Shallower than forecast deficit for 2020-21

The federal government lowered its deficit forecast for the 2020-21 fiscal year by nearly $30 billion, citing an improvement in Canada’s growth trajectory since the Fall Economic Statement. Ottawa now expects the deficit for the last fiscal year to stand at $354.2 billion, down from that previous forecast for a $381.6 billion shortfall. While that outlook did improve, it still represented the largest peace-time expenditure in Canadian history by essentially any metric.

Feds see $154.7 billion deficit for fiscal 2021-22

While the deficit expectations for the last fiscal year did improve, the feds forecast a deeper deficit for the year ahead. Ottawa is now expecting to post a $154.7 billion shortfall in the coming fiscal year, more than $30 billion larger than the $121.2 deficit forecast in the Fall Economic Statement. Canada’s debt-to-GDP ratio, a key metric for gauging the sustainability of the deficit, is forecast to peak at 51.2 this coming fiscal year before steadily declining to 49.2 in 2025-26, the end of the forecast horizon. The Trudeau-led Liberals had established a declining debt-to-GDP ratio as their fiscal anchor in their pre-pandemic budgets, but switched to so-called “fiscal guardrails” in the wake of the unprecedented spending spree to assure Canadians the debt load will not spiral out of control.

Extension of recovery benefits

Ottawa unveiled plans to extend a trio of income support programs put in place to avert the worst of the economic shocks due to the pandemic. The Canada Emergency Wage Subsidy, Canada Emergency Rent Subsidy and Lockdown Support and will be extended, in the wake of the extension of the Canada Emergency Business Account, in what represents one of the priciest measures in this year’s budget. All told, the extensions to those programs will cost about $12.1 billion, one of the most expensive line items of the budget overall.

National childcare program

The federal government is moving ahead with plans for a national child-care plan after pledging in the Fall Economic Statement it would unveil its full platform in the budget. The program is expected to cost $30 billion over the next five years, and $8.3 billion ongoing thereafter, in order to drive down the cost of child care to $10 per day by 2025-26. Ottawa is aiming to cut current child-care costs in half by the end of 2022 through the program, which shares many aspects with Quebec’s long-running subsidized child-care program, which has helped boost the participation rate among core-aged women substantially higher than the national average.
Increasing Old Age Security for 75+

Ottawa is boosting the Old Age Security benefit for Canadians aged 75 and up, making good on a campaign pledge made in 2019. The feds will provide a one-time payment of $500 to pensioners who will be 75 or older by next summer in August, and then plan to increase ongoing payments by 10 per cent as of July 2022. Ottawa said the increase would provide a $766 boost to individual payments in the first year, and would be indexed to inflation thereafter. The measure is expected to cost $12 billion over the next five years.

Tax on foreign-owned vacant homes

In a nod to the housing affordability crisis gripping much of the nation, the federal government plans to impose a tax on foreign-owned, unoccupied homes. Under the plan, an annual one per cent tax on the value of the home would be applied to any non-Canadian citizen or permanent resident deemed to have a vacant or underutilized home. However, Canada does not closely track foreign home ownership and there have been concerns raised in the past on how lawmakers could determine if a home was indeed sitting empty for long periods of time.

$2.5 billion for affordable housing

In the same vein, the federal government is planning an additional $2.5 billion over the next seven years for affordable housing initiatives. That funding would help finance rapid housing initiatives to help under-homed Canadians find a place in short order, rather than being forced to wait for long lag-time construction of acceptable accommodation.

$15 minimum wage

The federal government announced plans to increase the minimum wage to $15 across the board, raising the pay of more than 26,000 workers who currently take in a sub-$15 an hour paycheque. The measure would not apply in provinces that currently boast a minimum wage north of that figure, and would rise with inflation. Ottawa said the measure would largely boost the male population, which account for the bulk of the workforce currently earning the minimum wage.

Investing in the green economy

In keeping with Ottawa’s pledge to “build back better,” the feds are earmarking another $5 billion over the next seven years for what they describe as a “Net Zero Accelerator” to hasten Canada’s push to achieve net-zero emissions by 2050. The plan involves helping heavy emitters, including the metals and cement industries, reduce their carbon footprint through investments in new technologies and incentivize a push toward lower carbon emissions output.

Loans for home retrofits

The federal government is tasking the Canada Mortgage and Housing Corporation with dispersing $4.4 billion worth of interest-free loans to homeowners looking to retrofit their abodes with more efficient materials. The loans, capped at $40,000, would be put towards projects that reduce the carbon footprint of a home, including more efficient energy-conserving windows and doors and high-efficiency furnaces. Ottawa said it expects more than 200,000 Canadian households will tap into the program.

Indigenous infrastructure spending

Ottawa is earmarking more than $18 billion over the next five years for investments in First Nations communities. The planned spending includes $6 billion on Indigenous infrastructure, including desperately-needed water sanitation facilities. Currently, there are 52 long-term drinking water advisories in effect in 33 communities, down from 105 such advisories when the Liberals were elected to power in 2015.

Digital services tax

Ottawa is making it official after years of mulling a tax on foreign tech titans like Netflix Inc. The feds plan to impose a digital services tax of three per cent of revenue from companies that sell data and content to Canadians, applying to businesses with gross revenue of more than 750 million Euros ($1.13 billion). Up until now, the likes of Netflix have not been required to collect and remit taxes from Canadian consumers to the federal government.

Funding for long-term care

The feds outlined $3 billion for long-term care facilities after seniors homes proved to be among the hardest hit locations during the pandemic. While long-term care homes are under provincial jurisdiction, Ottawa said it would work with the provinces to ensure the funding helps support standards of long-term care living and bolsters permanent changes to the legislative framework surrounding those homes.