How does the BC Budget fare on tackling affordability and inequality?

“It’s a pretty substantial step in the right direction,” says Alex Hemingway, a senior economist with the Canadian Centre for Policy Alternatives.
A "no vacancy" sign outside a residential building.
The B.C. government needs to get the housing crisis under control if it wants to address affordability and inequality, says a senior economist with the Canadian Centre for Policy Alternatives. Photo by Denisa Reyes/The Discourse

Amid broad public concern over the rising cost of living, the B.C. government has promised to reinvest a surprise surplus into health care, affordable housing and direct support for struggling British Columbians.

In terms of tackling affordability and inequality in the province, “it’s a pretty substantial step in the right direction,” says Alex Hemingway, a senior economist with the Canadian Centre for Policy Alternatives.

“We’re facing so many crises in this province,” he says. These measures are shifts in the right direction, “but they’re not going to be enough unless they’re sustained.”

The big picture is that the province and other jurisdictions have been chronically under investing in basic societal infrastructure like housing, childcare, health care and more, Hemingway says. A solution to this would have to bring government institutions together to invest in issues that impact people’s day to day lives, and the good news is that we have the economic capacity to do so, he says.

B.C. needs well-designed public policies, and also needs to “sustain and increase public investment to tackle the big challenges that we face,” he says. “This budget is a shift in that direction. It doesn’t get all the way there by any stretch of the imagination, but we need to push on in that direction and not hold back or cut back in the face of an economic slowdown.”

Budget boosts support for low- and middle-income residents

It’s good to see that the government is increasing the shelter allowance to $500 for people receiving income assistance or disability benefits, Hemingway says. The previous rate of $375 had stagnated for years and “had become an embarrassment, given the cost of housing in this province.”

But two significant shortcomings remain for social assistance in B.C., Hemingway says. One is that the level of assistance is still “far below the poverty line.” And the other is that the shelter allowance is only offered to people who have housing. As a result, he says, “some of the people who need it most are not going to benefit from this increase.”

Increased funding for the B.C. family benefit, boosted support for school food programs, expanded affordable childcare and the introduction of free contraceptives will also all help address affordability, Hemingway says.

The government has also boosted payments through the B.C. climate action tax credit as a way to combat unaffordability. “It’s a pretty good, targeted way to get some extra cash in the hands of middle and lower income households at a time when the cost of living is rising significantly,” says Hemingway.

A new renter’s tax credit offers an annual rebate of $400 for renters with incomes up to $60,000, and lesser amounts for those with incomes up to $80,000. That’s good to see, but Hemingway says if the housing crisis isn’t addressed, that assistance won’t make much of a difference in the face of rising rents. Ultimately, solutions like these don’t address the root problems, Hemingway says

“We need to do more to address the underlying drivers of the cost of living.”

More support is needed, particularly to address affordable housing

It’s good to see these measures in the budget, but many of them amount to Band-Aids on much bigger problems, Hemingway says. “You do need Band-Aids when there’s bleeding, but there’s a lot more work to do to address the underlying problem.”

For example, there are still big question marks around the province’s affordable housing strategy, he says. “Housing is such a linchpin of affordability,” and until the crisis is under control, affordability gains in other areas could be quickly swallowed up.

The gap between incomes and what it costs to live in B.C. remains insufficiently addressed, Hemingway says, with a large gap between minimum wage and what is considered to be a living wage in most of the province.

And the government also missed an opportunity to increase taxes for people with high incomes, wealthy landowners and large corporations, “which is something that we could do and should do, in our view, both to raise revenue to make additional social investments and to directly reduce inequality,” he says.

What’s the risk of government overspending?

This year’s surplus came as a surprise, due to an economic recovery from the pandemic that was faster than expected. The government plans to spend that surplus and run a small deficit this year. This is an appropriate response to a time of economic downturn, because government spending can blunt the impact of reduced spending elsewhere, Hemingway says. “This is a reasonable time to do it.”

Over recent decades, Hemingway says there has been a significant ideological emphasis on reducing public spending and on the dangers of even short-term deficits. But those ideas are “not in line with economic evidence.” In fact, restrained public investment has hurt the wider economy, he says.

The planned return to balanced budgets in B.C. should come from increased revenues, not from shortchanging public investments, he adds.

The government is coming off a long period of underinvestment in public and social infrastructure, Hemingway says. Although government spending as a percentage of the province’s total economic activity is now higher than it was before the pandemic, it’s still much lower than it was a couple decades ago. “If we restored provincial spending as a share of GDP to the level that existed 20 years ago, we’d actually have an additional $5 billion available to invest this year beyond what’s in the budget,” he says.

The increased spending reflected in this budget is “good and much needed,” he adds. The affordability crisis we now face is actually a product of that underinvestment.

“We’ve been shortchanging that investment for far too long, and that has economic costs,” Hemingway says. For example, underinvestment in housing makes it harder for businesses to attract and keep employees, which hurts the private sector.

Cutting spending to balance the budget in the medium term would be a bad idea, he says, especially when there are many opportunities for the province to increase revenue and reduce inequality by “focusing on those at the top,” such as people with high incomes, wealthy landowners and large corporations.

That’s not pie-in-the-sky thinking, Hemingway says. Even fairly conservative credit rating agencies “will say in their reports that B.C. has the flexibility to raise additional tax revenue while remaining competitive with other jurisdictions.”

This reporting was made possible through the financial support of Coast Capital, a member-owned cooperative. The article was produced with full editorial independence; Coast Capital was not involved in the story selection, reporting and editing process. You an read all previously published articles here:

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