ICBA ECONOMICS OP/ED: Eby's Wrecking Ball

The following op-ed, co-written by ICBA Chief Economist Jock Finlayson and consulting economist Ken Peacock, first appeared in Business in Vancouver on July 21, 2025.

In just a few years, British Columbia has gone from being one of the most fiscally sound provinces with a low debt load and a stellar credit rating to being in perhaps the weakest financial position of all major Canadian jurisdictions.  Having dug itself into a very deep fiscal hole under the leadership of Premier David Eby, and with the economy already on shaky ground before the trade turmoil that erupted in early 2025, B.C.’s financial outlook is not only dismal but looks poised to worsen.

Like other provinces, B.C. took a fiscal hit during the pandemic. But it emerged in solid financial shape and even posted two consecutive surpluses after 2020-21, buoyed by windfall revenues from the re-opening of the economy and record-high commodity prices.

This enviable fiscal position began to unravel in 2023–24.  Under David Eby, spending and borrowing soared even as revenue growth abated.  The result was a $5 billion operating deficit—equivalent to 1.2% per cent of GDP – incurred at a time when the economy was still enjoying decent growth. The following year (2024–25), government operating and capital spending became completely untethered from economic reality, with the deficit surging to a record $9.1 billion and the province further ramping up its ambitious capital spending program – causing overall taxpayer-supported debt to rise vertiginously.

The 2025 Budget presented by Finance Minister Brenda Bailey in February offered no respite, confirming that the re-elected NDP government intended to shun fiscal discipline and stick with an economic plan underpinned by an ever-expanding public sector.  Instead of charting a path to lower the operating deficit, the government pencilled in an even larger shortfall of $10.9 billion in 2025–26, with similar torrents of red ink projected for the two subsequent years.

Budget 2025 also called for total capital spending of roughly $15 billion annually over three years. While much of this reflects needed infrastructure investment, some of the record borrowing is due to projects being carried forward because of missed construction timelines and cost escalation. The government’s ideological commitment to union-only Community Benefit Agreements has piled on yet more unnecessary costs.

Under the updated plan set out in the 2025 Budget, B.C. is on track to run five consecutive operating deficits.  Even before Trump, these were expected to add at least $45 billion to the net debt.  Over the same period, capital investments add another $60 billion or so. This year total taxpayer-supported debt has already doubled compared to where it stood under former Premier John Horgan. The plan outlined in the 2025 Budget will see BC’s debt reach $166 billion, which will be a staggering $105 billion increase since David Eby became leader. Stated plainly, the Eby government has taken a wrecking ball to British Columbia’s public finances.

International credit rating agencies have taken note. B.C. has seen multiple downgrades, and we are convinced more will follow in 2026-27.  More revenues must now be allocated to servicing the debt – indeed, debt servicing costs today rank as the third largest line item in the Budget after health and education.

And all of this is before we account for the potential negative effects of the Trump-initiated tariff war.  The 2025 B.C. Budget assumed 1.8% economic growth in 2025, with no adjustment for tariffs. But supplementary economic modelling done by the government estimates that broadly applied 25 per cent U.S. tariffs along with similar Canadian retaliation could push B.C.’s economic growth rate close to zero this year, with only a slight pick-up in 2026. Absent a policy response, that means even bigger deficits.

The recent cancellation of B.C.’s carbon tax will aggravate the fiscal challenge, by slashing revenues by another $1.8 billion annually. Combined, the tariff impacts and the loss of carbon tax revenue could result in the deficit swelling another $3-4 billion.

Other revenue assumptions also appear shaky. Budget 2025 posited an 11 per cent increase in property transfer tax revenue—improbable amid the ongoing dramatic fall-off in home sales. The Budget had PST revenues climbing by 5.3 per cent, even as population growth stalls and household spending falters. And the forecast 28 per cent gain in resource revenues seems optimistic at a time when global economic growth is slowing.

The First Quarter Fiscal Update, due in September, will provide a clearer and more realistic view of the province’s books.  Given trade headwinds, a weakening economy, softening revenues across multiple fronts, and the Eby government’s obvious fiscal mismanagement, we anticipate an operating deficit of $16-18 billion — the biggest among the ten provinces on a population-adjusted basis.