The B.C. government’s new budget will probably look a lot like its old budget. That is deliberate, says Finance Minister Carole James, because the governing New Democratic Party’s priorities haven’t changed: affordable housing, child care and climate change.
“What we’re looking at is budget 2019 basically building on what we did in budget 2018,” James said of the budget she’ll deliver on Tuesday.
“We started off with a shift in approach from the previous government, where they really told people you either had to have a strong economy or investments in people. It was either-or. Our budget really said we need both.”
There’s another reason for the similarities between this year and last year: The NDP government’s biggest promises on affordable housing and daycare are 10-year visions that aren’t even close to fruition. Each year, James said, she’ll put aside more money to try to get closer to specific election promises like $10-a-day child care.
“Young families haven’t had a lot of hope in British Columbia, in our urban centres in particular,” said James. “They’ve seen their costs rise and struggled to get by, whether it be on housing or child care. So we’re really focused on how we can give back hope to those families.”
There will be one major difference, however. Most of the revenue-generating measures the NDP promised in the 2017 election — tax increases on high-income earners, corporations, luxury homes and the increased carbon tax — have already been enacted. James might have to curtail some spending ambitions unless she can find new sources of cash for the provincial treasury.
Despite a healthy surplus, the province’s fiscal security is at risk with the financial meltdown at the Insurance Corp. of B.C. — where losses could reach $2.5 billion over two years — and a $1-billion taxpayer bailout on deferral accounts at B.C. Hydro.
“ICBC and B.C. Hydro have been a huge challenge to the budget, a huge challenge to families and the public when it comes to the dollars they’ve had to take on for the messes left us,” said James.
“But it’s a big issue and I continue to be concerned. It’s not a piece I feel comfortable about. We’re headed in the right direction and making changes we need to occur. But there’s a cost to that.”
Last year, Postmedia spoke with several people about what they were hoping to see in the February 2018 budget, including a prospective homebuyer, a renter, a mother and a businessman.
We’ve caught up with those people to find out if the improvements they had hoped for in 2018 happened — as well as their wish lists for the NDP’s second full budget on Tuesday.
LISTEN: Mike Smyth and Rob Shaw answer all the important questions raised by the B.C. NDP government’s throne speech. Why all the populist measures? Can the B.C. government really act on changing your cellphone bill? What do allies and critics think of the speech? Smyth and Shaw also talk about Liberal MLA Linda Reid having to resign her assistant deputy speaker’s job and Premier John Horgan resisting calls for a public inquiry into money laundering.
The main theme of the NDP’s throne speech on Feb. 12 was affordability, and the government focused on several areas that include tackling expensive ferry fares, stopping mass ticket-buying by scalpers and taming sky-high cellphone bills. But the speech offered little new on the main reason B.C. is expensive: the cost of homes.
Housing affordability was a key campaign promise when the NDP was elected in 2017. But to help renters, the throne speech made only a general promise to “speed up much-needed rental housing” and a vague prediction that rock-bottom vacancy rates would rise.
Last year at this time, Liam McClure, of the Vancouver Renters Union, hoped the 2018 budget would include specific measures, such as a rent freeze, improved tenant rights language to deal with issues such as renovictions, and the creation of more social housing.
But renters are still waiting for significant action.
“We just haven’t seen the movement in the last year that we were hoping for, and it has been a bit of a disappointment,” McClure said.
“I think at the provincial level there hasn’t been as much energy as we’ve seen at the municipal level in terms of putting forward policies and solutions for some of the problems we are seeing.”
Last fall, the government accepted a Rental Housing Task Force recommendation to keep 2019 rental increases by landlords to the rate of inflation (2.5 per cent), rather than the 4.5 per cent hike recommended by the residential tenancy branch. This was helpful to renters, McClure said.
But the task force, which consists of three MLAs appointed last April by the premier, stopped short of backing a key idea that many tenants’ advocates, including McClure, believe is important: so-called vacancy control, which would tie rent controls to the unit, not the tenant, to stop a landlord from jacking up the rent when a new person moves in. Landlords were happy this policy was not endorsed, saying it gives them more money to invest in rental stock.
The task force’s top recommendation was to end renovictions — when landlords evict long-term tenants to renovate and then find new residents at higher rents. But McClure said the suggested changes don’t go far enough, and he would like to see stronger language in this year’s budget.
“I don’t have my hopes up, but I’m interested in hearing what they are going to do around ending renoviction because we haven’t had enough movement,” he said.
He would also like the budget to include funding for more social housing and non-market homes for low-income families and individuals.
Last year, the government introduced a speculation tax and a tax surcharge on homes valued at more than $3 million, part of a 10-year plan to help build up to 114,000 new affordable homes.
What is different going into this year’s budget is that home prices are falling, which has benefited Jodi Harris — who just bought a townhouse in Langley after trying to get into the real estate market for the past 18 months.
The lower prices allowed her to remain in Metro Vancouver, as the frustrated woman had been house hunting in areas like the Okanagan, which has slightly lower real estate prices. “I had prepared to leave the Lower Mainland. I really didn’t see my housing prospects changing,” Harris said.
She believes the province’s speculation tax played a role in dropping home values. “I think the frenzy around purchasing is starting to diminish.”
But she stresses the provincial government should not let its guard down because she knows many young professionals still struggling to buy their first home. Even as a nurse practitioner at Royal Columbian Hospital, and making a higher-than-average salary, she had extreme challenges buying a modest home.
“I don’t think any millennial has illusions of grandeur, that they will walk into (buying) a detached home,” she said. “I don’t know how everyone can be so short-sighted with this problem. You need young people to power the economy.”
Jock Finlayson, of the B.C. Business Council, said he believes the speculation tax has played a role in lowering prices for large homes and high-end condos, but he believes the federal government’s move to “tighten up mortgage rules coupled with higher borrowing costs has really been the key to the broader softening of the market.”
James says the speculation tax is just one element in her government’s 30-point housing plan. She promised to continue to boost the housing supply, although she offered no specifics. She also promised to improve transparency around home ownership and to create a condo flipping registry.
“I’m feeling cautiously optimistic in looking at the housing market right now. We’re seeing some shifts in all types of housing, a moderating of prices in detached homes, townhomes and condos. That’s really critical,” she said.
Child care: the $10 challenge
Tamara Herman put her son’s name on multiple waiting lists for licensed child care more than four years ago, before the boy was born, and he still does not have a spot in a daycare.
Even though the NDP promised universal $10-a-day child care when the party was elected in 2017, Herman is patient because she believes this government is moving toward positive change, albeit slowly.
“Our situation hasn’t changed because it is going to take many years to repair a completely broken child care system,” said Herman, whose 3½-year-old son, Emil Porter, is in the care of a nanny collective.
“It’s a little late for us personally, but I’m encouraged to see that progress is being made in general on child care … for the first time in many years.”
After the throne speech, Premier John Horgan said this year’s plan will likely include the continued development of the government’s fee-reduction subsidies of up to $350 a month and pilot projects of the $10-a-day model.
Herman is happy the NDP is investigating the $10 model, arguing it puts families back to work and therefore reduces poverty, but is “less enthusiastic” about the fee- reduction subsidies. “Instead of subsidizing individual parents, I’d rather see them investing in building more child cares and making it a fair industry for people who work in the field.”
Opponents of the universal $10 model argue it will be too expensive and will unnecessarily subsidize middle- and high-income families who can afford to pay for their own child care.
However, Sharon Gregson, with the Coalition of Child Care Advocates of B.C. which has long lobbied for the $10 plan, hopes Tuesday’s budget will fund an expansion of the prototypes. She would also like the budget to include moving child care out of the Ministry of Children and Family Development and into the Education Ministry to become better aligned with the school system. She also wants a pledge of $200 million to build more licensed spaces and to train more workers.
“There has been more positive action on child care in the last 10 months than in the preceding 16 years,” Gregson said.
“(But) there’s still lots to do and it’s not perfect. Families need much more access to licensed spaces — especially non-traditional hours and in rural and remote communities — and early childhood educators need better wages.”
James said the government has 53 sites in B.C. testing the $10 plan, and that residents must wait for the government to finish designing its new child care plan to ensure quality, space and accessibility.
“It’s a 10-year program and we’re only going into year 2,” the finance minister said. “We have a review program going on on the prototypes for $10-a-day to make sure we see how they went and successes, and are there any pieces that need to be adjusted. And so that will be part of the work over the next year.”
She added that child care is the topic that most residents raise with her. “Despite the speculation tax and housing measures, it’s probably the biggest piece I get stopped by families to tell me the biggest change it’s made for them.”
The fiscal reality: taxes and spending
The NDP has now enacted most of the new taxes it had promised, including a one per cent hike to the corporate income tax rate, an income tax increase for those who earn more than $150,000, and those taxes on high-end and empty homes.
But besides the woes at ICBC and BC Hydro, though, there is mounting financial pressure on the NDP because the cooling housing market has reduced property transfer fees.
“There are some new revenue sources but that’s being chipped away by the decline in (home) sales, and therefore property transfers. So I’ll be looking to see how does the arithmetic on all that add up,” the B.C. Business Council’s Finlayson said when asked about budget finances.
“We are not going into the (budget) lockup assuming there’s going to be a lot of tax changes. Sometimes you are surprised.”
If there are no new taxes, it’s not clear where the NDP will get more revenue to fund new ideas or the growth of big-ticket programs.
There is good news for the province’s bottom line, though, in that the economy is still strong, the carbon tax is set to rise from $35/tonne to $40/tonne on April 1, and the previous Liberal government’s $500-million Prosperity Fund remains available.
Finlayson would like to see a small reduction in one of the NDP’s taxes, arguing the tax bracket for higher income taxes should rise from $150,000 to $250,000, to align with policies in Alberta and Ontario. He also wishes for some type of relief for the industries that are the most affected by the increasing carbon tax.
Still, Finlayson anticipates James will produce a balanced operating budget. He would like to see a slight increase on the capital projects side — but wants B.C.’s current debt-to-GDP ratio of 14 per cent to stay below 20 per cent so that the province can hold on to its triple-A rating.
“We think there is a lot of unmet need for capital, both maintenance and to build new bridges and tunnels and infrastructure,” he said.
The throne speech was silent, he said, on attracting business investment in B.C. “To me that sends a signal that the budget won’t have much around building the economy. Because that has not been much of a major focus of this government. Their agenda has been more social and environmental.”
Climate change, poverty reduction and other priorities
There are other items that are expected to be crucial elements in Tuesday’s budget.
Climate change, once dominated by discussion of the carbon tax, has taken on a new face with the NDP’s CleanBC plan. It is an aggressive proposal to increase electricity use across the province and reduce fossil fuel pollution from cars, homes and businesses. The budget is expected to lay out incentives for items such as heat pumps and electric vehicles.
Other issues that could be touched on in the budget include tackling money laundering, although the premier has deflected calls for a public inquiry; potential costs associated with the promise of historic legislation to enshrine into law the United Nations Declaration on the Rights of Indigenous Peoples; and past promises to boost staffing levels in seniors’ care homes and reform the annual school funding formula.
The throne speech did pledge to roll out a poverty reduction strategy, after the government initially promised to do so last year. That could come with a hefty price tag.
“Certainly the throne speech is a roadmap, the aspirational road map for the government for the year ahead,” Horgan told reporters after the speech.
“The budget will be where you will find the resources, the funds, and the initiatives that we talked about. When we brought forward legislation on the poverty reduction plan, and when we brought forward our CleanBC plan, it was with the view of funding those initiatives in the coming budget. And I know Carole James is very excited to tell you about that herself (on Tuesday).”