Federal budget response from DPAC, CPEPC, CPMA and F&BC
Of course, most governments traditionally seek to build their budgets around easily communicated themes. However, the themes chosen for this budget are so broad that almost any type of spending or program could fit into them. And, indeed, that seems to be what happened. All stakeholders will find at least one thing they like about the budget, which will essentially make it a model for the Liberal platform in the next election which is due to take place at some point this year.
The main items in the budget are ultimately either public health spending and the fight against COVID-19, or spending on longer-term programs for a range of topics unrelated to the pandemic. Notable budget allocations in each of these categories are:
- COVID-related programs: Expanding pandemic support programs for businesses and individuals, an investment of $ 2.2 billion in national bioproduction capacity and an allocation of $ 3 billion to work with provinces to improve standards of care in long-term care facilities; and
- Other: A $ 30 billion allocation to create a national early learning and child care program, direct supports for businesses large and small, and $ 17.6 billion in new environmental spending, plus many more initiatives.
A deeper dive
Chrystia Freeland’s mandate letter asks her to avoid creating “new permanent spending” in her role as finance minister. But, in addition to COVID-related spending, some measures in this budget – including the proposed early learning and child care program – could permanently increase the size of the federal government. In any case, the current national record is unprecedented in nature.
Federal financial overview
The budget deficit for fiscal year 2020-2021, although lower than forecast in the Fall Economic Statement 2020, stood at $ 354.2 billion, or 49% of GDP.
Going forward, annual deficits will continue for the foreseeable future, although they are expected to decline significantly. Short-term projected deficits are $ 154.7 billion in 2021-2022 and $ 59.7 billion in 2022-2023, reaching a low of $ 30.7 billion – or 1.1% of GDP – at the end of the budget’s budget horizon, in 2025-2026. .
The dramatic decline in projected deficits over the budget horizon demonstrates that it is possible to significantly reduce federal spending by cutting programs related to the pandemic. However, for these projections to be true, pandemic control programs would have to go. and the government should avoid announcing significant new spending for the next few years.
The fact that federal debt as a percentage of GDP was not to exceed 30% in the Liberal government’s pre-pandemic fiscal planning highlights the unprecedented scale of federal spending in the past fiscal year and in the years to come. Now, this measurement is expected to hover between 49 and 52% for the foreseeable future.
Combat COVID-19 and its economic effects
The Liberals will say the spending is essential and worth it in the long run – an argument that they may well choose or be forced to present voters with an election before the end of the year.
The budget extends key pandemic support programs for individuals and businesses – the Canada Emergency Wage Subsidy, the Canada Recovery Benefit, the Canada Emergency Rent Subsidy and Lockdown Assistance – until ‘to at least September. The budget also proposes to invest $ 8.9 billion over six years in additional support for low-wage workers, establish a federal minimum wage of $ 15 an hour and extend health insurance benefits. -employment from 15 to 26 weeks.
In addition to that program, a new Stimulus Canada hiring program will run from June to November and will provide $ 595 million to incent companies to hire laid-off workers or hire new ones.
The budget also allocates $ 3 billion to improve standards of care in long-term care facilities, sets aside funds to increase Old Age Security for those 75 and over and announces a fund of $ 2.2 billion. dollars to develop national bioproduction capacity. Together, these measures have been positioned by the government as essential to address the ongoing pandemic, variants of COVID-19 and the potential need for booster vaccines in the years to come.
There is clearly no mention of the Canada health transfer in the budget. This has been identified by the premiers as the main problem during the pandemic period, as the federal government has repeatedly said the pandemic is not the time to deal with transfers. The difference is significant and promises to be an irritant for the federal government in the months to come.
Long-term economic recovery
Perhaps the most important part of the budget is a commitment of up to $ 30 billion over five years, reaching $ 8.3 billion every year, on an ongoing basis, to build a learning and child care system. high quality, affordable and accessible young children across Canada. The Liberals are positioning this spending as an economic measure – and an equality issue – that will grow the economy by allowing more parents – especially women – to work.
If implemented, it would require substantial negotiations and partnership with the provinces – this funding would allow a 50% reduction in the average fee for regulated early learning and child care in all provinces other than Quebec , to be offered by the end of 2022, and annually. the growth in the number of affordable child care spaces across the country. The system would be based on the Quebec model and would aim to offer childcare services across the country for an average of $ 10 / day over five years.
The budget also aims to directly grow businesses large and small through a recapitalization of the Strategic Innovation Fund, dedicated support for black women and entrepreneurs, and $ 4 billion in assistance for small businesses. so that they are competitive in the digital economy and the transition to electronic commerce. models.
Climate and environment
Budget 2021 promises that the government will announce “new more ambitious 2030 climate goals in the coming days” and allocate $ 17.6 billion in new investments to create green jobs, green the economy and the fight against climate change.
The political context on climate and the environment changed last week when the Conservatives announced a plan to fight climate change. This plan includes a commitment to meet Canada’s 2030 emissions reduction targets under the Paris Agreement and includes both a carbon price and a clean fuel standard – two policies the Conservatives have previously embraced. opposites.
With today’s budget, the Liberal government is essentially trying to set a new national bar for climate policy, committing to reduce GHG emissions by 36% from 2005 levels by 2030 (which goes beyond the Paris targets) and achieve net zero emissions by 2050. If this is achieved, these would be standards of international importance and leading.
The Prime Minister and several Cabinet members will attend the United States ‘Climate Leaders’ Summit this week, so stakeholders should watch for even more future announcements in this policy area. The credibility and ambition of each party’s climate policy will undoubtedly be at the heart of the next elections.
Official Opposition Leader Erin O’Toole said it was an election budget – a statement that may well turn out to be true. He also criticized the government for abandoning a traditional fiscal anchor and said the budget did not present a serious plan for economic recovery or to support workers and businesses. The Conservative Party has announced that it will be proposing amendments to the budget, and the Conservative caucus is expected to vote against the budget.
NDP Leader Jagmeet Singh reiterated his calls for a wealth tax and criticized the Liberals for saying great things but not following policies like child care and insurance. drugs. Green Party leader Annamie Paul shared the latter sentiment and expressed doubts that this Parliament will last long enough to implement the programs proposed in the budget.
Bloc leader Yves-François Blanchet was more reserved in his judgment of the budget, but again called for an increase in the Canada health transfer to the provinces.
Importantly, the NDP has already indicated that it will not vote against the budget, so the government is unlikely to fall for confidence votes on this fiscal front. The budget will be debated for four days and will be the subject of three votes during this period, each of which can be considered a vote of confidence. The outcome of these votes is predictable and the chances of an election immediately after the budget are low.
The next big battle between the parties is likely to be the passage of the first Budget Implementation Act (BIA) by Parliament. For stakeholders, getting your spending in this BIA and seeing it passed before the end of this parliamentary session could be the difference between seeing the flow of relevant spending by spring or facing the uncertainty of a federal election.
Meanwhile, it is still possible to engage the entire Cabinet to influence some of the details and funding of specific programs outlined in this budget – and this is particularly the case for the $ 100 billion in economic stimulus spending. post-COVID.
Longer term, it’s easy to see the battle lines for a 2021 election drawn around this budget. The Conservatives will criticize the amount of spending and the NDP will question the credibility of the Liberal Party in delivering promised programs, while the Liberals will ask voters to trust them on both issues.
Ultimately, however, the timing of the elections will depend on the still uncertain deployment of vaccination and the public health conditions caused by the pandemic. The vaccine supply is far from guaranteed and has been interrupted or delayed by all suppliers. Minister Freeland’s speech underscored that the government expects to receive 100 million doses of the vaccine by September 2021 – enough for two doses for every adult who needs them.