Published at 16:07
Permanent red ink
Ottawa expects a $52.8 billion deficit this year. If this deficit has nothing to do with the magnitude of the deficit recorded since the beginning of the pandemic – 328 billion in 2020-2021 and 114 billion in 2021-2022 – the fact remains that there is no return to a balanced budget. .
The deficit will continue to accumulate, but it should gradually decrease to $8.4 billion over five years. Consequence: The federal debt will continue to rise.
In the current fiscal year, the hole in public finances is expected to be 2% of real gross domestic product (GDP), adjusted for inflation. Public debt will be 45% of GDP. Despite the accumulation of deficits, this indicator, which measures the state of public finances, should continue to improve over the next few years.
Multiply new houses
Home ownership is becoming more difficult due to skyrocketing home prices across the country, and Treasury Secretary Chrystia Freeland’s budget calls for more than $9 billion in hopes of alleviating the “housing shortage” that is raging.
To remedy the situation, at least 3.5 million new units are needed by 2031. Ottawa, in particular, will create a fund to accelerate the construction of housing of all categories combined, and this measure will cost 4 billion dollars. The social housing niche will also receive 1.5 billion over two years to improve supply. The budget package will also finance measures to facilitate the purchase of the first property.
In addition, in hopes of curbing real estate speculation, the Trudeau government has imposed a two-year moratorium on foreign investment in the Canadian real estate market. He does not exclude the possibility of going further if necessary.
Dentist for everyone
It’s unclear how, but $5.3 billion over five years will be spent on dental insurance for children under 12 this year, and then gradually expand the program to families with annual incomes below $90,000.
That commitment, a New Democratic Party condition to allow Justin Trudeau’s liberals to rule as if they were in the majority, should cost $1.7 billion annually in the long run.
A number of services for children under 10 are already covered by the Régie de l’assurance maladie du Québec (RAMQ). It remains to be seen whether the province will exercise its right of withdrawal in exchange for financial compensation. Federal officials failed Thursday to explain how the federal program would be rolled out. Announcements are expected.
Shadow of Putin
The geopolitical context changed overnight when Russian President Vladimir Putin decided to launch a military offensive against Ukraine on February 24th. Thus, by 2026-2027, Ottawa will allocate an additional $8.1 billion to “strengthen” the Canadian military.
Canada will devote 1.5% of its GDP to the defense sector in 2026-27, compared to 1.36% currently. These efforts will not allow the country to meet the 2% criterion set by NATO. For years, Canada has been criticized for lagging behind in this regard. To achieve NATO’s goal, it was necessary to increase the national defense budget by about $15 billion annually.
The Freeland budget also provides 940 million over five years, including 690 million this year, to support Ukraine, which is still trying to resist the Russian advance.
Bank recovery tax
The pandemic allowed financial institutions to make gold deals, and the Trudeau government decided it was time to share it. We still decided to cut the pear in half.
The Recovery Dividend will allow the federal government to raise about $4 billion over five years. It will take the form of a “one-time tax” on income, which will be spread over five equal annual installments. Ottawa justifies the measure on the grounds that these important pandemic measures have “de-risked some of the largest” banks.
In addition, life insurance companies and banks will see a 1.5 percentage point increase in the tax rate, raising $2 billion over five years. However, this measure does not reach the 3 percentage points that Justin Trudeau spoke about during the last election campaign. The promise was criticized by the Canadian banking sector, who considered it tantamount to taxing their shareholders.
Solutions for pollutants
Industrial polluters, such as cement producers and steel companies, will have access to $2.6 billion in tax credits to use carbon capture and storage to reduce greenhouse gas emissions.
The prohibitive cost of these technologies is holding back their adoption, federal officials say. Thus, the Trudeau government is offering large industrialists three rates of tax credit to implement these tools.
By 2030, the tax credit is expected to remove 15 megatons of CO annually.2 as a result of fuel use and various industrial processes. In comparison, Quebec emits 80 megatons of CO2 in year.
According to the budget, the tax measure will be in effect until 2040. Its annual cost is estimated at $1.5 billion starting from 2026-2027.
Bollards and mines
In addition to subsidies for the purchase of electric vehicles, the budget includes $400 million to install charging stations in more remote locations. Ottawa believes it has a responsibility to “create an infrastructure that drivers can rely on”.
The Infrastructure Bank will also invest half a billion dollars to improve “charging and refueling infrastructure.”
Critical minerals such as lithium, nickel and cobalt are essential for the production of electronic devices and lithium-ion batteries for electric vehicles. The federal strategy provides $1.7 billion to stimulate projects in these sectors. Quebec already has its own strategy.
Speed up reconciliation
Freeland’s budget also includes about $11 billion in new investment over six years, including $2.5 billion this year. About half of the package is for a package of measures to accelerate access to services for indigenous children. The other half is for Aboriginal communities.