How Much Will Voters Care About BC’s Deficits?

One week before calling a provincial election, the British Columbia government said it was on track to run a budget deficit of $13.8 billion this year.

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The announcement sparked a flurry of newspaper columns decrying the record-high shortfall. “NDP dropped any pretence of fiscal prudence,” read one headline a week after the update.

“B.C.’s spending problem is now a fiscal crisis,” read another, published last week .

Meanwhile, Conservative Party of BC Leader Lorne Doerkson challenged the NDP government’s financial record on the campaign trail.

“The deficit is at an absolutely unexplainable level right now,” Doerkson told CTV on Oct. 4. “We have to get our revenue back in line in this province.”

But the reports of the province’s budget woes are greatly exaggerated, said economist Marc Lee.

“A bunch of old white guys in Victoria are lighting their hair on fire about how bad this is, and the worst thing we could do is just listen to them instead of taking a fulsome view of the whole picture,” said Lee, who works for the Canadian Centre for Policy Alternatives.

“The people who are mostly scolding about the size of the debt and deficit are only looking at a piece of the picture.”

This year’s budget deficit would be the latest in a four-year run of deficits starting in 2023-24, after Premier David Eby took office. And his government’s September fiscal update projects at least two more years of shrinking deficits.

But while the deficit is projected to be large, Lee said it isn’t an outlier when compared with the size of the B.C. economy. And the big spending comes with much-needed assets such as schools, hospitals and infrastructure upgrades.

Plus, running a deficit when times are tough — for example, at a time when fuel costs are rising and the United States is leveraging hostile tariffs — can help steer the economy away from a recession.

Still, Eby’s consecutive deficits are adding to the province’s mounting debt. And while Lee argues the province has room to continue putting money into the economy, economist Nancy Olewiler said the deficit deserves a closer look.

“It is right to call attention to deficits,” Olewiler said. “It is right to call attention to the debt load, but you need to go underneath the hood and ask, What is the government doing?”

Contextualizing the deficit

A government’s deficit or surplus is the annual balance of all its spending relative to the money it takes in. If it takes in more money than it spends during a fiscal year, that’s a surplus. If it spends more than its revenue, that’s a deficit.

This year, for example, the government projects it will spend $13.8 billion more on programs like health care, education and other ministries than it will take in from taxes, resource royalties and other fees.

The $13.8-billion number is a projection. The Canadian Centre for Policy Alternatives’ Lee noted the budget includes $5 billion of “padding,” or what the government calls “contingencies,” to account for unexpected expenses in financial planning. That leaves room for the real budget balance to vary widely from projections.

Despite forecasting a nearly $11-billion budget deficit last year, the province’s final accounting put the actual deficit at about $7.7 billion. That deficit was in part lowered by a $2.6-billion payment from tobacco companies over the health impacts of tobacco products.

Without context, these record-high numbers can be hard to understand, Lee said. But increased spending is partially driven by inflation and rising costs. Lee said it’s often more useful to compare deficits with the size of the B.C. economy.

“We live in a world of growth,” he said. “Everyone gets so worked up about these big numbers. We've never seen that big a number before. But our GDP has never been this big either.”

Lee suggested that comparing instead the province’s debt with the size of its economy can help add context to the numbers. With the $5 billion in padding removed, B.C.’s forecast deficit is about 1.9 per cent of its gross domestic product.

Each year’s deficits or surpluses contribute to the government’s debt. Deficits add to provincial debt, and surpluses reduce it. The B.C. government projects provincial debt to reach $181 billion by the end of the fiscal year, which has risen due to several years of consecutive deficits.

Lee said the NDP likely should have tried to run surpluses while the economy surged coming out of the COVID-19 pandemic. Still, Lee said, the province’s current financial situation has left the government a lot of room to continue running deficits.

“We're not barrelling towards this cliff that we're going to drop off and then the B.C. economy is going to explode, leaving everyone unemployed,” Lee said. “That's just simply not going to happen.”

According to the September fiscal update, B.C.’s taxpayer-supported debt-to-GDP ratio is expected to settle at about 30 per cent by the end of the fiscal year.

The government’s current financial position is due to both challenging economic circumstances and choices to spend without having some historical sources of revenue. Olewiler, professor emeritus at Simon Fraser University, said the province has made several decisions that have kept tax revenues low, including historical income tax cuts.

In this province, income less than about $50,000 is taxed at 5.6 per cent. That’s lower than in Alberta, where the lowest earners pay eight per cent, and higher than in Ontario, where the lowest earners pay close to five per cent.

According to Olewiler, B.C.’s low-tax environment comes partly from the province’s past carbon tax policy.

The 2008 carbon tax came with low-income dividends and reductions in individual and corporate income tax rates. But when the NDP cancelled the tax last year, it did not reverse the income tax cuts — contributing to a relatively low-tax environment here in B.C.

“We are still a low-tax province, relatively speaking, and you can't keep spending money when you don't have it coming in,” Olewiler said.

The province also no longer collects dividends from BC Hydro and is working on a new royalty framework that will overhaul the fees the government collects from oil and gas companies. It’s unclear how this change will affect government revenue.

Olewiler added that factors like human-caused climate change — which makes extreme weather such as wildfires and atmospheric rivers more likely to happen — are also getting increasingly expensive to mitigate.

“We had a lot of wildfires this year,” she said. “That is literally money going up in smoke.”

What does debt get us?

The B.C. government ran another deficit this year. Finance Minister Josie Osborne presented the province’s latest budget forecast on Sept. 14, telling reporters this year’s deficit forecast comes amid a costly wildfire season and the latest 50 per cent U.S. tariffs.

Lee said it’s a widely accepted economic policy to increase government spending during difficult economic times to help steer away from a recession.

“When times are bad, they're essentially injecting money into the economy by providing those deficits,” Lee said. “If we weren't doing that, we would actually tilt the economy into recession this year.”

Lee noted the most recent deficits include borrowing that funds new and replacement schools, hospitals and cancer care centres, and infrastructure investments such as 21 kilometres of highway expansion in the Fraser Valley.

“All of this stuff has value,” he said. “We're not just borrowing money and then burying it in a hole in the ground and then forgetting about it.”

The cost of debt

Mounting debt is not without cost to taxpayers. Tax revenue is partially used to make payments on — or “service” — that debt. And that cost is expected to rise, meaning it’s getting more expensive to continue servicing government debt.

That’s partially because central banks are expected to raise interest rates to contain inflation, increasing the cost of borrowing.

But increasing debt can also increase a government’s borrowing costs and drop its credit rating. The B.C. government has ratings ranging from A to AA across a number of credit agencies, which reflect several downgrades in recent years.

In 2021 B.C. held a higher, AAA credit rating across several agencies.

Now, for example, Moody’s Ratings scores B.C. as an Aa2 — down from Aa1 in 2025. The agency currently rates Ontario at the slightly more risky rating of Aa3, and Alberta at Aa2.

Currently, according to the fiscal update, the province puts 6.2 cents per dollar of taxpayer-supported revenue toward servicing its debt. B.C. projects that cost will rise to 8.2 cents by the fiscal year starting in 2028.

Lee said it’s unclear when the cost of servicing debt becomes a problem, though, for example, he said servicing costs of 25 cents on the dollar would be a “big problem.”

“There are arbitrary lines on that,” he said. “It all depends on your comfort level, on how much debt you're willing to take on and why you're going into that debt.”

Olewiler said the upward trend in servicing costs is something to keep an eye on.

“You should be concerned, but not terrified,” she said. “The reason for concern is how quickly [the cost] has gone up. The government has a plan to reduce it and reduce the deficits, and hence not add as much to the debt. But is that fast enough?”

Olewiler added that when more money is spent servicing debt, the government has less capacity to react to unexpected economic shifts.

“I think you have to be careful,” she said. “We don't know what's coming down the pipe. COVID-19 would be a prime example of that.”

What are the parties’ plans to manage the deficit?

Lee believes doing what it takes to balance the budget this year will be unpopular.

“I bet the political price is higher for cutting spending or increasing taxes,” he said. “David Eby's choice has been to just let the deficit go. But having done that for several years in a row, he's getting criticized.”

Neither the BC NDP nor the Conservative Party of BC responded to requests for comment.

And both Lee and Olewiler said it’s too early to say how parties’ policies thus far will affect B.C.’s budget balance.

But the two biggest political parties have offered clues as to how they plan to move forward. So far, the NDP has pledged spending on health care — including a $90-million contribution toward redeveloping health and seniors’ care services at the Oak Bay Lodge, and eight new MRI machines and 10 new CT scanners for health-care facilities across B.C.

To help pay for this, Eby has pledged a new tax plan the BC NDP says will raise $1 billion in revenues.

The party is proposing tax increases for residents who earn more than $190,000 per year, ranging from an 18.8 per cent tax on the portion of income between $190,405 to $265,545 to a 24.5 per cent tax on income above $1 million.

Eby has also pledged to suspend the provincial motor fuel tax of 10 cents per litre.

Lee said the fuel tax cut, if made permanent, would nearly “cancel out” all the revenue from the income tax plan. Still, he said, the policy would shift the tax burden off low- and middle-income households and onto high-income residents.

Meanwhile, the Conservatives have pledged to hold the line on health-care spending, while hiring more doctors and nurses. In an effort to crack down on crime, the Conservatives have also promised to hire 500 new RCMP officers over the next five years, and to hire 50 new Crown prosecutors and pay for 20 more trial judges.

They have also promised not to introduce any new taxes and to scrap the provincial sales tax on some machinery, equipment and business software for three years to stimulate investment in the province. The Conservatives have also promised a $1,000 income tax cut .

Olewiler said she’s not yet sure how much the deficit will matter to voters this election cycle. But she said that ultimately, the issue comes down to what the government is spending on, and how voters feel about it.

“It’s about asking which direction is the province going,” she said. “It's not just about the bottom line. It's about what's making up the bottom line.”

Read more: BC Election 2026 , BC Politics