British Columbia Budget 2026: Securing B.C.’s Future

Overview

Minister of Finance Brenda Bailey tabled the 2026 Provincial Budget, titled Securing B.C.’s Future, this afternoon. Against a backdrop of global economic uncertainty and slowing growth, the Minister outlined a fiscal plan focused on “making careful choices to protect what matters most.” The budget centers on three core pillars: safeguarding critical services like health care and education, strengthening community safety, and future-proofing the economy through skills training and major projects.

Budget 2026 aims to accomplish balancing efficiency measures against rising deficits, introducing an expenditure management framework even as the provincial deficit is projected to climb to a record $13.3 billion. While the government has committed to reducing the public sector by 15,000 FTEs over three years and re-pacing its capital plan to slow debt growth, these savings are largely being outpaced by the rising costs of existing services. Rather than returning to a balanced ledger, the government is utilizing administrative savings to soften the impact of record-high borrowing, aiming to keep frontline service funding levels comparable to pre-pandemic benchmarks despite the deteriorating fiscal outlook.

Key Economic Figures

Budget 2026 forecasts an updated $9.6 billion deficit for the 2025-26 fiscal year, an improvement of $1.6 billion from previous updates due to stronger corporate and personal income tax revenue. The government projects a deficit of $13.3 billion for 2026-27, which is then forecasted to decline gradually to $11.4 billion by 2028-29.

B.C.’s real GDP is forecast to grow by 1.3% in 2026 and 1.8% in 2027. Modest near-term growth is attributed to ongoing trade uncertainty and the impact of reduced federal immigration targets. The taxpayer-supported debt-to-GDP ratio is forecasted to climb from 26.1% to 37.4% over the three-year plan. Crucially, debt servicing will rise from 4.9 cents to 8.2 cents per dollar of revenue, signalling that debt costs are beginning to “crowd out” future program spending.

Deficit Outlook: An updated $9.6 billion deficit for 2025/26 (improved due to strong tax assessments), followed by a projected $13.3 billion in 2026/27. Deficits are expected to decline slightly to $11.4 billion by 2028/29.

Economic Growth: Real GDP is forecast at 1.3% in 2026 and 1.8% in 2027, constrained by federal immigration changes and trade uncertainty.

Debt & Interest: The taxpayer-supported debt-to-GDP ratio is forecast to climb from 26.1% to 37.4% over the three-year plan. Crucially, debt servicing (the “interest bite”) will rise from 4.9 cents to 8.2 cents per dollar of revenue, signalling that debt costs are beginning to “crowd out” future program spending.

Operating Debt Surge: Operating debt (money borrowed for day-to-day expenses) is projected to more than double, rising from $31.9 billion to $69.0 billion by 2028/29.

Topline

Trade Uncertainty and U.S. Tariffs

Global trade policy and U.S. tariffs remain a primary risk to the fiscal plan. The budget assumes continued volatility surrounding the renewal of the Canada-United States-Mexico Agreement (CUSMA). To mitigate these and other unforeseen risks, the government has allocated $5 billion annually in a Contingencies Vote to address caseload pressures and emerging priorities.

Economic Growth and “Look West” Strategy

The budget introduces the Look West: Jobs and Prosperity for a Stronger BC and Canada plan, which aims to attract $200 billion in private sector investment over the next decade. Key investments include:

$241 million over three years to double funding for trades training and SkilledTradesBC.
A new $400 million BC Strategic Investments Special Account to enable co-investment with the federal government on nation-building projects.
$40 million in new funding to strengthen permitting capacity in the natural resource and tourism sectors to reduce delays for business.

Taxation Updates

The government is implementing a significant expansion of the tax base to modernize revenue streams:

PST Expansion (Effective Oct 1, 2026)

Professional Services: PST (7%) will now apply to accounting, bookkeeping, property management, and commissions on non-residential real estate.
Construction/Design Middle Ground: Architectural, engineering, and geoscience services will be taxed on only 30% of the purchase price, a measure intended to mitigate impacts on infrastructure costs.
Telecom & Textiles: Elimination of PST exemptions for basic cable, toll-free lines, residential landlines, and clothing patterns/repair services.

Real Estate & Income Tax

Additional School Tax (AST): Increasing tax rates for residential properties valued over $3M, starting in 2027.
Rental Development Support: Expanding the Property Transfer Tax exemption for purpose-built rentals to include a 24-month pre-sale leasing period, aiding developer financing.
Income Tax Adjustments: The first tax bracket rate rises by 0.54 percentage points in 2026. Crucially, the government will pause tax bracket indexing from 2027–2030, allowing “bracket creep” to generate significant revenue.

Housing and Affordability

The Province is adjusting its capital plan while still allocating $37.7 billion over three years for taxpayer-supported infrastructure. Affordability measures continue through the BC Family Benefit and stable child care funding. The budget also increases the speculation tax for foreign owners and untaxed worldwide earners, and increases taxes on homes valued over $3 million through the Additional School Tax.

Public Safety and Community Support Budget 2026 provides $139 million over three years to address concerns regarding repeat violent offenders and property crime. This includes the new Chronic Property Offending Intervention Initiative and expanded resources for the Provincial Forensic Firearms Lab to accelerate investigations.

Healthcare and Education Services

Health Care: Over $2.8 billion in new funding over three years is allocated to expand the health system, including $131 million specifically for mental health and addictions treatment based on the Chief Scientific Officer’s recommendations.
Education: The K-12 system receives $634 million in new funding over three years to hire additional teachers, special education teachers, and counselors.
Child Care: $330 million is allocated over three years to maintain affordable fees and support operators.
Children and Youth: $475 million is dedicated to a new direct-funding model for children and youth with support needs to improve flexibility and access.

Meaningful Reconciliation

The government is launching the BC First Nations Equity Finance program, providing up to $1 billion in loan guarantees to support First Nations’ equity ownership in major natural resource and infrastructure projects.

Sector-Specific Policy & Investment Highlights

Critical Minerals, Energy & Clean Tech

B.C. is positioning itself as a global leader in the low-carbon economy through the Look West investment plan.

Permitting Acceleration: Over $40 million is allocated to reduce permitting backlogs in natural resources, moving toward fixed timelines for critical mineral projects.
Grid Expansion: BC Hydro’s capital plan has increased by $1.3 billion over previous forecasts (totaling $14.6 billion) to support the North Coast Transmission Line and new “calls for power” to meet industrial demand.
Strategic Investment: A new $400 million B.C. Strategic Investments Special Account will co-invest with the federal government on projects related to national sovereignty and the energy transition.

Labour & Jobs

The budget reflects a major realignment of the provincial workforce.

Skilled Trades: A landmark $241 million investment to double apprenticeship seats by 2028/29, targeting the labor shortage in construction and clean energy.
Public Service Reduction: A commitment to reduce the public sector by 15,000 FTEs over three years through administrative consolidations, while pledging to protect frontline healthcare and education roles.

Technology, AI & Innovation

The Province is using tax policy to drive R&D and high-tech manufacturing.

Patent Box Regime: The government is exploring a “patent box” tax structure to offer lower rates on profits from intellectual property developed in B.C.
Manufacturing Incentives: A new temporary Manufacturing and Processing Investment Tax Credit for businesses investing in new buildings and machinery.
SR&ED Alignment: B.C. is updating its Scientific Research and Experimental Development tax credit to match federal expansions, increasing access for tech startups.

Forestry, Agriculture & Trade

Trade Resilience: Despite a $200 billion private sector investment goal, the budget warns of significant risks regarding U.S. tariffs and the upcoming CUSMA renewal.
Regulatory Modernization: Funding is focused on removing “barriers, delays, and duplication” in natural resource permitting to support forestry and agricultural competitiveness.

Tax Measures & Revenue Updates

The government is implementing a major expansion of the Provincial Sales Tax (PST) and updating various consumption taxes to modernize the tax base, currently the narrowest in Canada.

PST Expansion to Professional Services (Effective Oct 1, 2026)

The PST (7%) will now apply to several high-value sectors, aligning B.C. with most other provinces.

New Taxable Services: Accounting and bookkeeping; rental property and strata management; commissions on non-residential real estate; and security/private investigation.
Partial Taxation: For Architectural, Engineering, and Geoscience services, the PST will apply to 30% of the purchase price.
Fiscal Impact: Projected to generate $563 million annually by 2028/29.

Elimination of PST Exemptions (Effective Oct 1, 2026)

Telecommunications: Exemptions for basic cable television, toll-free (“1-800”) services, and residential landlines are eliminated to ensure fairness across digital platforms.
Textiles: Exemptions for clothing patterns, yarn, and fabric used for clothing repair are eliminated. Services related to clothing and footwear (repairs/alterations) will also become taxable.

Tobacco and Vaping Tax Updates

To support provincial health goals and increase revenue, the budget introduces the following:

Tobacco Tax: Effective March 1, 2026, the tax rate on cigarettes increases from 32.5 cents to 35 cents per cigarette ($70 per carton). The tax on loose tobacco increases from 32.5 cents to 35 cents per gram.
Vaping Tax: The provincial portion of the coordinated vaping tax will be adjusted to maintain alignment with federal health strategies and revenue requirements.

Income Tax Adjustments

Rate Increase: The rate for the first tax bracket (up to ~$48k) rises by 0.54 percentage points in 2026.
Indexing Pause: A four-year pause on indexing tax brackets (2027–2030), resulting in “bracket creep” to generate significant provincial revenue.

Capital Plan: The “Re-pacing” Strategy

The taxpayer-supported capital plan for the next three years is $37.7 billion, roughly $8.2 billion lower than previous forecasts.

Resequencing: Major projects like the Fraser River Tunnel are being extended over a longer term to manage construction inflation.
Education & Health: $3.9 billion remains allocated for K-12 school replacements, and $2.8 billion in new operating funding is provided for the health system, including the New St. Paul’s Hospital.
Housing: The budget notes an “adjustment to the pace” of some housing investments to ensure fiscal sustainability.

Fiscal Metrics

2026/27 Deficit: Projected at $13.3 billion.
Debt-to-GDP: Forecast to rise from 26.1% in 2025/26 to 30.6% in 2026/27, eventually reaching 37.4% by 2028/29.
Interest Bite: Debt servicing costs will rise from 4.9 cents per dollar of revenue to 8.2 cents by the end of the fiscal plan.

Strategic Considerations

Fiscal Vigilance: The rising “interest bite” and debt levels suggest the Province will remain disciplined on new spending for the foreseeable future, emphasizing efficiency and “shared services.”

Procurement Timelines: Clients in the construction and infrastructure sectors should prepare for shifting timelines as the Province “re-paces” major projects.

Labour Opportunities: The massive expansion in trades training provides a window for industry partners to collaborate on apprenticeship and workforce development.

Innovation Incentives: High-tech and manufacturing firms should review the new investment tax credits and the potential “patent box” regime to optimize their B.C. operations.

Read the full budget here.

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