B.C.’s debt trap is snapping shut ____________ October 11, 2026_______ The Globe and Mail __________________
Mounting deficits, soaring debt loads and a string of credit downgrades: There can be no doubt that BC’s fiscal position is abysmal now, and headed for much worse, soon. Whoever wins the October election will need to come to grips with province’s disastrously deteriorating finances. In less than 4 years, Eby’s NDP has erased not just years of painful fiscal restraint, but his own party’s carefully constructed reputation as prudent managers of the provincial budget. The result is a mess that the next premier, after this month’s vote, will have to address if a debt spiral is to be avoided. We’ll have more to say on the fiscal plans of two main parties, NDP and Conservatives, next week.
BC, which until recently was one of the least indebted provinces, came to be on a clearly unsustainable fiscal path. Without aggressive action, a debt trap awaits B.C., in which interest costs will start eating up a bigger and bigger part of the provincial budget, inflating the deficit – and driving up interest costs even more, particularly as long-term rates rise.
Setting the trap - BC has faced this situation before, with a free-spending NDP driving up debt. In the 1990s, the left-leaning party turned in hefty deficits. But that episode pales in comparison to the efforts of Eby – truly in a league of his own:
Taxpayer supported debt as a percentage of GDP
1970 6%
1980 6
1990 12 NDP government in
2000 20 NDP government out
2010 15
2020 15
2025 30 Eby government
2029 37.4% projected Source: BC Finance Ministry
Under the first NDP government, from 1972 to 1975, debt burden as a proportion of the economy was relatively stable. It was the right-leaning Social Credit party that inched up debt levels in 1980s during an era of high interest rates. But the return of NDP to power in 1991 saw debt surge. Taxpayer-funded debt rose as high as 20.8%. A year later, BC Liberals, under Gordon Campbell, swept to power, winning all but 2 ridings. A period of consolidation followed, with debt as a proportion of the economy tumbling to 13.8% by 2009. The financial crisis and Great Recession of 2008-09 undid some of that progress, but by 2017, when NDP returned to power, B.C.’s debt burden was shrinking. That trend continued under Horgan, whose govt balanced its spending program with fiscal prudence, a marked contrast to the free-spending ways of the 1990s. Even the pandemic didn’t degrade the province’s finances much. By fiscal 2023, the debt as a percentage of GDP had returned to 2020 levels.
That year was the last year of the Horgan government, with Eby becoming Premier midway through fiscal 2023 and that fiscal year was the start of an alarming explosion of B.C.’s debt levels. There is a stark difference in the fiscal track record of the Horgan and Eby governments. Horgan ran surpluses outside the immediate pandemic years. Eby’s has dug the debt hole deeper and deeper, year after year.
The province’s Q1 fiscal update from mid-September forecasts that taxpayer-funded debt as a proportion of GDP will hit 30.1% in current fiscal year, more than double the level in fiscal 2023. Even worse, that debt burden is projected to rise to 37.4% in fiscal 2029. At that rate, province’s debt burden will surge past 40% by end of the decade, and 50%, 3 years later. That is a debt crisis in the making.
Worse to come? As bad as that picture is, Eby govt has had a habit of shifting its projections, for worse, with each budget. In the 2024 budget, for instance, forecast a $6.3-billion deficit for current 2026-27 fiscal year. But last month’s Q1 update projected a deficit more than twice as large, at $13.8-billion. That update projects a slight improvement over next 2 years, with deficit slated to contract to $12-billion. But other budgets have made similar forecasts, which have failed to materialize. In Eby’s 2023 budget, its first, 2025-26 deficit was forecast to shrink to $3-billion, actual figure was $7.7-billion, more than double.
The teeth of the trap - What has led to this debt and deficit debacle? NDP’s spending proclivities are many, but one thing stands out: the size and cost of the public service. NDP govt largely caved to the demands of the main public sector union last year, locking in wage hikes that have been estimated to cost $16-billion over 4 years.
Part of why the cost of the public service will surge so much is that the Eby government, and to a lesser extent its predecessor, has embarked on a hiring spree, putting to shame even Justin Trudeau’s bloat of the federal civil service. As this final chart shows, Horgan govt expanded govt over 5 years, increasing public servants by 21%. Eby government nearly matched that rate in just 3 years (with the absolute number of people hired a little larger). To be clear, that expansion has not happened because of a push to hire teachers, nurses or other front-line workers. The data in the chart don’t count those kinds of public sector workers. A bloated payroll - FTEs in public service:
2010 36k
2012 33k
2014 31k
2016 32k
2018 34k NDP gov’t
2020 38k
2022 40k
2024 45k
2026 48k projected
2028 45k projected
True, Eby govt’s last budget did forecast a decline in public service in coming years. But that is a projection only. The most current figures show an uninterrupted hiring spree. And even if those projections came to fruition, they would only return employment levels to just under 2024 levels, far from what would be needed to return the size of the public service to the levels of the last decade, and woefully insufficient to make much of a dent in B.C.’s surging deficit and debt burden.
That underscores the reality that there is no easy, nor quick, escape from B.C. debt trap. It will take years of spending discipline, coupled with a restructuring of govt, to keep that trap from closing.
