Tax hike, record deficit and public sector cuts among B.C. budget highlights

By Canadian Press on February 17, 2026.

VICTORIA — Here are some highlights from British Columbia’s 2026 budget, which Finance Minister Brenda Bailey says involves “serious work for serious times.”

It includes a tax increase on the lowest income tax bracket, cuts to public-sector staffing and delays to capital projects, even as the deficit continues to spike.

INCOME TAX HIKE

The tax rate on the lowest income tax bracket is being raised by 0.54 per cent to 5.6 per cent, while offsetting that with tax credits for some lower earners.

While Bailey cast the changes as meaning that 40 per cent of taxpayers would see their income taxes drop, most will see their taxes rise, topping out at $201 more for those earning more than $140,000 without additional credits.

Bailey says it’s a structural change that will help B.C. revenues into the future.

THE DEFICIT

It’s Bailey’s second budget and while she had previously said that 2026 would see the deficit being brought down, instead it is surging by about 38 per cent, to a record $13.3 billion.

In part, that reflects this year’s deficit being pared back to $9.6 billion, down from the previous forecast of $11.2 billion on the back of increased tax revenue.

But even that does not change the fact that the deficit remains stubbornly high — under the budget’s three-year plan, it would be $11.4 billion in the 2028 fiscal year.

CAPITAL SPENDING DELAYS

Capital spending on things such as schools, housing and health-care facilities falls to $18.7 billion in 2026 — down from a forecast of $20.4 billion in the previous budget — then declining further to $16.1 billion by 2028 fiscal.

The government calls it a “re-pacing” to provide fiscal sustainability and predictability.

The impacts will be felt across much of the province, with construction of seven approved long-term care homes being delayed. Phase 2 of Burnaby Hospital and Cancer Centre and student housing at the University of Victoria are also being delayed.

Some housing construction is also being adjusted, involving “reallocating” $1.4 billion over the three-year fiscal plan.

PUBLIC SECTOR CUTS AND SAVINGS

The government is reducing the public sector by 15,000 full-time equivalent positions, and is aiming to save $3.5 billion over three years through “expenditure management.”

It says it will be developing “specific targets to reduce the number of executive positions.” There will be a focus on Crown corporations and the health sector.

The B.C. public service is meanwhile being reduced by 2,500 full-time equivalent positions by the end of the three-year plan, “largely through attrition and voluntary departures.”

This report by The Canadian Press was first published Feb. 17, 2026.

Canadian Press Staff, The Canadian Press

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