Debt interest payments have skyrocketed in Ottawa and the provinces. Federally, that began when the Liberals came to power in late 2015. In British Columbia, the NDP government in 2023 said the province can afford to take on deficits. If so, that is only due to the prudent spending of the previous B.C. Liberal government. The Eby government has certainly not emulated that.
Federally, spending from 2014-15 to 2022-23 ballooned by 75% in nominal terms. Rapid growth in spending in 2020-21 can be attributed to the Covid crisis, but spending growth resumed after the end of the Covid programs. Tight fiscal management is an afterthought for the Liberals.
Federal deficits were almost consistently greater than planned under the Trudeau government. Net debt almost doubled from 2016-17 to 2022-23. Gross debt (a broad measure of the liabilities of the government) swelled to $1.9 trillion in 2022-23. Interest costs from 2021-22 to 2023-24 鈥� just two years 鈥� nearly doubled to $46.5 billion!
(The Fraser Institute鈥檚 Jake Fuss, Jason Clemons, and others wrote several articles and reports on federal and provincial debt in January. Most statistics here are drawn from those pieces.)
In 2016, the Liberals raised the top personal income tax rate, bumping the combined federal-provincial rate above 50% in most provinces. 鈥淭his represents a serious competitive challenge for Canada鈥檚 ability to attract and retain entrepreneurs, investors, skilled professionals, and businesses,鈥� argued Fuss and Clemens. Canada鈥檚 corporate rates also became less competitive.
If the Liberals were actively seeking to reduce economic growth, they could hardly have done better than massively growing Canada鈥檚 national debt, reducing our tax competitiveness and rendering new resource and energy projects difficult or impossible with the 2019 Impact Assessment Act. It all constituted a direct threat to growth, which has since been realized.
Meanwhile in B.C., spending is scheduled to continue to grow rapidly under the NDP, elected in 2017. The NDP鈥檚 annual rate of spending growth per person, in constant dollars, rose by more than 5.5% to 2021-22, a rate more than ten times the level of the previous Liberal government.
The government is forecasting an operating deficit of $6.7 billion for 2023-24, higher than during Covid in 2020-21 at $5.5 billion. The net debt per person will increase by a shocking 44.8% from 2022-23 to 2025-26. Debt interest payments are projected to expand by 36.7% over the same period. Both the debt and debt interest costs may be out of control.
David Eby, premier since late 2022, has faced urgent problems, which required more spending. The Eby government has aggressively tackled the housing shortage, and provision of primary care and mental health and addictions care, but it initiated or expanded less urgent programs too. And the NDP expanded the public service an unjustifiable 31% in its first six years in office.
As in Ottawa, the B.C. government has prioritized growing spending as opposed to growing the economy. Indeed, the NDP government has continued to add extensive regulatory and tax barriers, introducing the comprehensive CleanBC plan in 2017, and in 2023 requiring all LNG projects in the assessment process to be net zero by 2030, amongst other initiatives. These actions have inhibited investment and expansion in the energy and resource industries.
Finally, the burgeoning debt interest costs, in Ottawa, in B.C. and in other provinces, are limiting program expenditures. The Fraser Institute informs that in the current fiscal year, at the federal level, interest costs are only $3 billion lower than the Canada Health Transfer at $49.4 billion.
In B.C., provincial interest charges of $3.3 billion exceed the $2.7 billion B.C. carbon tax revenue. Combined B.C. and (B.C. portions of) federal interest costs of $9.6 billion exceed the total provincial social services budget of $9.1 billion. Federal plus provincial interest costs in several provinces equal or exceed the total kindergarten to grade 12 education budget.
Continued growth of deficits and debt will burden governments with ever larger interest costs. That will limit funds for essential government services, and inevitably increase taxes for residents and companies. Additionally, a less friendly business environment will reduce the expectation of a reasonable profit on investment, the prospect for future economic growth and the tax base for governments.
Our governments must provide Canadians realistic cause for hope. Change is paramount, either in government policies 鈥� or in the parties and leaders forming governments!
bruce
Bruce W Uzelman, based in 琉璃神社, holds interests in economics and political science.
