VICTORIA – The first full budget from the new provincial government is being met with mixed reviews by the Business Council of British Columbia.
The budget presented by Finance Minister Carole James introduces a new payroll tax, takes significant steps towards addressing housing affordability, and commits to a significant expansion of child care in the province. However, the Business Council believes there is more work to do to strengthen the foundations of BC’s prosperity.
The new Employer Health Tax represents an additional cost for employers. The Business Council is concerned about increasing the payroll tax burden. “Our initial assessment is that this new tax will increase overall payroll costs for our members by several hundred million dollars a year,” said Greg D’Avignon, the Business Council’s President and CEO.
The budget contained several measures affecting the housing sector. “We recognize the pressure on government due to widespread public concerns over housing affordability and the role of non-residents in driving local housing markets,” says D’Avignon.
“Today, the Minister announced a series of steps to curb housing demand. While further review of their potential impact is warranted, the planned changes, taken together, are unprecedented in scope and may cause some disruption to the market.”
BC’s robust housing sector, along with associated construction activity and retail spending, has been a very significant factor driving the province’s recent strong economic growth. The budget projects a significant decline in housing starts in the years ahead, which underscores the need to encourage growth in other sectors of the province’s economy, particularly our major export-oriented industries.
“We also believe the province should be doing more to speed up and reduce the cost of new residential development. Progress on affordability requires strong action on housing supply, not just additional government interventions to lessen housing demand,” says D’Avignon.
The Business Council applauds the government’s stated intention to provide energy intensive trade exposed industries some relief from BC’s escalating carbon tax. This should reduce the extent of any “carbon leakage” and loss of industrial production, as the carbon tax rises in the next four years.
The Business Council has long been worried about the sluggish pace of business investment and weak capital formation. “BC businesses aren’t investing enough in machinery, equipment, advanced process technologies, intellectual property products, and other categories of assets that make our firms and workers more productive,” says Jock Finlayson, the Business Council’s Executive Vice President and Chief Policy Officer.
“On a per employee basis, B.C. businesses invest less than 60 per cent as much as their American counterparts, on average. Unfortunately, the new budget will do little to boost business investment. In fact, like Canada, British Columbia is losing ground to the United States on competitiveness and business attraction owing to higher taxes, increased regulation, and rising carbon prices on our side of the border, at a time when the US is moving in the opposite direction.”
The budget indicates that BC continues to run a slim operating surplus over the three-year fiscal plan. “The updated fiscal plan looks reasonable. With the province’s economy growing robustly over the last several years, we believe the government should steer clear of operating deficits,” Finlayson added.
Despite the identified areas of concern, the government has taken several positive steps that will be welcomed by many in the business community.
The NDP government has committed to a stepped-up program of capital spending, which is consistent with past advice from the Business Council. “The province has large unmet needs for new and refurbished infrastructure, including bridges, roads and road improvements, and modern health care facilities.
“We support the Minister’s decision to accelerate capital spending, particularly since borrowing costs remain relatively low,” stated D’Avignon. “We also support the decision to give universities and colleges greater scope to develop additional student housing.”
Government is investing in 2,900 additional post-secondary seats in technology related fields of study, supporting the development of talent, one of the key assets in our emerging knowledge economy and an important factor in the success of the new Digital Technology Supercluster and the Cascadia Innovation Corridor.
The Business Council also recognizes and supports the moves to expand child care and related services. “As the government implements its agenda in this area, we believe the focus should be on providing additional assistance of low and moderate-income families,” D’Avignon says.
The Business Council also endorses the decision to set aside additional funds to encourage growth in the agri-food sector.
