At the cost of a handful of measures agreed with the NDP, the Trudeau government has a free hand to include in its first post-pandemic budget, tabled Thursday, some of its recent election promises, such as help to housing and access to the property.
Finance Minister and Deputy Prime Minister of Canada, Chrystia Freeland, who signs her second budget, insists that she drafted it with great caution in a context of great global economic uncertainty. “Now that the COVID economic crisis is over, it’s time for a responsible approach,” she said Thursday.
Completed, the remaining pandemic relief programs. The federal government will no longer have to spend the approximately 60 billion that this year cost the “insurance policy” for confinements, which ends on May 7. The better-than-expected economic situation also provides an additional $14 billion in leeway this year. This reduces the expected deficits without, however, achieving a balanced budget in Canada in the years to come.
Thanks to its agreement reached two weeks ago with the New Democratic Party (NDP), the Trudeau government has ensured that it will remain at the head of the Government of Canada until 2025, even if it was elected in September with a minority mandate.
“We are going to do a lot more things in the next three budgets,” promised Minister Freeland, about electoral promises missing from the document presented Thursday, particularly in terms of health. Canada’s military spending, although increased by six billion over five years, is not enough to meet the 2% of GDP target set by NATO. Eventually, this threshold will oscillate around 1.5%.
The 2022 budget does not satisfy the other opposition parties at all. The Conservative Party of Canada called it “the first NDP budget in history”: overspending and “irresponsible”. The official opposition considers that public finances are still not under control, that it is introducing too many new taxes and that it is not responding adequately to the housing crisis. “What we will see will be the price increase,” laments the interim chief, Candice Bergen.
“It’s a slap in the face in Quebec,” chanted the leader of the Bloc Québécois, Yves-François Blanchet, who accused the federal government of interfering in provincial jurisdictions. However, he finds the new budget quite thin compared to the one presented before the election campaign. “If he didn’t have the deficit […] it would look like a conservative budget. The Bloc would have liked to see an increase in health transfers to the provinces, an increase in the old age security pension for seniors over 65, in particular. He will vote against.
Red-orange budget
As agreed with this fourth party in the Commons, the Liberal government is investing money this year for a dental program initially intended for children from families whose annual income is less than $90,000. The government must still announce by what mechanism these families will be entitled to the program, amounting to 5.3 billion over five years.
Part of this funding may be drawn from the tax hike for banks and banks and insurance companies, of one and a half percentage points, another measure negotiated with the NDP. These financial institutions will also have to pay part of the bill for the post-pandemic recovery, through a one-time tax of 15% of their income above the billion dollars. However, the government only plans to recover 6 billion in 4 years with these measures, less than the 10.5 billion promised during the election campaign.
“There are companies that have made astronomical profits during the pandemic. What we are looking for are not colossal sums. It remains quite modest compared to what was amassed during the pandemic, ”comments Guillaume Hébert, researcher at the Socio-economic Information Research Institute (IRIS).
Lots of new homes, faster
The Trudeau government is taking advantage of this relative stability in power to implement one of its main election promises, namely the creation of a tax-free savings account for the purchase of a first home (TFSAPP), which could be open as early as 2023. This should allow Canadians under 40 to save tax on the purchase of a first property, at a cost of 725 million over 5 years.
The government promises to double residential construction in the country, by granting $4 billion to the Canada Mortgage and Housing Corporation (CMHC) to create some 100,000 homes across the country. Ottawa also prohibits the purchase of housing by foreign investors.
To fulfill its promise to become carbon neutral by 2050 while maintaining economic growth, the Canadian government is pulling out all the stops to attract private investment. The federal government estimates that it will need investments of 125 to 140 billion each year to build this carbon neutral economy. It launches two funds independent of the government with the aim of “sharing the risks” between the public and the private sector.
A Canada Growth Fund will receive $15 billion, with the mission of attracting at least three times that private investment over five years, to reduce greenhouse gas (GHG) emissions and promote growth not only low-carbon industries. A Canadian Innovation and Investment Agency will be created, with a budget of one billion over five years, to fund research into new technologies.
More carbon capture
Minister Freeland intends to improve the refundable tax credit for the controversial carbon dioxide (CO2) capture and sequestration technologies “resulting from the combustion of fuels, industrial processes or directly in the air to then store the CO2, usually deep underground, or use it in other industrial processes like permanent mineralization in concrete”. This will lead to additional spending of $2.6 billion over five years, then $1.5 billion per year until 2030.
$3.8 billion is also earmarked over eight years for Canada’s first critical minerals strategy. Among other things, the budget envelope includes $1.5 billion in funding for infrastructure investments “that will support the development of critical mineral supply chains.”
More than $10 billion more will be dedicated to “advancing the path of reconciliation” with Indigenous peoples. This includes $133 million starting this year to enable communities “to locate and commemorate burial sites in former residential schools,” among other things. A similar first envelope of 27 million promised in the 2019 budget mysteriously disappeared from radar before reappearing two years later, the day after the discovery of unmarked graves in Kamloops, British Columbia.
With Marc Belair-Cirino