A new report from a public policy think tank is sounding alarm bells about the level of public debt in Canada.
The Fraser Institute says combined federal and provincial debt have climbed in under a decade from $834 billion to about $1.3 trillion.
And it warns that interest payments on that debt are getting out of control, weighing in at nearly $60 billion last year alone — about the same as all spending on K-12 public education in Canada.
Study co-author Charles Lammam says it means consequences for the Canadian taxpayer.
“Whether you are talking about a household or a government, when you take on debt you have to pay interest. For governments, that leaves less money for other priorities. This is important because as governments have increased their debt load over the last eight years, they’ve had to pay more in interest. These interest payments are taking away resources from other spending programs.”
Lammam says that risks slowing down the economy and crippling government programs like healthcare, education, and tax cuts.
Trouble going forward
He says another worry is the fact that governments have accumulated debt by borrowing at historically low interest rates. He warns those rates can’t stay at rock bottom forever.
“Now if interest rates were to rise, the cost of carrying debt will also increase, and it means even more money will have to be redirected to pay interest on the debt.”
And he projects the problem will get worse with eight out of 10 provincial governments, along with the federal government, running deficits.
Lammam says at the federal level alone, debt is expected to grow to $692 billion, meaning debt interest payments of $25.9 billion.
Debt interest payments, federally and provincially: 2015/16
Lammam says since 2007/08, B.C.’s debt has grown by about $26 billion to where it sits now at just under $41 billion.
Compared to the rest of Canada, British Columbia is projected to spends the third most on debt interest repayments, $2.5 billion, behind Ontario and Quebec.
But when payments are looked at as a percentage of provincial revenue, B.C. is in better shape.
The province pays about five cents on the dollar in debt interest payments, the third lowest in Canada, behind Alberta and Saskatchewan.