Clock ticking on B.C. government’s debt bomb

After a razor-thin election victory last month, Premier David Eby now must identify priorities for his new cabinet. If he’s concerned about the wellbeing of future British Columbians, one of the top priorities should be slowing down the accumulation of government debt. Given just how quickly debt is piling up, time is not on Premier Eby’s side. Absent a change in course, B.C. will be one of the most indebted provinces in Canada in just a few years.

Until recently, that prospect would have seemed preposterous. In 2014/15, the province’s net government debt (a measure that adjusts for financial assets) was $8,200 per person, which was the third lowest in Canada. For context, at that time Ontario’s per-person debt stood at $21,600.

Since then, however, B.C.’s finances have rapidly deteriorated. Last year alone, the B.C. government ran an operating deficit of approximately $5.0 billion. Even larger deficits are expected over the next three years. Largely as a result of these operating deficits, paired with significant long-term spending in the capital budget (e.g. roads and hospitals), the province’s debt burden is climbing at an unprecedented pace—much faster, in fact, than during the 2008 financial crisis and the pandemic.

So how quickly is debt piling up? This year, the government forecasts debt will exceed $16,000 per person—remember, that’s approximately twice as much in nominal terms as a decade ago—and by 2026/27 reach $22,000.

That’s as far as government projections go. However, according to a recent study published by the Fraser Institute, if the B.C. government continues to add debt at a similar pace, by 2029/30 B.C. will surpass Ontario and Quebec—two of most indebted jurisdictions in North America—in per-person debt and for the amount of debt relative to the size of the provincial economy.

All of this is bad news for B.C. taxpayers who must pay the interest on government debt. Over the next three years alone the interest on taxpayer-supported debt will total a projected $11.9 billion. That money will be unavailable for badly needed tax relief or core public services such as health care. And of course, this debt will remain a burden for future taxpayers who will either have to pay it off or continue to pay debt interest on it in perpetuity.

Sometimes in matters related to public finances, governments have the luxury of time to address their problems. The second Eby government does not have that luxury. Unless the government controls spending to slow the pace of debt accumulation, it will likely become one of the most indebted in Canada. And it will pass an enormous burden onto future generations of British Columbians.