Stronger Fiscal Outlook Creates Opportunities

Sept. 14, 2007

VICTORIA – British Columbia’s updated fiscal plan is showing strong results, creating an opportunity for further investment in priority areas, Finance Minister Carole Taylor announced today with the release of the First Quarterly Report for 2007/08.

“When B.C.’s bottom line improves, so do our options,” said Taylor. “A strong and competitive economy, combined with a prudent approach to budgeting, allows for additional flexibility in meeting British Columbians’ priorities. We can do more while keeping the budget balanced and debt affordable.”

The updated forecast shows taxpayer-supported capital spending is up $691 million across the three-year plan, reflecting new health projects in Victoria, Kelowna, and Vernon along with additional investments in the education sector and social housing. Total taxpayer-supported capital spending for 2007/08 is now forecast at $4.3 billion, which is $393 million higher than budget.

The improved fiscal outlook allows the Province to finance these investments without additional increases in debt. British Columbia’s total debt is forecast to reach $34.8 billion, which is $2.1 billion lower than budget. The taxpayer-supported debt-to-GDP ratio, a key measure of debt affordability, continues its downward trend, and is projected to fall to 13.8 per cent by the end of 2007/08.

For 2007/08, revenues are up $1.1 billion from budget due to increased taxation revenue, higher federal transfers, and higher net income for ICBC. These increases are partially offset by reduced natural gas revenues. Spending is forecast to increase $190 million from budget due primarily to higher forest fire and flood related costs, additional child care spending, and changes to MLA compensation and pensions. The 2007/08 surplus is forecast to be $1.6 billion, up from $400 million expected at budget.

Economic growth is expected to remain robust at 3.0 per cent in 2007, down slightly from the 3.1 per cent forecast in the February budget. The revision reflects weakness in lumber and natural gas markets, and lower U.S. economic growth but is partially offset by stronger domestic demand, steady employment gains, and continued strength in retail trade. Similarly, the economic growth forecast for 2008 is revised to 2.9 per cent, from 3.0 per cent at budget.

“British Columbia’s economy is proving to be quite resilient in the face of some significant challenges and risks,” said Taylor. “Despite a weak U.S. housing market, high Canadian dollar, and instability in financial markets, we continue to forecast robust economic growth this year and next.”

In addition to presenting the First Quarterly Report, the Finance Minister also released the 2008 Budget Consultation Paper, which is provided to the Select Standing Committee on Finance and Government Services to assist their consultations with British Columbians on choices and opportunities for Balanced Budget 2008.