Commentary
By Ben Eisen and Tegan Hill

Recently, David Eby’s government tabled the British Columbia government’s budget for the 2025/26 fiscal year.

The document was soaked in red ink and full of bad news, with a projected budget deficit of $10.9 billion this year (the largest on record) and similar deficits in each of the following two years. Net debt (total debt excluding financial assets) is expected to soar from $88.7 billion at the end of 2024/25 to $155.3 billion at the end of the government’s fiscal plan in 2027/28.

What does this mean for British Columbians? Governments deal with such enormous sums of money that it is difficult to understand the real impact on the lives of residents. A closer look at some of the headline numbers demonstrates that these impacts are substantial.

Let’s start by looking at the projected surge in provincial net debt, which is expected to reach $155.3 billion at the end of the government’s fiscal plan. If we divide that by B.C.’s population, we see that the government expects to be carrying $27,077 of debt for every man, woman and child in the province by the time the current fiscal plan ends. This is up from $12,882 as recently as 2023/24 (in nominal terms).

The problem with a government running up so much debt, just like an individual or household, is that interest needs to be paid on it. Ultimately, the money to make the interest payments on government debt comes from B.C. residents and businesses.

Annual payments on government debt interest are expected to grow quickly in the years ahead. In 2023/24, debt interest charges cost British Columbians $3.3 billion. At the end of the government’s fiscal plan, that number is expected to reach $7.2 billion.

Again, putting these figures in per-person terms provides context. Government debt interest per person stood at $595 in 2023/24 in nominal terms. By 2027/28 that number is expected to reach $1,247.

Another way to look at it is that instead of spending 4.1 per cent of all government revenue on debt interest as was the case in 2023/24, the fiscal plan projects this share will rise to 8.1 per cent at the end of its fiscal plan.

The consequences for British Columbians of seeing 8.1 cents of every tax dollar they send to Victoria go toward government debt rather than 4.1 cents are clear. It means that less money is available for other priorities. Opinions may vary on the best use of these scarce dollars, with some preferring spending on core public services and others preferring tax relief. However, the ability to pursue any of these objectives becomes compromised when debt interest payments begin to consume more and more of each dollar of tax revenue.

There is reason to worry these costs could grow further in subsequent years, again for reasons that are relatable on an individual level. In 2024, British Columbia’s credit was downgraded by S&P Global Ratings (the third credit downgrade in three years) with a warning of additional future downgrades if debt continued to pile up. Individuals who have seen their credit scores go down know that downgrades can cause the cost of each new dollar of debt to rise. With the combination of British Columbia presenting no plan to meaningfully slow the pace of debt accumulation in the future and the prospect of more downgrades on the horizon, it is a near certainty that without major policy changes, the interest costs borne by taxpayers will keep going up in the years ahead.

Given the huge numbers involved, the impact of government finances on the lives of individuals and businesses can sometimes be obscured. However, big developments such as the record-high deficits and substantial increase in debt confirmed in the recent budget have real consequences for British Columbians, who will ultimately be on the hook for the rapidly growing interest costs that are the unavoidable result of the government’s ongoing debt binge.

Ben Eisen is a Senior Fellow while Tegan Hill is Director, Alberta Policy at the Fraser Institute.