BC Had Fastest Spending Growth Among Provinces Prior to COVID-19: New Study

British Columbia's provincial flag flies on a flag pole in Ottawa, on July 3, 2020. Adrian Wyld/The Canadian Press

British Columbia had the fastest provincial spending growth in Canada even before the COVID-19 pandemic hit the country, a new Fraser Institute study has found.

The study, titled “The End of Spending Restraint in British Columbia,” analyzed the province’s fiscal development since the election of John Horgan’s NDP government in 2017 to gauge whether or not the incumbent leadership continued the trajectory of frugal spending practiced by its various predecessors.

Published on Jan. 4, the study noted that B.C. had been characterized by spending restraint compared to most other provinces from 2000 to 2017.

“In 2017, after years of spending restraint and general prosperity in B.C., the government decided to ramp up spending,” said co-author Ben Eisen, senior fellow at the Fraser Institute, in a press release.

In the restraint era from 1999/2000 to 2016/2017, the real per capita spending in B.C. rose by 8.4 percent, the authors calculated, based on data obtained from Statistics Canada. However, from 2016/17 to 2019/20, the per-person program spending increased by 12.6 percent.

“In other words, in the final three pre-COVID years alone, spending increased by more than the total growth in the preceding 17 years,” the release said.

Compared to other jurisdictions, B.C.’s real per-person spending growth far exceeded the rest of Canada (5.1 percent) in the three years between 2016/17 and 2019/20.

The study also noted that during the restraint era, the spending grew at a compound annual rate of 0.5 percent. But with the shift in fiscal policy in 2017/18, the compound rate of real per-person spending growth has surged to 4.7 percent.

The change in B.C.’s approach to spending has also affected its debt accumulation. With the restraint approach, the debt-to-GDP ratio fell from 18.4 percent in 1999/00 to 14.4 percent in 2016/17. Under the Horgan government, under which the pace of spending has accelerated, the ratio is expected to increase to 15.6 percent in 2022/23.

According to the study, Ontario and Quebec fared better than B.C. in terms of debt. Ontario forecasted that its debt-to-GDP ratio would decrease by 1.3 percentage points from 2016/17 to 2022/23 while Quebec projected its ratio would decline by 12 percentage points over the same period.

“Ontario and Quebec were subject to many of the same fiscal pressures stemming from the COVID-19 pandemic and yet did not experience an increase in net debt comparable to that which occurred in British Columbia,” the authors said.