OTTAWA — Treasury Secretary Chrystia Freeland is moving into the post-pandemic era and is pledging to respond to the rampant housing crisis with his 2022 budget, unveiled Thursday. The recently concluded agreement between liberals and new democrats also makes itself felt.
“Today, Canada is back in power,” she said of the economic disruption she has overcome since the onset of COVID-19 more than two years ago.
She, who is also a vice premier, said in her speech before the Commons that the recovery of lost jobs is 112% and that “it’s time to end the emergency support measures associated with the pandemic.”
The pandemic will come at a high cost: at least $350 billion in spending over two years. A sign that the government believes it is coming to an end, it only intends to spend $11.7 billion this year and beyond.
But the federal government insists it must now respond to the runaway inflation and rising cost of living that Canadians are feeling. To this end, the 2022 budget has given a special place to investment in housing.
Trudeau’s government is signaling that it intends to honor its campaign promise to introduce a tax-free savings account to buy a first home. This initiative will save up to $8,000 per year, and the total amount will not exceed $40,000.
Unused contributions cannot be carried over. The first installments are expected to be paid in 2023 and the measure will cost $735 million over five years.
Ottawa is also pledging another commitment: to ban foreigners from buying non-leisure property. There are exceptions, for example, for refugees and foreign students in the process of obtaining permanent residence.
Helping people find housing is part of an agreement with the New Democratic Party (NDP) that allows the Liberals to stay in power until 2025.
The first figures for the dental insurance plan
Another central milestone of the Liberal-New Democrat alliance, dental insurance, also has a place in the budget exercise. For the first time, liberals calculated how much it would cost to carry out the promised plan. They plan to invest $5.3 billion over five years from 2022 to 2023, and then $1.7 billion each year thereafter.
As planned, the dental plan, offered to families with annual incomes of less than $90,000, will initially be available in the first year for children under 12 years of age. Later, this scheme should be extended to all minors and then to people with disabilities before it becomes available to all low-income households.
What’s more, on the environment side, Trudeau’s government is a bit more specific about how it intends to meet the targets of its greenhouse gas reduction plan unveiled last week. To meet its goal of 60% of car sales being zero-emission vehicles by 2030, Ottawa is proposing to extend its program to 2025, offering up to $5,000 in discounts on this type of purchase.
Thus, we intend to allocate $1.7 billion over five years in addition to scaling up the program. Investments are also planned to expand the fleet of charging stations, such as a $400 million package for Natural Resources Canada to deploy these facilities in remote communities.
While promising plenty of investment, the liberals also insist that they will show fiscal responsibility. “Canada is proud of its traditions (in that sense). It is my duty to immortalize it, and I will do so,” said Ms Freeland.
Among other things, Ottawa intends to plunge into the pockets of banks and insurers, as the liberal platform promised. The government will introduce a special tax only for the last fiscal year, as well as the Canadian Recovery Dividend. After all, the relevant institutions will have five years to pay out an additional $6.1 billion.
Political scientist Genevieve Tellier of the University of Ottawa calls the 2022 budget “reasonable.”
“We expected large expenditures, which may even increase the federal budget deficit. This is not what we saw,” analyzes one who specializes in public finance.
If she notes that there is no shortage of planned investments, she emphasizes that revenues will also be in accordance with the budget plan.
“We started taxing people, wealthier companies,” says Ms. Tellier. I feel like the government is trying to find the right balance between giving more while staying a little within normal and reasonable limits in terms of budget balance.”
In his opinion, the amount required from financial institutions is “significant”. The public finance expert recalls that several voices have been heard during the pandemic saying that these organizations have made progress during the health crisis. “They borrowed a lot of money and it’s not the kind of service that was slowed down during the pandemic.”
The government forecasts a $113.8 billion deficit for the year just ended, up from $144.5 billion in the December economic report.
For the current fiscal year, it will amount to $52.8 billion, and next year – $39.9 billion, the Ministry of Finance predicts.
The 2022 budget still does not provide for a return to a balanced budget, but the deficit for fiscal year 2026-2027 will be reduced to $8.4 billion.
What about the defense budget?
In the area of national defense, the budget provides for new investments of more than $8 billion over five years. “This funding will strengthen Canada’s contribution to its core alliances, enhance the capabilities of the Canadian Forces, continue to support culture change and the creation of healthy and safe jobs within the Canadian Forces, and strengthen Canada’s cybersecurity.” document.
Thus, government experts have estimated that Ottawa will spend about 1.5% of its GDP on defense at the end of the five-year budget forecast horizon. This calculation is based on the NATO methodology, which, in particular, takes into account expenses such as veterans’ pensions, which are not included in the defense budget.
In the context of the Russian invasion of Ukraine, there is a lot of pressure on Canada to meet the 2% of GDP target that NATO requires of its member states.