B.C.’s latest budget will slash public sector jobs and raise taxes.
But over the next three years, the province’s debt is still expected to soar. By 2028, British Columbians could be paying 8.2 cents out of every tax dollar toward interest.
Finance Minister Brenda Bailey released what she has called a “tough” budget on Tuesday (Feb. 17), but also made the firm declaration that it is not an “austerity” budget — the government still intends to invest in services.
That being said, the government must “pause on some of the things that we want to do and focus on the things we have to do.”
The basic personal income tax rate for the lowest tax bracket will increase from 5.06 per cent to 5.6 per cent. To offset this for low earners — Bailey says 40 per cent of people will receive a tax reduction — the province will increase the tax reduction credit by $115.
That credit is phased out for people earning more than $25,570. It is completely unavailable for people earning more than $44,950.
The increase will be applied to paycheques starting July 1.
Other tax changes include a one-per-cent increase in the speculation and vacancy tax, the introduction of a provincial sales tax for professional services such as geoscience, architecture and accountancy, and an increase in the school tax for people with homes worth more than $3 million.
The province also aims to cut 15,000 public sector jobs over the next three years. These cuts will ideally come through attrition and early retirement incentives, but layoffs have not been ruled out.
The government has not yet decided exactly where these cuts will be made, but Bailey has pledged to protect frontline workers, particularly those in health care and education.
Soaring debts
The deficit is set to rise next year from $9.6 billion to $13.3 billion, before dropping to $12.1 billion and $11.4 billion the following years. Total budget expenses are just shy of $95 billion this year, and $98.8 billion next year.
Part of the reason for the increase next year is that the province benefited from a large tobacco court settlement, which brought in a one-time payment of more than $2.7 billion, applied to the 2025/26 budget.
Over the next three years, the provincial debt and interest bite will accelerate. Total debt for this current year is projected to hit $154 billion.
By 2028/29, that debt is expected to soar to more than $234 billion, with British Columbians paying 8.2 cents out of every dollar for interest. That is up from 4.9 cents per dollar now.
Bailey says the budget is “not about nostalgia, but about making careful choices” within the new economic reality of trade uncertainty caused by U.S. President Donald Trump’s evolving trade threats.
That being said, this budget acknowledges that despite this uncertainty, B.C.’s exports were unchanged in 2025 compared to the previous year.
Bailey blamed factors ranging from the NDP needing to make up for a lack of spending by the B.C. Liberal government before 2017, to the pandemic, to the broader impact of Trump’s trade war on growth.
The economy is growing. The forecast is for 1.3 per cent GDP growth for this fiscal year and 1.8 per cent. This, Bailey said, is still far short of the 3 to 3.5 per cent once expected for the year.