The B.C. government has tabled a tough, stay-the-course budget intended to cap spending, sell off "non-strategic assets" and rein in the deficit with very few handouts to taxpayers or businesses on Tuesday.

Finance Minister Kevin Falcon said the "fiscally prudent" budget would limit overall spending increases to two per cent in coming years and keep the government on track to balance the budget by 2013/2014.

2012/13 budget highlights

  • $10,000 tax refund to help first-time homeowners buy a newly built home.
  • Liquor Distribution Branch warehousing and other "surplus assets" to be sold off to reduce the deficit.
  • No cash for public sector wage increases or for teachers' wage increase.
  • Modest spending increases for health care, justice and social programs.
  • No tax increases for individuals or families but MSP premiums to rise by four per cent.
  • A possible one per cent tax increase for large corporations in 2014, but no increase for small businesses.

Falcon said the government would finish the current fiscal year with a $2.5-billion deficit, which would be cut to $1 billion in the 2012/2013 fiscal year.

Former deputy minister and political commentator Bob Plecas told CBC News he thought the budget was "the toughest budget we've had since '83."

Key to the government's plan to reducing the deficit is the sale of $700-million worth of what Falcon called "non-strategic surplus assets," including its monopoly on wholesale liquor distribution and unused land held by the government, health authorities and school boards.

B.C. Federation of Labour president Jim Sinclair immediately criticized the sell-off, saying it was the equivalent of paying your mortgage by selling your home and living on the street.

But Mark Von Schellwitz with the Canadian Restaurant and Food Services Association predicted selling of the liquor warehouse operations in Vancouver and Kamloops would mean better pricing for both business and consumers.

 "It is something that we have been advocating for years, something that numerous studies have said is the right thing to do."

The government also plans to increase its revenue by taking more cash from ICBC, the B.C. Lottery Corporation and from natural gas revenue as prices rise and more production comes online.

Tight spending controls

Based on the three-year fiscal plan, most ministries will see little or no spending increases in the coming years with the exception of health, which will see an average 3.2 per cent increase per year.

Post-secondary and K-12 education will both get slight funding increases, but will be expected to find "administrative savings" in the coming years to keep ahead of inflation.

 "I have no idea what that means," B.C. Teachers Federation president Susan Lambert said. They have done this for over a decade already, so where are these savings they are projecting? I don't see them... All I see is a net $100-million cut to public education."

There will also be funding increases to improve services for individuals with developmental disabilities, to handle more income assistance cases, and for reforms and new hiring in the justice system.

But Sharron Matthews of the Canadian Bar Association was concerned there was not enough funding to fix the problems plaguing B.C.'s courts.

"It is going to mean that the backlog is not going to get cleared in the immediate future and it is going to grow. The government has put all of its eggs in the reform basket," Matthews said.

But a dozen other ministries such as environment, finance, jobs, tourism and innovation will face cuts or see marginal increases that will not stay ahead of inflation.

"This is the new reality for governments … controlling government spending," Falcon said.

He also made it clear there was no extra cash for teachers or other public sector contract negotiations. "There is no money in this plan for wage increases," said Falcon.

$10,000 cash for new home buyers

The budget contained only a few modest handouts for taxpayers, including the promise of a $10,000 tax rebate to help families and individuals buy a first home.

"The biggest hurdle is the down payment you need to come up with," Falcon said.

The cash rebates will apply only to B.C. residents who buy newly built homes as their first residence before the end of 2012.

There were also changes to the homeowners grant to ensure all low-income Canadian Forces veterans qualify, and grants to help seniors make home renovations to stay in their homes longer.

The unpopular carbon tax will also be up for review in the coming year, said Falcon, who said he was particularly concerned about the effect it was having on the province's agricultural sector.

"We had always anticipated others would follow us down this path … That didn't happen," said Falcon, who added the next scheduled increase in July would be the last for the time being.

Maintaining the bottom line

Falcon said the budget was designed to maintain B.C.'s triple-A credit rating during the continuing global economic turmoil and ensure the province continues to attract international investors.

"Prudence, I believe, is externally important in the kind climate we face today … We are going to see slow growth for some time to come."

Sachi Kuri of the Canadian Federation of Independent Business said the budget was "what we wanted in the big picture," but was concerned about the possible corporate tax increase in 2013.

But Children's watchdog Mary Ellen Turpel-Lafond was critical of the tight spending on social programs.

"It is a harsh budget," she said. "It is directed towards deficit reduction, which I understand has a significant amount of public support. But what about families that have been hardest hit by recession? British Columbia has the highest child poverty rate in Canada."