a world of limited resources requires delivering a low-carbon future.
in the federal and B.C. budgets is
setting clear priorities and making Ottawa continues to spend lavishly
boosting innovation and accelerating
trade-offs, Minister Freeland’s – arguably, indiscriminately – in
both the growth of technology-
inaugural budget falls short. It is this area. The 2021 federal budget
producing companies and the take-
up of advanced process technologies adds $17.6 billion in climate-
across the broad business sector. friendly spending to the $15 billion
announced last year – and the $14
Here, the federal budget promises billion promised for public transit in
billions more to support the life The Trudeau and Horgan
February 2021. On climate and clean
sciences and bio-manufacturing governments are equally
energy, the federal government will
industry, clean technologies, the committed to activist agendas be funding too many things to keep
development of electric vehicles, on the hot-button issues of track of – everything from rolling
the aerospace sector, quantum
climate change and delivering out more EV charging stations to
computing, AI, genomics, and digital
a low-carbon future. helping to finance carbon capture
technologies, among others. A and sequestration, reducing land-fill
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 7FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
methane emissions, manufacturing competitive disadvantage – both It is not too early to begin
electric vehicles, helping GHG- globally and in North America – putting in place the building
emitting sectors decarbonize, because of the province’s failure
blocks for a post-pandemic
subsidizing building retrofits, to mitigate the negative financial
expanding the production and use of impact of the escalating carbon
world, particularly as the
cleaner fuels, procuring more low- price on trade-exposed sectors. This global economy looks poised
carbon Canadian-made goods in the counts as the Business Council’s to grow robustly in the next
federal public sector, and much else biggest disappointment with the 2-3 years.
besides. new provincial budget. The irony
is that B.C.’s export goods have a
A notable tax policy change is the
lower carbon content than similar
decision to cut in half the federal
goods produced by competing sector has taken on during the last
small business and corporate income
jurisdictions, yet the province’s 14 months. In Canada, grand political
tax rates for technology companies
carbon pricing system makes it ambitions will soon bump up against
that produce zero-emission goods,
increasingly difficult for many the hard reality of limited fiscal
beginning in 2022 and extending
large and mid-sized exporting and resources and the need to get back
through 2029. This should make
manufacturing businesses to justify to sustainable budgetary positions.
Canada a more attractive location
deploying capital to operations This observation is especially relevant
for manufacturers of certain clean
in British Columbia. Unless the for the federal government, but it
technology products and benefit
government moves soon to tackle also applies to most of the provinces,
the sector here in British Columbia.
this problem, the province will be at including B.C.
Another climate-related promise in
growing risk of de-industrialization
Budget 2021 is Ottawa’s commitment We judge that the federal and B.C.
and disinvestment across a number
to earmark up to $35 million to budgets score well in addressing
of export-focused industrial sectors.
create a Centre for Innovation and ongoing COVID-related disruptions
Clean Energy, based in B.C. The B.C. but are less successful in charting
government previously announced CONCLUSION a realistic and feasible path to
its intention to support such a a more prosperous future. For
Centre, whose mandate will be to As Canada struggles to get through
Canada as a whole, achieving a
commercialize and scale-up the use the latest wave of COVID infections,
2% or more real GDP growth rate
of clean technologies. government budget-makers are
over the medium-term will be very
faced with a challenging and
Turning to the B.C. budget, the challenging without a marked
uncertain environment. The most
NDP government has allocated improvement in the country’s
pressing task is to deal squarely
another $506 million over three serially underwhelming productivity
with the pandemic and its continued
years to roll out more initiatives performance. The content of the
economic and social fallout. Both
under its existing CleanBC plan. 2021 federal budget suggests that
B.C. and the federal government are
Much of the new funding is to stronger productivity growth is
doing this in their 2021 budgets, and
support “cleaner” transportation by relatively low on the current list
the Business Council fully supports
increasing the market penetration of national government priorities.
focusing on the here-and-now issues
of zero-emission vehicles and to There is little in Minister Freeland’s
posed by the COVID crisis. At the
reduce carbon emissions from budget that is likely to boost
same time, it is not too early to
the building stock. Unfortunately, productivity or encourage a stepped-
begin putting in place the building
the province has done almost up pace of non-residential business
blocks for a post-pandemic world,
nothing to address the business investment in a country where that
particularly as the global economy
community’s concerns that B.C.’s is desperately needed after several
looks poised to grow robustly in
current carbon pricing system puts years in which Canada has fallen far
the next 2-3 years. In addition,
our natural resource, manufacturing behind peer jurisdictions in capital
policymakers cannot ignore the
and transportation industries at a investment per worker. A similar
mountain of new debt that the public
comment can be made about the B.C.
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 8FEDERAL & B.C. BUDGETS
2021 ANALYSIS APRIL 22, 2021
budget, which in addition is notably
light on measures to strengthen CO-AUTHORED BY
the competitive position of the
province’s leading export industries.
Ken Peacock
For both B.C. and Canada, creating
an environment that supports
Chief Economist
thriving and growing export-capable and Vice President
industries is and will remain essential
to prosperity. It is not clear that David Williams, DPhil.
policymakers understand this. Vice President of Policy
Finally, with the opportunity to
comment on both the federal and Jock Finlayson
provincial budgets in the same
Executive Vice President
publication we want to draw
some contrasts between the two
and Chief Policy Officer
documents. The production, layout
and information contained in the
B.C. budget sets the standard. Our
provincial budget is clear, transparent,
and easy to understand. Reading it,
one gets a sense of confidence. The
budgetary forecasts are integrated
with economic forecasts, and all the
information is presented for anyone
to read. Although the provincial
budget did not delineate a specific
fiscal anchor, the document clearly
explained the reasons and provides
some indication of the path back to
balance.
In contrast, the federal budget is
sprawling, unclear and frequently
difficult to understand. Spending
announcements are often re-
announced and lumped together
over several years. Literally hundreds
of programmatic measures and
spending commitments are splashed
throughout the 800 page document.
Reading the federal budget conveys
a sense that the government is
budgeting by bullets and flashy
spending announcements rather than
on the basis of a carefully thought-
out plan.
Where Leaders Meet to Unlock BC’s Full Potential | www.bcbc.com 9You can also read
