Loss of carbon tax boosts B.C. deficit as economic growth set to slide

British Columbia’s forecasted deficit has hit a record high of almost $11.6 billion for the first quarter of the 2025-2026 fiscal year, largely due to the elimination of the carbon tax and amid “global trade uncertainty.”

Finance Minister Brenda Bailey is also projecting higher deficits than she previously forecasted through to 2028 as growth slides, while the province’s debt is predicted to spike by almost $60 billion over the next two fiscal years.

Bailey’s fiscal update revises gross domestic product growth down to 1.5 per cent from 1.8 per cent in 2025, and to 1.3 per cent from 1.9 per cent in 2026.
The projected deficit is almost $700 million higher than the government’s original $10.9 billion set out in the last update.

Deficits over the next two fiscal years are also set to spike by about $2.5 billion each year compared to predictions in the provincial budget, with a $12.6 billion deficit forecast in 2026-2027 and $12.3 billion in 2027-2028.

B.C.’s debt is also projected to rise to more than $212 billion in 2027-2028, up from about $155 billion in the current fiscal year.

Despite the grim outlook, Bailey says B.C.’s economy remains steady and in a good position to weather global trade uncertainty.

Provincial government faces criticism for increasing debt

The Canadian Federation of Independent Business (CFIB) says this should be a wake-up call for the province — the organization is asking government to show “fiscal discipline” and limit spending.

Ryan Mitton, CFIB’s Director of Legislative Affairs for B.C., criticizes the increase in the province’s public sector compensation.

“Since 2017, public sector compensation costs have nearly doubled, with 210,000 new employees added and management costs rising at an even faster pace,” Mitton said.

“Businesses cannot be asked to shoulder more taxes and fees to plug budget gaps,” he added.

Additional criticism comes from the Greater Vancouver Board of Trade (GCBOT), which says that the financial report confirms that B.C.’s finances are not on a sustainable path. 

“Debt-fueled spending and persistent deficits leave less room for investment in the services British Columbians depend on,” said GCBOT Vice-President David van Hemmen.

“We need a clear and transparent plan to put provincial finances on a sustainable footing, strengthen confidence, and create the conditions for private sector growth.”

In a written statement, the lobby organization calls on the provincial government to “attract investment, get our goods out to market, and build a stronger and more affordable province.”

In a statement, the Canadian Taxpayers Federation (CTF) highlights the interest payments the province has to pay on its increasing debt.

“Interest payments on the debt are costing B.C. taxpayers more than $5.2 billion this year, a 22 per cent increase compared to last year,” the statement read.

“B.C.’s interest charges equal enough money to pay for five brand new hospitals,” said CTF spokesperson Kris Sims.