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Budget takes aim at debt reduction

MSP premium cut helps single-parent famlilies
February 16, 2016 7:42 P.M.
Finance Minister Mike de Jong.

A cut in MSP premiums for single-parent families, measures to increase housing affordability in the overheated Lower Mainland market and a debt-fighting rainy day fund are among highlights of the B.C. budget announced Tuesday.

Finance Minister Mike de Jong released details of what the Liberal government touts as its fourth balanced budget, a $1.6-billion fiscal plan that calls for spending increases on core services. That will include annual three percent hikes in the health ministry budget, $500 million of which is to be funded by lower interest costs resulting from retirement of operating debt.

New and increased investments in government programs and services include:

  • $3.2 billion over three years added to the Ministry of Health compared to 2015-16.
  • $673 million in additional support for children, families and individuals in need over three years, including $217 million for the Ministry of Children and Family Development to support vulnerable youth and their families, and $456 million for the Ministry of Social Development and Social Innovation to support those in need and to increase monthly disability income assistance rates.
  • $143 million over three years to enhance key areas of the B.C. economy that support jobs in communities, including the new $75-million Rural Dividend Program to help small communities strengthen and diversify their economies, additional support for youth trades training, building the B.C. wood brand in India, and additional B.C. Transit funding.

Changes to Medical Services Plan (MSP) premiums and enhanced premium assistance effective Jan. 1, 2017, are aimed at helping lower-income families, individuals, and seniors with the cost of living. 

All children will be exempted from MSP premiums, directly benefiting about 70,000 single-parent families. By making children free and expanding premium assistance, an additional 335,000 people will see their premiums reduced and an additional 45,000 people will no longer pay MSP premiums at all. 

With these changes, a single-parent with two children would save up to $1,224 each year, and a senior couple earning up to $51,000 may now qualify for reduced premiums. Once the changes are implemented, nearly two million B.C. residents will pay no premiums at all.

The budget introduces a new full exemption from the property transfer tax on newly constructed homes (including condos) priced up to $750,000. This exemption will save purchasers up to $13,000 on a newly constructed home and is estimated to provide approximately $75 million in property transfer tax relief for new construction in 2016-17.

That move got a thumbs-up from the Canadian Homebuilders Association.

“We have advocated that changes to the property transfer tax structure are long overdue and that B.C. home buyers deserve a reduction in taxes on housing,” said Neil Moody, CHBA CEO in B.C. “We are pleased to see the provincial government eliminate the PTT on new housing units up to $750,000.”

Proposed changes to the Property Transfer Tax Act will authorize government to collect new information from owners when they register their property. The government will resume collecting data that specifically identifies foreign purchasers. Beginning this summer, individuals who purchase property will need to disclose if they are citizens or permanent residents of Canada, and, if they are not, their citizenship and country of residence.

Government is also investing capital funding of $355 million over the next five years for construction and renovation of affordable housing for people with low to moderate incomes.

A portion of the dividend derived from the government’s strengthening economy, fiscal discipline, and reduction in operating debt will be used to establish the B.C. Prosperity Fund. Budget 2016 applies an inaugural commitment of $100 million from the forecast 2015-16 surplus to establish this long-term legacy intended to:

  • Help eliminate the province’s debt over time.
  • Invest in health care, education, transportation, family supports and other priorities that provide future benefits.
  • Preserve a share of today’s prosperity for future generations.

A top priority for the B.C. Prosperity Fund is reducing taxpayer-supported debt. A minimum of 50 percent of each year’s allocation to the fund will go toward debt retirement, and a minimum of 25 percent will be saved to accumulate earnings. The remainder will be available for core government priorities that provide long-term benefits to British Columbia. In addition, future government surpluses including LNG revenues will help grow the fund over time.

Budget 2016 continues to invest in new and upgraded infrastructure to support services and jobs. Taxpayer-supported infrastructure spending will inject $12 billion into the economy over the next three years, build new projects, and expand and sustain existing infrastructure. This includes:

  • $3.1 billion in total transportation infrastructure investment, including highway upgrades and transit infrastructure.
  • $2.9 billion for new major health-care projects and upgrades to health facilities, including the new Centre for Mental Health and Addictions.
  • $2.5 billion for post-secondary facilities, including building capacity and helping meet the province’s future workforce needs in key sectors, as set out in the B.C. Skills for Jobs Blueprint.
  • $1.7 billion to maintain, replace, renovate, expand and seismically upgrade K-12 school facilities, including new school space to accommodate increasing enrolment.

The surplus forecast in each year of the fiscal plan helps keep taxpayer-supported debt affordable. By the end of 2015-16, the direct operating debt will be reduced by $2.2 billion since government resumed balancing its budget. Under the current fiscal plan, with continued fiscal discipline, there will be an opportunity for B.C. to be free of operating debt as early as 2020 – the first time in 45 years the province would not be carrying the burden of operating debt.

The independent B.C. Economic Forecast Council is projecting provincial real GDP growth to be 2.7 percent in 2016, 2.6 percent in 2017, and an average of 2.4 percent over 2018-20. Government’s economic growth forecast remains prudent relative to the fForecast council at 2.4 percent in 2016, 2.3 percent in 2017, and 2.3 percent in 2018.

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