B.C. Finance Minister Kevin Falcon signalled Tuesday the B.C. Liberals are prepared to do whatever it takes to balance the books in time for next year's provincial election, including raising corporate tax rates.

Falcon indicated a firm financial foundation - a balanced budget - is the key to a Liberal election win.

Falcon also set the stage for a downsizing of British Columbia's groundbreaking carbon tax, saying the province is prepared to put the greenhouse gas fighting tax on hold until the rest of the world catches up.

The slow-down on the carbon tax brought on stern rebukes from environmental groups who said B.C. is giving up its leadership on climate initiatives.

The next B.C. election is set for May 2013 and the Liberals, who are currently trailing the Opposition New Democrats in public opinion polls, are seeking their fourth consecutive term.

The budget Falcon tabled Tuesday forecasts a deficit of $968 million this year and a surplus of $154 million in 2013-2014.

The deficit for the budget that wraps up the current 2011-2012 fiscal year on March 31 is forecast to hit $2.5 billion, slightly better than the $3.1 billion deficit Falcon projected last fall.

“Keeping British Columbia's fiscal house in order does mean some tough decisions in the short-term,” Falcon said during his speech to members of the B.C. legislature. “But consider what's at stake here. It's our future - the future of this province, and the future of our people.”

He said the Opposition New Democrats are not taking heed of the economic turmoil around the world and plan to introduce tax-and-spend programs that will only increase the provincial debt.

“That's the wrong direction,” said Falcon. “The lesson is clear: the tax, spend and borrow approach is not just wrong. It is potentially catastrophic.”

But Falcon's budget does include tax increases, along with tax breaks aimed at the elderly and families.

He said medical services premiums will rise by four per cent - about $5 a month for a family of three - after three straight years of six-per-cent increases.

Falcon said the government's commitment to balance the budget has reached the point where he is prepared to raise business taxes, actions once considered unheard of for the free enterprise coalition.

The 2.5 per cent small business tax, promised to be eliminated as part of the failed attempt to win the harmonized sales tax referendum, will stay and only be reviewed when the books improve, he said.

Falcon said he is prepared to raise the general corporate income tax rate to 11 per cent from 10 per cent in April 2014 if the budget situation doesn't show signs of improvement.

“It underscores how serious we are about meeting our target and our requirement to balance the budget in 2013-2014,” he said in a pre-budget briefing with reporters. “We've said we don't want to have to do it, but we've put it in (the budget). We felt it was important to signal to everyone they have to do their bit.”

B.C. Business Council executive director Jock Finlayson said raising corporate taxes is not what businesses want to see from the Liberals, but he's prepared to stomach a temporary increase.

“It is not something my community is going to welcome,” he said. “But in the grand scheme of things, it's a modest step.”

Falcon said the Liberals are committed to fighting climate change, but the July 1 scheduled increase in the carbon tax will be the last one until a review is completed.

He said the Liberals want to examine if the carbon tax is affecting the province's economic competitiveness.

The carbon tax was implemented in 2008 as part of former premier Gordon Campbell's aim to reduce greenhouse gas emissions by one third by 2020.

Environmentalists said putting the carbon tax on hold is a step backwards for the province.

“We're missing an opportunity and a vision,” said David Suzuki Foundation spokesman Ian Bruce.

Falcon introduced a series of family-oriented tax breaks aimed at new home buyers seniors and families with children.

First time, new, home buyers will be eligible for a bonus of up to $10,000. Seniors will be eligible for a home renovation tax credit of up to $1,000 and families will be eligible to tax credits for arts and sports programs for kids.

Iglika Ivanovo, a B.C. Centre for Policy Alternatives spokeswoman, said the budget and tax credits do nothing to help the record numbers of B.C. families and seniors living in poverty.