February 18, 2026
Territories of Musqueam, Squamish and Tsleil-Waututh Nations/Vancouver B.C.
Judith Bosire, Chief Economist
Judith_bosire@vancity.com
The British Columbia Budget 2026 is about protecting essentials, asking households and businesses to contribute more through targeted tax measures, and slowly regaining financial balance — not about bold promises or fast relief.
The province is projecting a $13.3B deficit in 2026/27, narrowing to $11.9B by 2028/29, which is roughly 3% of the province’s total economic output in the first year. In other words, the government is accepting higher borrowing today as the tradeoff for maintaining services while the economy remains under pressure.
Of greater concern is the debt to GDP ratio projected to rise to 37% of GDP by 2028/29. While this level of taxpayer supported debt remains affordable by interprovincial standards, the rapid upward trajectory matters because debt servicing costs are expected to grow significantly, with the interest bite rising from 4.9 cents to 8.2 cents per dollar of provincial revenue over the fiscal plan. Simply put, this means, the province has reduced future fiscal flexibility and limited spending on public services or tax relief.
Budget 2026 is about bracing for a long storm. The government is not promising big new programs but rather saying, times are uncertain, money is tighter, so we are focusing on essentials.
This budget matters because it shapes three things businesses and households feel every day:
For households
While it prevents further erosion, the budget does not meet the moment on affordability; tax changes and limited relief mean most households see little tangible improvement.
Cost of Living: This budget doesn’t dramatically lower costs, but it tries to prevent things from getting much worse. Specifically, core benefits and supports stay in place, healthcare and education remain funded, and some low-income tax credits increase.
Taxes: Lower income households are largely shielded from tax increases, while middle income families face gradual upward pressure, and higher income or high property value households bear most of the new tax burden. The average taxpayer is expected to pay about $76 more in 2026. For homeowners, the budget also results in a slightly higher annual bill, as property taxes are now set to grow in line with the economy.
Services You Rely On: Healthcare access remains the focus, but pressure on the system will continue. Schools and social supports get ongoing funding, with help increasingly targeted to those with higher needs.
For Small Businesses
This budget takes a steady, cautious approach for small businesses, offering support to keep them stable, but it does not introduce large new measures that would significantly boost sales or customer demand.
Cautious Operating Environment: The government is aiming to keep small businesses steady by supporting operations and jobs while accepting that higher taxes, fees, and softer demand limit expansion.
Wages and Hiring: The budget encourages small businesses to invest and hire through offering targeted credits and workforce support, but with lingering demand uncertainty and higher borrowing costs limiting how far they can go.
Taxes: The budget expands PST to certain professional services including accounting and consulting services, which will raise costs for small businesses that use professional services, making everyday operations more expensive.
Investment incentives: The manufacturing and processing credit offers one of the few strong investment boosts, up to $300,000 in refunds to support equipment upgrades, but only for targeted sectors.
Taxpayer-supported debt-to-GDP rises from 26.1% (2025/26) to 37.4% (2028/29). Debt is growing significantly faster than the economy. While a 26% debt‑to‑GDP ratio is comfortably manageable, moving toward the high‑30% range materially reduces fiscal headroom. This limits the province’s ability to respond to future shocks, such as recessions, natural disasters, or federal funding changes, without either borrowing more at higher cost or raising taxes.
Interest bite increases from 4.9¢ to 8.2¢ per revenue dollar, a key medium-term risk. For every dollar the province collects, more than 8 cents will soon go just to paying interest on debt, up from about 5 cents only a few years ago. This reflects both higher debt levels and a higher interest rate environment. As interest costs grow, they crowd out spending on public services (health, education, infrastructure) and reduce flexibility in budget planning.
Debt remains affordable relative to peers, but flexibility is narrowing. Compared with peers, the province is not yet an outlier on debt affordability metrics, which supports its current credit standing. However, the combination of rising debt ratios and a growing interest burden means the province is moving closer to thresholds that rating agencies view as constraining. In short, the province still has room to maneuver, but much less than before.
BC Budget 2026 arrives at a moment when British Columbia faces twin economic challenges: a climate driven rise in disaster costs and a sharp drop in population growth due to changes in federal immigration policy. While the budget acknowledges both pressures, it misses a critical opportunity to convert them into engines of long-term economic resilience.
Climate Action: Budget 2026 strengthens BC’s disaster response capacity, but it misses the chance to turn climate action into a driver of shared prosperity. Vancity’s wishlist is clear: dedicate a portion of the province’s $38 billion infrastructure plan to energy efficiency retrofits, clean energy deployment, and climate tech commercialization; and create a sectoral clean growth strategy that positions communities, not just large industry, as partners in the transition. These are the kinds of measures that would turn resilience spending into long-term economic strength.
Newcomer Economic Integration: Budget 2026 recognizes BC’s population decline but offers no real plan to integrate newcomers into the economy. With immigration volatility now a clear economic risk, BC needs stable, community-anchored integration programs—and tools that allow financial institutions to help newcomers build credit, skills, and businesses that strengthen the province’s economy.
Budget 2026 reflects a government focused on stability rather than expansion amid heightened global trade uncertainty, slowing population growth, and rising debt‑servicing costs. Compared to Budget 2025, it marks a clearer pivot toward revenue measures, expenditure restraint, and public‑sector reductions, while maintaining core public services and targeted affordability supports.
For Vancity members and communities, this budget signals a longer period of financial pressure rather than a turning point. Large deficits, projected at $13.3B in 2026/27 and narrowing to $11.9B by 2028/29, or roughly 2.9% of GDP, are being used to prevent service cuts, not to meaningfully reduce the cost of living. As a result, households and small businesses are likely to continue managing tight budgets, uneven growth, and cautious investment decisions, reinforcing the importance of community-based financial support and stability.
In the end, how this will show up on Main Street is as a budget that keeps the lights on but doesn’t yet make life feel easier. While it protects essential services, for most households, the lived experience is continued pressure: costs remain high, relief is limited, and confidence is fragile. Small businesses see a similar pattern: stability at the margins, but few signals that demand, investment, or growth are about to pick up meaningfully. British Columbians may feel safer that things are not falling apart, but still uncertain about when opportunity and affordability will truly improve.
Vancity is a values-based financial co-operative serving the needs of its 585,000 member-owners and their communities, with offices and more than 60 branches located in Metro Vancouver and Squamish, the Fraser Valley, the Sunshine Coast, the Vancouver and Gulf Islands and Alert Bay, within the territories of the Coast Salish and Kwakwaka'wakw Peoples. With $39.7 billion in assets plus assets under administration, Vancity is one of Canada's largest credit unions. Vancity uses its assets to help improve the financial well-being of its members while at the same time helping to develop healthy communities that are socially, economically, and environmentally sustainable.
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