OTTAWA – The Trudeau government will spend an additional $ 25.1 billion to boost immediate health and economic measures to get Canada through the pandemic, and is planning an additional three-year stimulus package of up to $ 100 billion to foster a economic recovery that he still accepts the horizon.
Finance Minister Chrystia Freeland unveiled her first major economic and fiscal plan in a fall update that featured what she called “the biggest economic relief package for our country since World War II.”
It includes new spending of $ 13 billion for Ottawa’s COVID-19 vaccine treatment plans, $ 1 billion to set national standards for long-term care homes and to help provinces meet those standards , and new credit supports for hard-hit business sectors. such as tourism, hospitality, travel, arts and culture.
It also includes “down payments” on Freeland’s plan to “build back better” with money for child care, long-term care and a green stimulus package.
To pay it all off, Canada will continue to borrow and will run a deficit of $ 381.6 billion in 2020-21, the largest budget deficit since World War II.
That deficit number is very likely to increase, financial documents suggest, because if the virus continues to spread and new lockdowns take a larger share, then Ottawa will be forced to spend more on direct supports.
In addition, the deficit of $ 381.6 billion does not include stimulus spending planned between $ 70 billion and $ 100 billion over three years. This needs to be rolled out in detail in a full budget in the new year.
Freeland said this will amount to three to four percent of GDP, spending she described as crucial to speeding up a recovery “once the virus is under control.”
Freeland described the big brushstrokes of what she called the upcoming “growth plan”, and just a few details, including $ 2.6 billion over the next seven years for energy-efficient home renovations and about 3 billion dollars over the next fiscal year for children’s benefits, early childhood education workers and a secretariat to begin the work of building the system.
There were several measures sure to be immediately popular:
- Freeland will introduce new temporary assistance for low- and middle-income families of up to $ 1,200 in 2021 for every child under six whose families are eligible for the Canada Child Benefit, a measure that will cost $ 2.4 billion of dollars.
- Ottawa will lower the GST / HST sales tax on face masks and face shields, a move that will only make a small slash of $ 95 million in federal coffers.
- Ottawa will eliminate interest on the federal portion of Canada Student Loans and Canada Apprentice Loans for 2021-2022.
- There will be new taxes on digital giants, which could bring in up to $ 6.5 billion, officials said.
Overall, Freeland touted his concern for workers, especially women hit hard by the toll of the pandemic, the so-called “surrender.”
“It’s a feminist agenda,” Freeland said in the House of Commons. “And I say it proudly. It is also a program that makes good business sense and is supported by many Canadian business leaders.
“As we rebuild, we have it within our grasp to build back better, to address the challenges that hold us back: homelessness, systemic racism, the unfinished and essential work of reconciliation.”
In the first detailed account of federal spending since being re-elected by the Liberal government, Freeland presented no specific plans to stem the red ink other than a possible end to the stimulus package, but she said she would have “fiscal safeguards”. which “will help us determine when the stimulus will be reduced.”
“The government will monitor progress against several related indicators, recognizing that no data point is a perfect representation of the health of the economy. These indicators include the employment rate, the total number of hours worked and the level of unemployment in the economy.
“When the economy recovers, the time-bound stimulus will be withdrawn and Canada will resume its long-standing, prudent and responsible fiscal trajectory, based on a long-term fiscal anchor, which we will highlight when the economy is stronger. stable. ”
Freeland has repeatedly highlighted everything Ottawa has done to date.
To date, Ottawa has disbursed over 80% of all government spending, which includes $ 322 billion in direct measures to fight COVID-19 and help people. “It really has been amazing support,” Freeland told reporters.
The provinces and territories, on the other hand, spent $ 60 billion in direct support.
“It’s important to highlight how badly the federal government is there right now,” Freeland said. “We’ve already spent a lot,” she says. “And we will continue to do so.”
Although the provinces have called for more long-term injections of federal funds into health care, Freeland has not forecast any further increases planned for the Canada Health Transfer – a touchy subject that will be the subject of discussion. first ministers meeting over the next two weeks.
But she announced changes to a federal-provincial spending program known as the Fiscal Stabilization Fund – which Alberta and Saskatchewan have long been calling for – that could translate into more “billions” for those provinces. , who saw their revenues fall due to problems. in the oil and gas sector before the pandemic. However, officials could not determine how much it would cost the federal treasury.
Freeland presented four possible scenarios of how the economy could evolve if the pandemic were to stabilize or worsen. They could add up to $ 7 billion a year to the deficit, according to the documents.
She said that besides the cost in human lives, the most “devastating” cost of the pandemic was the loss of jobs.
Freeland said his message to Canada’s credit rating agencies was: “Canada’s spending as described today is prudent, it is thoughtful, it is prudent.
She added, “The best way to meet our credit obligations is to have a strong and growing economy. That’s what it’s all about in this plan, ”and underlined the“ forward-looking directions ”she outlined in the plan.
Ottawa had already spent $ 1 billion on research into COVID-19 treatments and vaccines, but the economic update says it will spend another $ 13 billion on vaccines and distribution – a figure that hasn’t not burst the specific amount for the seven vaccine purchase contracts to date. and also included all supplies to be distributed.
The economic update presents an optimistic outlook: that the deficit is expected to decline significantly over the next two fiscal years, to $ 121.2 billion in 2021-2022 and to $ 50.7 billion in 2022-23, ” as the economy recovers and the need for temporary measures diminishes. According to this optimistic view, in four years the deficit is expected to drop to $ 24.9 billion.
But the reverse is also true. The deficit this year could climb to more than $ 400 billion if the virus reappears, lockdowns take an even bigger slice of the economy and the government’s stimulus must adjust. The document indicates that this year’s deficit could well reach $ 399 billion, and four years later it is still hovering over $ 33 billion.
Freeland said the measures taken by the government have already had an impact. “To date, Canada has recovered nearly 80% of the more than 3 million jobs lost at the start of the pandemic. Compare that to the United States, which recovered just over half of it. “
Overall, she said the government has yet to include the $ 100 billion in spending that is still to come over the next few years because “the ultimate size and timing is highly dependent on how the economy evolves. health and economic situation ”.
In the area of housing, the financial update promises extensions of two existing initiatives – one that provides low-interest loans and mortgage insurance for specially designed rental projects, and the other that targets lower borrowing costs for first-time home buyers. The rental construction program will see its lending capacity nearly doubled, from $ 13.75 billion to $ 25.75 billion, over the next seven years starting in 2021.
The construction of purpose-built rental units has been identified as a key factor in addressing the affordability issue for large cities like Toronto. While there are around 5,000 purpose-built rentals slated for completion in the Toronto area next year – more than there have been in 25 years, according to Urbanation President Shaun Hildebrand – a senior analyst with the Canada Mortgage and Housing Corporation recently told The Star that Toronto alone, tens of thousands of new purpose-built rentals are needed each year just to meet the demand of its usual population growth .
Homeless shelters will also get an infusion of funds, with $ 299.4 million pledged as part of the federal homelessness strategy to ensure remoteness, improved cleaning and more. health and safety measures to prevent outbreaks in communities.