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Throne Speech heavy on costs but offers little to build the foundations for a strong, innovative B.C. economy
Posted Feb 12, 2019
February 12, 2019 (Vancouver, B.C.) - Following today’s Throne Speech, the Business Council of British Columbia is concerned about the lack of government attention being paid to the provincial economy. Maintaining and enhancing the government services upon which so many British Columbians rely is an essential role of government. However, the ability to provide high quality public services which enhance our collective quality of life depends on a competitive and thriving economy.
The Business Council commends the Throne Speech’s commitments to improving support for families, in particular increased access to child care. BCBC is also committed to continuing our work with government and Indigenous partners to support Indigenous communities’ full participation in the B.C. economy which will improve health, education and social outcomes for Indigenous people. We also recognize the need to address global climate change. Through our work on the low-carbon industrial strategy, we believe B.C. is well positioned to make an impact as a low-carbon supplier of choice if we leverage our strengths and focus on being competitive on the global stage. Despite these efforts, challenges persist in our economy.
“Where is the future economic growth necessary to sustain families and communities across the province going to come from?” asked Greg D’Avignon, President and Chief Executive Officer of the Business Council of British Columbia. “As economic activity continues to shift away from frothy housing markets and debt-financed consumption, we need to redouble efforts to build ‘tradeable’ industries that can generate export earnings and support good jobs. Businesses, employers and investors are looking for a coordinated economic vision and purposeful action from all levels of government to chart a realistic path forward for medium and long-term growth.”
Competitive tax and regulatory policies, which have been lacking in B.C. and Canada over the last six years, are necessary to create the conditions for investor confidence, increased productivity, higher wages, and rising government revenues.
“Over the last six years, British Columbia’s businesses, industry and employers have been saddled with nearly $6 billion in increased provincial taxes and fees, plus ever-growing regulatory costs and complexities that weigh on growth and put at risk the province’s capacity to fund the important commitments outlined in today’s Throne Speech,” said D’Avignon. “Amid global political and economic uncertainty, B.C. and Canada are not effectively leveraging our strengths to raise living standards for British Columbians.”
Since 2013, businesses and employers have been facing the cumulative impacts of various provincial tax increases starting with the return to the PST, costing business more than $2 billion each year, a 2-point increase in the corporate tax rate equaling about $680 million, and now the new Employer Health Tax which amounts to the largest tax increase on employers in B.C. since the re-imposition of the PST.
At the same time, the province is hiking the minimum wage -- a decision supported by the Business Council – and policy and regulatory changes are being undertaken or planned that will affect environmental assessment, the Labour Code, public sector procurement, and WorkSafeBC, among other areas. Most local governments in B.C. continue to hike commercial and industrial property taxes, fees and development levies, while the federal government and the provinces collectively have committed to steady increases in CPP premiums.
“Increased business operating costs, greater regulatory, legal and administrative complexity, and higher personal income taxes on skilled workers and entrepreneurs are among the headwinds that make it harder to attract capital and talent to B.C.,” commented Jock Finlayson, the Business Council’s Executive Vice President and Chief Policy Officer. “Already, we see evidence of sluggish investment by many B.C. companies as well as moves by some firms to redeploy capital to other, more competitive jurisdictions, including in the United States.”
“Focusing on British Columbia’s economic growth and competitiveness needs to be a priority as we confront troubling signs of a slowdown globally, and also here at home,” added Mr. Finlayson. “This year, global GDP growth is expected to cool to around 3% thanks to tightening financial conditions and persistent trade tensions. Canada’s economy is also losing steam.”
Despite some positive economic indicators at home including low unemployment, stable government finances, and optimism surrounding LNG investment, several factors raise concerns that cracks may be starting to appear.
Retail sales have almost flatlined for the past year. Consumer spending has fallen markedly for big-ticket items, like autos. And while the weakness in residential real estate markets may be an intended product of the government’s affordability agenda, it leads us to ask how the province will replace this economic activity, particularly in Metro Vancouver. This is compounded by increased uncertainty in the housing sector driven by new, unclear rules and painfully slow local government decision-making.
Furthermore, B.C. is now experiencing net negative interprovincial migration, meaning more people are moving out of British Columbia to other provinces than are re-locating here from within Canada. This trend has not been seen since early 2013 and is unusual given B.C.’s high job vacancy rate.
“As the economy slows, employers face ever increasing government-imposed costs, and investor confidence wanes, decisions made at boardroom tables will increasingly be felt at families’ kitchen tables, whether through the loss of investment and economic opportunities or diminished government revenues to provide the services that British Columbian’s expect,” added D’Avignon. “We are asking policy-makers to bring a renewed focus to the economy and the underpinnings of long-term prosperity in the context of shifting global economic realities and the need to focus more on outcomes and less on process.”
Looking ahead to next week’s budget, the Business Council will be looking for stable fiscal policy including a balanced operating budget, prudent spending and a low debt-to-GDP ratio. Another priority is public sector capital spending to develop transportation and other critical infrastructure that supports the efficient movement of people and goods around and through the province, and an improved quality of life for British Columbians. The Business Council urges the province to take steps to bolster B.C.’s competitive position to help attract and retain highly-skilled talent, investment dollars, and entrepreneurs, and reverse our reputation as a jurisdiction where it’s increasingly difficult to get things done.
About the Business Council of British Columbia
Now in its 53rd year as the premier business organization in British Columbia, the Business Council of B.C. is a non-partisan organization made up of 250 leading companies, post-secondary institutions and industry associations from across B.C.'s diverse economy. The Council produces exceptional public policy research and advocacy in support of creating a competitive economy for the benefit of all British Columbians. bcbc.com