Finance Minister Chrystia Freeland’s first federal budget projects deep deficits for years to come as it promises to support people through the pandemic crisis and make Canada’s economy greener and more welcoming to women.
“This budget is about finishing the fight against COVID. It’s about healing the economic wounds left by the COVID recession. And it’s about creating more jobs and prosperity for Canadians in the days and decades to come,” Freeland said in prepared remarks from her budget speech to be read in the House of Commons today.
“It’s about meeting the urgent needs of today and about building for the long term. It’s a budget focused on middle class Canadians and on pulling more Canadians up into the middle class. It’s a plan that embraces this moment of global transformation to a green, clean economy.”
The first federal budget document in two years is enormous — at 739 pages — and staggering in scope. It reveals that, over the past year, Canada ran up a deficit of $354.2 billion and plans to follow that up next year with a reduced deficit of $154.7 billion that is supposed to gradually decline to $30.7 billion in 2025-26.
While massive, the deficit came in lower than the federal government’s $381.6 billion prediction in the Fall Economic Statement. The PBO estimated the deficit for the 2020-21 fiscal year would be $363.4 billion, while the C.D. Howe Institute forecast it at $388.7 billion.
An anchor, not a ‘straitjacket’
The budget predicts federal debt will hit 51.2 per cent of GDP in 2021/22 before sliding back to 49.2 per cent of GDP by 2025/26 — lower than the $381.6 billion fore cast in the Fall Economic Statement but still enough to push the country $686.1 billion further into debt between now and 2025/26.
Watch: Finance Minister Chrystia Freeland’s federal Budget speech in full:
A senior government official speaking on background warned that those fiscal targets can’t be seen as a “straitjacket” because events could prompt the federal government to spend more to support Canadians.
The official also said the goal of getting back to an annual deficit of 1.1 per cent of GDP within five years is the fiscal anchor that will guide future budget deliberations.
Conservative Leader Erin O’Toole said he has “real concerns” about the budget’s debt and deficit projections.
“It seems there is not a fiscal anchor in this plan,” he said. “It’s almost like a floating anchor all depending on a massive debt and no clear plan to actually see economic growth, with risks of inflation on the horizon, no plan for large sectors of our economy, no serious plan to help save the tens of thousands of small businesses hanging on by a thread.”
KEY REVENUE MEASURES IN BUDGET 2021:
Large digital companies with gross revenue of 750 million euros or more will face a three per cent tax on revenues starting Jan 1, 2022, which is expected to bring in $3.4 billion in revenue over five years.
Luxury cars and personal aircraft with sale prices of over $100,000, or boats for personal use with price tags of more than $250,000, will be subject to a 10 to 20 per cent tax starting Jan 1, 2022. This tax is expected to raise $604 million over five years, starting in 2021-22.
Non-residents that own Canadian properties that sit vacant will be hit with a 1 per cent tax on the value of the property beginning Jan. 1, 2022 — a measure expected to raise $700 million over four years.
“Homes are for Canadians to live in,” Freeland told reporters earlier today. “They are not assets for parking offshore money and this tax measure will work to ensure that that is the case.”
NDP Leader Jagmeet Singh said the budget’s luxury tax measures don’t make up for the absence of a broader tax on wealth.
“In rejecting any measure to make the ultra-rich pay, what Justin Trudeau is saying is that workers, families are going to have to pay the price,” he said.
To bring more women into the workforce, the federal government announced $30 billion over five years and $8.3 billion a year afterward to create and sustain early learning and child-care programs. Freeland described the measure as a “smart, responsible, ambitious” plan for jobs and growth.
“The truth is that the tragedy of COVID-19 has created a window of opportunity, which we can open to finally build a system of early learning and child care across our country,” Freeland said in the budget foreword.
The budget says Canadians will begin seeing a 50 per cent cut in their child care costs by the end of 2022, and forecasts that the average cost of daycare will be further reduced to $10 a day by 2025/26.
Child care as an economic accelerator
The budget casts the program as an investment in growth, saying that Quebec’s GDP increased by 1.7 per cent when it introduced its provincial child care program.
“It is the care work that is the backbone of our economy. Just as roads and transit support our economic growth, so too does child care,” the budget document says.
O’Toole asked whether the Liberal government had reached out to the provinces to discuss the child care plan, pointing out that early childhood learning and education are provincial responsibilities.
“I’d prefer letting parents be in the driver’s seat and giving options to all Canadian families. So this is one where we will be proposing amendments,” O’Toole said.
Singh said the NDP could support the government’s child care plan but he fears it may never become a reality.
“The real problem here is that the Liberals have promised this so many times that people are cynical, understandably,” he said. “For nearly three decades … they have made this same promise in some form of another and not delivered it.”
The budget allocates $17.6 billion for the green recovery, with a goal of conserving 25 per cent of lands and oceans by 2025.
To get there, the budget sets aside $4.4 billion to help homeowners complete approved energy retrofits with interest-free loans of $40,000. The budget also offers a dedicated stream of funding to help low-income homeowners and rental properties for low-income renters.
The budget also earmarks $5 billion over seven years, starting in 2021-22, for the Net Zero Accelerator, a program to fast-track decarbonization projects.
The budget extends the COVID-19 wage subsidy, rent subsidy and lockdown supports to Sept. 25, with plans to start gradually reducing support payments beginning in July. Those subsidies could be further extended to Nov. 20 if pandemic conditions demand it.
New measure to boost hiring
The cost of extending the wage subsidy is estimated at $10.1 billion in 2021-22, while the extension of the rent subsidy and lockdown support is expected to cost $1.9 billion.
The federal government is also introducing a new measure to help businesses hire staff. The Canada Recovery Hiring Program will provide qualifying employers with up to $1,129 per week for employees hired between June 6, 2021 and November 20, 2021.
The program is expected to cost $595 million in 2021/22.
The federal government is also extending the maximum period of employment insurance sickness benefits from 15 weeks to 26 weeks.
The budget introduces a new $15 federal minimum wage, which the federal government says will benefit the 26,000 workers in federally regulated private businesses while providing support for vulnerable workers.
The federal government is providing $57 million in 2021/22 to cover costs farmers incur in quarantining workers as they enter the country.
Pensioners 75 years of age or older are getting a one-time taxable grant payment of $500, to arrive in August. The federal government will boost Old Age Security for the same age group by 10 per cent annually, starting in July 2022.
Federal spending on benefits for the elderly will rise from $58.5 billion in 2020/21 to $81 billion a year by 2025/26.
National standards for long term care
While the budget does not lay out standards of care for long term care homes, it says the federal government will “work collaboratively with provinces and territories” and the Canadian Standards Association to develop them.
It commits $3 billion to Health Canada over five years, starting in 2022-23, “to support provinces and territories in ensuring standards for long term care are applied and permanent changes are made.”
The budget also pledges to spend $5.7 billion on youth over the next five years to help them access education and find jobs.
The federal government also proposes to extend the doubling of Canada Student Grants for a further two years until the end of July 2023. The budget estimated the cost of this extension at $3.1 billion over two years starting in 2021-22.
O’Toole said he’s very disappointed with the budget and thinks many members of his caucus are as well.
“We’re prepared to vote against it if that’s what we come to as a team,” he said. “There’s not the pressure that there normally is because the NDP have already said they will, in some form, support the budget. So that allows us to actually show how much Mr. Trudeau has missed the mark, pose some amendments we may be able to secure support from other parties on.”
Singh said his party feels that holding an election during the third wave of a pandemic would be dangerous and irresponsible. He said his party will not vote to take the country to the polls and will instead work within Parliament to get what he called a better deal for Canadians.
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