Ahead of an economic downturn, the Trudeau government on Tuesday tabled a 2023 budget with little fanfare, except that it clearly responds to Joe Biden on green investments, and to his political partner with new health care coverage. dental.
“I have never been so optimistic about the future of our country,” Finance Minister Chrystia Freeland said in the House when she tabled her latest budget, which is based on the 288 pages of a document entitled A Canadian plan. A strong middle class, an affordable economy, a prosperous future.
The Deputy Prime Minister did not have much leeway. On the one hand, too much spending would aggravate inflation. On the other hand, experts expect an economic slowdown from the end of the current year. A senior government official has even come forward to predict a “soft recession” that will push the unemployment rate up to 6.3% by the end of the year. The rate is currently very close to its historical minimum, ie 5%.
Faced with these two contradictory trends, the government has cut the pear in two. He boasts of a “responsible” approach that is supposed to avoid “pouring oil on the fire of inflation”, but pushes the achievement of a balanced budget out of its foreseeable horizon. Last fall, however, we thought we would get there for 2027.
The budget announces a deficit of $43 billion for the current year (2022-2023), or $13 billion more than anticipated in November. One of the causes of this increase in the deficit is a return to the doubling of the GST refund for a second time, but this year presented as a measure “for groceries”. Almost a third of the less fortunate Canadians, approximately 11 million people, will receive a cheque.
The deficit is expected to be comparable for 2023-2024 ($40.1 billion), then gradually decrease until it reaches only a tiny fraction of the country’s gross domestic product (GDP). The new measures in the 2023 budget add a total of more than 43 billion in deficit, over six years.
The green industry package
Despite the short-term economic gloom, the federal government is embarking on its marathon to reorient industries towards sectors that emit less greenhouse gases.
The “transformative” experiment in the economy would reap about $80 billion over the next twelve years. It must help sectors such as green hydrogen, or the production of clean energy. Hydro-Québec could be eligible for a portion of this amount for its future investments.
Ottawa is reacting to theInflation Reduction Act (IRA) American, a law of the government of Joe Biden aiming, among other things, to boost the production of electric cars with hundreds of billions. Canada, however, takes a slightly different approach, heavily based on investment grants. He gives details of the Canada Growth Fund, endowed with $15 billion starting this year, and managed by the federal employees’ pension fund PSP Investments.
Dental care, by phase
Among the other expenses described as “essential for the future of the country” by the Trudeau government, we find the public funds allocated to hospitals and dental clinics. The 2023 budget records the new billions earmarked for the provinces for health care as well as a comprehensive dental program for the poorest, as promised to the New Democratic Party (NDP).
The Trudeau government is thus carrying out this part of the agreement concluded in 2022 with the NDP, in exchange for the support of this party during all the important votes in the Commons. The Minister of Finance mentioned the “phases” of implementation of this new program which would be announced later.
The agreement specifies that the young, the elderly and the handicapped with low incomes would be the first beneficiaries. The new regime will cost 13.3 billion over the next five years.
Limit expenses
To balance things out, the federal government plans to cut spending on its operations by more than $12.7 billion, without cutting services or laying off public servants. The government plans to reduce spending on consultations and travel, as well as cut departmental budgets by 3% over four years.
Minister Freeland did not give any details on how she plans to achieve these savings. She also intends to collect $11.5 billion in new income from wealthy Canadians by taxing share buybacks and introducing an “alternative minimum tax”.
“It is not a priori uninteresting, that said, I think that as several measures of the Liberals have done, it does not concern a very large number of people and it will not have a major impact on income”, Guillaume Hébert, researcher at the Institute for Socioeconomic Research and Information (IRIS). He would have preferred full taxation of capital gains.
The budget is described as “prudent” by Jimmy Page, a former parliamentary budget officer now a professor at the University of Ottawa. “It’s a good thing,” he said. However, Ottawa should have provided a larger cushion in case the economy deteriorates more than expected, according to Desjardins Group senior economist Jimmy Jean. “We touch wood that the situation is not worse than what is anticipated”, he indicated to the Duty.
Despite a growing housing crisis in the country as well as a desire for closer ties with Aboriginal peoples, the federal budget does not provide much more in this budget, neither for housing nor for reconciliation. The budget does not announce major military investments.
” [Pour] housing is not a question of a lack of federal money,” justified the minister, according to whom the previous budget had already put the package in 2022 to help the construction and acquisition of properties.