Canada deficit at $354.2 billion
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.
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.
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 forecast in the Fall Economic Statement but still enough to push the country $686.1 billion further into debt between now and 2025/26.
“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.
-Large digital companies with gross revenue of $1.13 billion 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.”
Women into the workforce
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
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.
The budget allocates $17.6 billion for the green recovery, with a goal of conserving 25 per cent of lands and oceans by 2025. The budget also pledges to exceed Canada’s Paris climate accord targets by pledging to cut emissions by 36 per cent below 2005 targets by 2030.
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.
Seniors and youth…
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.”
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.
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 is extending the six-month moratorium on all student loan repayments to March 31, 2023, at a cost of $392.7 million in 2022-23.
And it 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.
Finally, Finance Minister Chrystia Freeland said the federal government would invest $2.2 billion to “rebuild” Canada’s bio-manufacturing capacity to spur vaccine development within Canada to ensure the country is “ready for new variants of COVID-19.”