Fresh from the lockup: Highlights of BC’s action-packed budget 2018

BC Budget 2018 includes major new investments in child care, housing and infrastructure combined with significant improvements in tax fairness.

This budget—the new provincial government’s first full budget—is a turning point. For too long, BC budgets have prioritized tax cuts and balancing the books over all else—preferring to sweep social, economic and environmental problems under the rug.

Budget 2018 tackles some of BC’s biggest problems head-on, while still returning a balanced budget.

It will take days or weeks to fully analyze this budget, but here are the highlights fresh from the lockup.

Building a universal, affordable child care system

BC Budget 2018 lays the foundation for a new universal, affordable, high-quality child care system—our province’s first new social program in generations. It will take a few years to fully implement the program, but this budget’s investments are a solid start and will immediately benefit thousands of BC families.

The budget invests $263 million in the child care plan’s first year with the annual commitment rising to $515 million in year three (including $153 million in federal child care funds). Child care advocates estimated that this level of investment will keep us on track to fully implement universal child care in eight to ten years.

Key elements of the child care investment include:

• A new affordable child care benefit up to $1,250 per month for infant care to offset some of the costs of child care, with payments to begin this September. The benefit will be income-tested and will be paid directly to child care providers. Families with incomes below $45,000 will receive the maximum amount and families with income below $111,000 will receive partial benefits.
• Direct funding to child care providers to reduce fees. The amounts would vary by age group with up to $350 per month for licensed group care for infants and toddlers.
• Capital funding to create 22,000 new licensed child care spaces as well as funds to maintain and upgrade existing spaces.
• Prototype spaces for a pilot program for affordable childcare for families with infants and toddlers, including free child care for families with income below $51,000 (to be funded from the federal-BC bilateral agreement on Early Learning and Child Care).
• Investment in training for early childhood educators.

BC Finance Minister Carol James said the government will work with the child care sector on a recruitment and retention strategy over the next year. To be successful, this must include funds to improve wages—which are notoriously low and well below the living wage in cities like Vancouver and Victoria—as well as ongoing professional development opportunities.

It’s also great to see the government investing to improve inclusion for children with disabilities in child care, and to provide funding for culturally based Indigenous care.

The branding of the $10-a-Day plan may be missing, but key elements of the plan are there. This is big. Universal, quality child care will enhance affordability, create employment, improve gender equity, boost the economy, reduce inequality and foster healthy child development. It may well represent the one thing this new BC government does that will have the single greatest impact on our province.

Housing and homelessness

Along with childcare, a comprehensive plan to address the housing affordability crisis is one of the two flagship priorities of Budget 2018.

This budget includes major new investments to build affordable housing with an investment of $1.6 billion dollars over the three-year fiscal plan and a commitment to $6 billion over the next 10 years. Over the 10 years, this would help create 34,000 new units of affordable housing. The government has called this the beginning of the “largest investment in affordable housing in BC’s history.”

The housing will include affordable rental housing, modular homes for people experiencing homelessness, permanent supportive housing, and housing for students, Indigenous people, and women and children fleeing violence. The largest of these categories is the affordable rental housing commitment of 19,250 units over 10 years, which appears to be specifically earmarked to mixed-income social housing.

In terms of student housing, universities will be able to borrow directly from the Province to begin building student housing on a larger scale, which will also free up units for other renters when more students are able to live on campus. The housing funding also includes $308 million over three years and $1 billion over ten years to repair and retrofit existing social housing units—shoring up thousands of units of the existing affordable housing.

The NDP’s election promise of creating 114,000 units of affordable housing across BC over 10 years is reiterated in the budget document. However, the rate of building laid out in the three-year budget plan is not on that pace. To close the gap between this commitment and the 34,000 units announced now, the budget document makes reference to an ongoing monitoring and review process “to consider additional measures and funding.”

Emphasis is put on partnerships to achieve this goal, including the creation of a new Housing Hub that, as announced in the throne speech, “will partner with faith organizations, non-profits and others who have available land” to contribute to housing projects.

Given the enormous scale of the housing crisis, housing investment must be accelerated and expanded in our view. Our own Marc Lee’s research shows the need—and feasibility—of constructing 5000 to 10,000 units of social and cooperative housing per year in Metro Vancouver alone. The Budget 2018 housing plan, while makings major new investments, moves at a much more modest pace.

Believe it or not, we’ve only just begun describing the housing measure in this budget.

In particular, the budget announces a series of exciting new tax measures relating to housing, including taxes on speculation and the wealthiest property owners. First, a “speculation tax” specifically targets those landowners who are not paying income taxes in BC, while exempting primary residences and long-term rental housing, which would raise additional revenue of $200 million per year.

We also see the beginning of a progressive property tax system, which the CCPA has long called for. By the end of the year, owners of properties worth over $3 million will face increases in both the property transfer tax and the provincially levied portion of annual property tax (called the “school tax”), raising another $281 million per year.

In addition, the so-called “foreign buyers tax” rate is also being increased from 15% to 20%, raising another $40 million per year in revenue.

These measures represent major strides in taxing the windfall profits flowing to landowners (as land prices have increased so dramatically over the past several years in BC). But left entirely untouched by these measures would be, for example, high-income local property owners who own multiple properties valued under $3 million, which is gap that ought to be addressed moving forward. The CCPA has proposed a more ambitious version of a progressive property tax—and the City of Vancouver has asked for the right to levy progressive property surtaxes—but these are great steps for a first budget.

Budget 2018 also includes measures to tackle tax fraud, evasion, and money laundering, all of which are welcome. The government will also move to close loopholes that have allowed property owners to avoid the property transfer tax by transferring the shares of property-owning trusts instead of the property itself. This is an important change.

In addition to increased funding to the Residential Tenancy Branch announced in September, the budget announces some important new protections and assistance for renters, including tighter restrictions on evictions based on renovation or demolition. Furthermore, by granting the power to zone neighbourhoods for rental housing only, the government is giving municipalities a new tool to encourage the creation of rental housing at a time when vacancy rates hover near all-time lows. And the budget is adding $116 million dollars of new funding over three years to Shelter Aid for Elderly Renters grants and the Rental Assistance Program, aimed primarily at low-income renters.

Absent from the budget is the promised $400 per year renter grant, which has been opposed by the Green Party and is indeed not necessarily the best public policy. But the budget does signal a plan to review the homeowner grant program, which is hopeful. Our recommendation has long been to reformulate the $800 million per year homeowner grant (HOG) into a housing grant that would go to owner and renter households alike and be linked to income. This new housing grant would level the playing field between renters and owners.

Overall, Budget 2018 is offering an important—and in some cases historic—new set of housing policies. We are seeing very welcome moves, but, as the government itself acknowledges, much more work remains to be done on housing.

MSP will be fully eliminated as of January 2020

 The revenues will be mainly replaced through a new Employer Health Tax similar to Ontario’s. As in Ontario, bigger businesses would pay slightly higher tax rates (up to 1.95% of payroll), and small businesses with a payroll less than $500,000 will be exempt. It is estimated the tax will raise about $1.9 billion annually when it comes into effect in January 2019. It fully replaces the revenues from the 50% MSP cut that came into effect in January 2018, and a good chunk of the next phase of fully eliminating MSP.

This is a positive step in the direction of tax fairness. MSP is BC’s most unfair tax and it’s good to see it go. However, the MSP used to contribute just over $2.6 billion per year to provincial coffers (in 2016/17) and the new Employer Health Tax would only raise part of that. It remains to be seen whether there will be other revenue measures to replace the MSP in addition to the new Employer Health Tax. Something may come from the report of the MSP Tax Force, which is expected in March.

Support for seniors and health care

Budget 2018 invests $548 million over three years to improve services for seniors. We don’t know yet how the funds will be distributed between home support and residential care facilities. Currently, 85% of residential care homes in the province fail to meet the provincial guideline of 3.36 hours of direct care per day, which means seniors are waiting longer for baths and not receiving enough help with essential daily activities.

Addressing the gaps in home and community care would make a big difference to reducing surgery wait times and help contain healthcare costs. Budget 2018 also has new funds to improve patient care by developing interdisciplinary teams of health professionals, which have the potential to greatly improve patient care especially for patients with complex or chronic conditions.

Health care spending as a share of the economy has been relatively steady for years, and is projected to fall from 7.8% in 2011/12 to 7.4% this year and 7.3% in 2021. It was good to see a small funding increase for the Ministry of Mental Health and Addictions to $10 million per year. Additional programs and supports for drug users and those looking to receive treatment should be brought online as soon as possible. The public health emergency is grave and to date, actions have been slow to address the urgency of the crisis. Last year, 1,422 people died from overdose in BC: equivalent to four deaths per day. We must turn the tide.

Indigenous issues

The Throne Speech promised action to reduce the socio-economic gaps between Indigenous and non-Indigenous British Columbians and Budget 2018 takes a first step in this direction with an investment of $53 million this year for Indigenous housing, culturally based Indigenous child care, a continuation of the Indigenous Skills Training Program and support for Indigenous languages and reconciliation work. This would increase to $97 million next year.

More needs to be done to improve the safety of Indigenous women and girls. Public transportation options along the Highway of Tears are long overdue. Poverty and lack of affordable housing mean many Indigenous children are apprehended by child protection authorities and separated from their communities and their roots. Supporting children and families in their communities is vital, and a key element of reversing ongoing colonial treatment of Indigenous families.

Infrastructure spending

 The BC Budget announced a significant increase in the government’s capital plan. It’s good to see strategic public capital investments in affordable housing, transportation and to expand health and education facilities, including investment in the facilities required to launch a universal, publicly funded system of early learning and child care. These investments would strengthen the provincial economy and set the stage for balanced and inclusive growth moving forward.

Finally, for capital expenditures—including hospitals, residential care facilities and urgent care centres—Budget 2018 is silent on the use of Public Private Partnerships (P3s). As a matter of good public policy, the infrastructure of our health care system should be owned collectively by British Columbians and not delivered through P3s.

Also in the budget

• A freeze in BC Ferries fares on major routes
• A 15% reduction on BC Ferries fares on non-major routes
• Restoration of the seniors discount for ferry travel on weekdays
• Some $4 million for a basic income pilot (no details on how it would be structured)

What wasn’t in Budget 2018?

Poverty

Notably missing from the budget were new measures to help some of the most vulnerable British Columbians, those living in poverty and receiving welfare and disability assistance.

Public consultation on development of a comprehensive poverty reduction plan is underway, however, the process is going to take a while. BC’s lowest-income families have waited long enough. It’s unacceptable to make them wait any longer when the need is clear and there are simple policy changes that can be implemented immediately to significantly improve the lives of low-income British Columbians.

We all pay for the negative consequences of poverty and homelessness. The ongoing public consultation should not be used as an excuse for failing to take immediate action to improve people’s lives.

We welcome the additional funds budgeted to increase resources to deliver social assistance, which should help reduce unacceptably long wait times on the welfare phone line. Also welcome are funds to improve legal aid, better support for women and children escaping abuse and violence, and funds for the Ministry of Labour to enforce the Employment Standards Act. We know that the amounts budgeted will need to significantly increase in future years to meet actual needs.

It’s unfortunate to see no increases to income assistance and disability rates beyond the $100 per month increase announced last September. Even after that increase, welfare rates remain thousands of dollars below the poverty line. A person on welfare is left with only $19 per week for food, after subtracting a very basic rental amount.

Climate change

The budget confirms we will see a $5 per tonne increase in the carbon tax in April 2018 with equal annual increases until 2021. This will be complemented by a rebate cheque targeted at low- and middle-wage earners, increasing as the carbon tax increases. The maximum annual rebate will increase this year to $135 per adult and $40 per child. The budget indicates that the carbon tax will shift away from revenue-neutrality—a move we very much welcome—with new revenues committed to the rebate, transitional support for emissions-intensive industries, and “new green initiatives.”

But the main signal from the budget on climate change is that we’ll have to wait until later this year for the government to “develop the next phase of green initiatives that will facilitate the pathway to BC’s climate targets.” The enormous scale and urgency of the climate crisis—and the stalled progress we’ve had in BC in recent years—mean we can’t wait much longer for action proportionate to the crisis.

To sum it up

BC Budget 2018 offers significant investments to tackle the big social and economic challenges currently facing our province. Now is the time to do this as interest rates remain near historic lows, our debt level is manageable and our taxes are some of the lowest of all provinces.

Topics: Economy, Features, Provincial budget & finance