British Columbia adding government debt faster than any other province

According to the Eby government’s recent quarterly fiscal update, British Columbia’s operating budget deficit will be even larger this year ($9.0 billion) than the $7.9 billion forecasted in the spring budget.

The fiscal update provides further confirmation that the government’s finances are being transformed from among the soundest in Canada to among the most precarious.

In 2016/17, B.C. had the second lowest per-person net government debt in Canada at $8,109 per person. Since then, the province’s net debt per person has approximately doubled, and the B.C. government has added more debt per person than any other province.

Unless the government drastically changes course, things will go from bad to worse in the years ahead. A recent study uses provincial government fiscal plans from across the country and recent historical data to project the future evolution of provincial debt across Canada. It shows that if B.C. continues on its current path, it will be one of the most indebted provinces in Canada within five years.

And having already passed New Brunswick, B.C. is on track to surpass the remaining Maritime provinces in terms of per person debt within two years. By 2029/30, the province is on track to have more government debt per person than Quebec and Ontario.

All of this new debt will come at a high cost to British Columbians. Over the past two years alone, the government’s debt interest costs have jumped from consuming 3.3 per cent of provincial government revenue to a forecasted 5.0 per cent this year. This is still lower than most other provinces for the time being, but it’s a large increase over just two years.

If the government continues its trajectory of debt accumulation, this number will continue to climb in the years ahead. That means that residents and businesses in the province will see more and more of their tax dollars spent on interest payments and less of their tax dollars available for other priorities.

If policymakers want to avoid this outcome, they must address the primary cause of the ongoing debt explosion—namely, rapid growth in government spending. B.C.’s relatively strong finances in 2016/17 were the result of a decade and a half of spending discipline when the rate of spending growth was held close to the rate of inflation plus population growth. In more recent years the government has spent much more freely. One 2023 study showed that absent this increase in spending, the large deficits and rapid debt of recent years would not be occurring.

The government’s recent fiscal update paints a picture of a province in freefall, adding debt at a historically unprecedented rate and faster than any other province. If the government continues on its current path, B.C. is on track to become one of Canada’s most indebted provinces over the next half decade.