What we know about Chrystia Freeland’s federal budget

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This article was published 05/04/2022 (898 days ago), so information in it may no longer be current.

Finance Minister Chrystia Freeland lays out her second pandemic budget Thursday. It will be her first since the Liberals got re-elected in fall 2021 and since Prime Minister Justin Trudeau struck a surprise deal with the NDP that promises support in the House of Commons and a three-year runway before the Liberals must head back to voters.

Here’s what to expect:

THE SIGNALS

• Killer shoes: Freeland chose Canadian-designed black patent spike-heeled pumps for her new budget day shoes that she hoped would add “height” and convey “power” on budget day. Fiscal power to slay the deficit? Not immediately. Military power to slay the Russian dragon? Not as such. Spending power? Oh yeah. The taps aren’t turning off. The smart money says the budget will showcase all of the above.

• New Spending: Part of the Liberal-NDP pact commits the government to spending on affordable housing, on dental care for children under 12 of low-income families and on taking steps toward pharmacare.

The Star’s Heather Scoffield reported that the big ticket item will be a shiny new $10-billion housing plan. It will aim to double the pace of housing construction by the end of the decade, slap a ban on foreign buying of Canadian homes, set up tax-free savings accounts for prospective first-time homebuyers and put billions into affordable housing for low-income families. It will include $4 billion to help municipalities fast-track zoning permits and approvals of home-building; $1.5 billion for new affordable housing through the Rapid Housing Initiative, and $1.5 billion for construction and renewal of co-operative housing.

(Read more about the federal government’s housing plan ahead of the 2022 federal budget.)

• Fiscal: A senior government official told the Star that the budget will “perhaps even overperform” in getting its fiscal house in order. So expect a wee surprise. Government revenues will come in higher than expected last year because the economy is “roaring” out of the pandemic, employment is going gangbusters, and high energy and commodity prices boost government coffers too.

Trudeau made clear the budget will show some fiscal discipline — something business leaders have slammed the federal Liberals for lacking. The prime minister said Wednesday “a declining debt as a proportion of our economy, of the size of our economy, a decreasing debt-to-GDP ratio … remains and that will always remain as one of our core fiscal anchors.” So while Ottawa borrowed and racked up a $398 billion deficit at the height of the pandemic in the rush to aid individuals and small businesses, Trudeau said this year’s budget will return to track a declining debt-to-GDP ratio “because it matters to Canadians.”

• Military: Trudeau has promised additional assistance to Ukraine and his defence minister has said there will be more money for the military to modernize the North American air defence system with the U.S. (NORAD) in the face of a more aggressive Russia. Expect that to be in the billions.

The Star reported on Sunday the Liberal government is expected to announce a major new defence policy review but it does not intend to chart a path to reach the NATO spending target of two per cent of GDP. That would require Canada to double its current defence spending level. We’re not Germany or Poland, the Liberals say. And we’ve got to do something about NORAD. CBC News reported Wednesday the budget would pour up to $8 billion in new money into defence, money for NORAD, as well as new equipment for Ukraine.

THE POLITICS

The Conservatives have long attacked the Liberals’ spending ways, and interim leader Candice Bergen previewed Wednesday that she expects another “irresponsible, high-tax, high-spend budget from the NDP-Liberal coalition, one that promises to drive up inflation.”

So the Conservatives can be counted on to vote against the budget.

But the political drama around whether the minority Liberal government survives is lessened by last month’s “no surprises” deal with the NDP. Leader Jagmeet Singh has already told the Star’s Alex Ballingall he expects a “down payment” on dental care, new spending on affordable housing, initial steps to increase taxes on big banks and the removal of some government supports for the fossil fuel sector.

(The Liberals promised during the election to put a three per cent tax on the largest banks and insurers that would begin by bringing in $296 million and rake in $1.3 billion by 2025.)

Then there is the Liberal caucus, where there are some internal politics to watch for as well. Freeland, the deputy prime minister, is politically ambitious and may want to shore up her business-friendly credentials with her fellow Liberals as well as the broader business community.

Longtime Liberal MP John McKay said the government has got to show “some fiscal discipline” and that will “necessarily require some forms of guidelines, whether it’s debt to GDP, name whatever it is. And if we don’t do that, then the market will do it for us.” Is he a minority within Liberal caucus? “I think I’m a minority voice with a very large minority,” said McKay.

OTHER EXPECTED GOODIES

• Legislation to come to lock in the national $10-a-day daycare plan. The government may also book funding for all provinces, beyond just Ontario, for what would be the sixth year of last year’s announced five-year plan. The Liberals promised ongoing funding of up to $9.2 billion (which includes other child care spending they did before last year’s big splurge).

• More money for health. The Liberals have already announced a one-time infusion of $2 billion to help provinces tackle surgical backlogs caused by the COVID-19 pandemic (though Trudeau promised $6 billion for that purpose during the election campaign). And there is more to come, possibly to meet the Liberal promise to give $3.2 billion to the provinces and territories for the hiring of 7,500 new family doctors, nurses, and nurse practitioners.

• More money to protect people from disinformation, and money to track down who is financing anti-democratic activities.

• Reuters reported the budget will spend $15 billion over five years to create a growth fund to draw new private investment into green technologies, but it’s not clear how much of that money will be a shuffling around of existing funds.

THE WORST KEPT SECRETS

Public Safety Minister Marco Mendicino said the budget is “a great reveal” and yeah, budgets are notorious for their secrecy, but … news gets out. See above.

We don’t know the title of the budget yet. But a senior government official told the Star that, unexpected world events aside, it will be a big down payment on the Liberals’ campaign promises.

“We got elected on a pretty ambitious platform that was all about tackling affordability challenges in this country for Canadian families. We can’t ignore that. There’s an obligation there to deliver on that front, and we’ve given ourselves a path to actually do just that, to deliver on that.”

WHAT NOT TO EXPECT IN THE BUDGET:

• A plan to eliminate the deficit.

• A path to reaching the NATO defence spending target of two per cent of GDP.

• Universal pharmacare. Despite long saying it would like to move in this direction, the Liberals have agreed with the NDP only that they will “continue progress” on this front, with a new act to frame it by next year and the development of a national list of “essential medicines and bulk purchasing plan” by 2025.

• Universal dental care. The Liberals have only promised to start with under 12-year-olds this year, then expanding to under 18-year-olds, seniors and persons living with a disability in 2023, followed by full implementation by 2025. The program is to be restricted to families with an income of less than $90,000 annually, with no copays for anyone under $70,000 annually in income.

With files from Heather Scoffield

Tonda MacCharles is an Ottawa-based reporter covering federal politics for the Star. Follow her on Twitter: @tondamacc