OTTAWA – Finance Minister Bill Morneau batted away criticism Wednesday that his second budget has no plan to return to balance, and questions about why the Liberals ditched their promise to reduce the debt-to-GDP ratio.
The document, titled “Building a Strong Middle Class,” includes $4.8 billion in new spending, but only $1.3 billion this year. The big ticket spending —a $7-billion child care plan and a $5-billion National Housing Fund, for example — is all spread out over a 10-year period that comes into effect in 2018-2019, only a year before the next election.
Finance Minister Bill Morneau gets a round of applause from Liberals as he delivers the 2017 federal budget in the House of Commons on March 22, 2017. (Photo: Sean Kilpatrick/The Canadian Press)
While it wasn’t a big-spending budget, as in 2016, Morneau still projects the Liberals will add $140.9 billion over six years to the national debt. The 2017-2018 deficit is expected to be $28.5 billion, with a $3-billion contingency. By 2020-2021, the deficit grows to $30.4 billion with no plan to get back in the black.
“We have shown in this budget a very responsible approach. We are making every dollar count,” he told reporters, sidestepping their questions.
“What you see is that we are focused on making investments but doing it in a way that is responsible.”
The new budget is a far cry from the Liberals’ election promise of running only two “modest short-term deficits of less than $10 billion each” and a return to balance by 2019-2020.
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Highlights from the 2017 federal budget tabled Wednesday, March 22 by Finance Minister Bill Morneau: (Source: The Canadian Press)
Employment insurance premiums are going up five cents to $1.68 per every $100 of insurable earnings, up from $1.63 — the maximum allowable increase under the Employment Insurance Act. Read more here. (Source: The Canadian Press)
The deficit is at $23 billion, down from $25.1 billion in the last fiscal update, and is projected to reach $28.5 billion for 2017-18 — including a $3 billion contingency fund — before declining to $18.8 billion in 2021-22. Read more here. (Source: The Canadian Press)
The 71-year-old Canada Savings Bond program, first established in 1946, is no longer cost effective and is being phased out. Read more here. (Source: The Canadian Press)
Higher taxes on alcohol and tobacco products: the excise duty rate on cigarettes goes up to $21.56 per carton of smokes from $21.03, while the rates on alcohol are going up two per cent. Both will be adjusted every April 1 starting next year, based on the consumer price index. Read more here. (Source: The Canadian Press)
The public transit tax credit, which allows the cost of transit passes to be deducted, is being eliminated effective July 1. Read more here. (Source: The Canadian Press)
The budget dedicates $11.2 billion to cities and provinces for affordable housing over 10 years as part of the second wave of the government's infrastructure program, $5 billion of which is to encourage housing providers to pool their resources with private partners to pay for new projects. Read more here. (Source: The Canadian Press)
An "innovation and skills plan'' to foster high-tech growth in six sectors: advanced manufacturing, agri-food, clean technology, digital industries, health/bio-sciences and clean resources Read more here. (Source: The Canadian Press)
$523.9 million over five years to prevent tax evasion and improve tax compliance, including more auditors, a crackdown on high-risk avoidance cases and better investigative efforts. Read more here. (Source: The Canadian Press)
$7 billion in spending over 10 years for Canadian families, including 40,000 new subsidized daycare spaces across Canada by 2019, extended parental leave and allowing expectant mothers to claim maternity benefits 12 weeks before their due date. Read more here. (Source: The Canadian Press)
$2.7 billion over six years for labour market transfer agreements with the provinces and territories to modernize training and job supports, to help those looking for work to upgrade skills, gain experience, start a business or get employment counselling. Read more here. (Source: The Canadian Press)
$59.8 million over four years, beginning in 2018-19, to make student loans and grants more readily available for part-time students, and $107.4 million over the same period for assist students with dependent children. $287.2 million over three years, starting in 2018-19, for a pilot project to facilitate adult-student access to student loans and grants. Read more here. (Source: The Canadian Press)
A national database of all housing properties in Canada, known as the Housing Statistics Framework, to track details on purchases, sales, demographics and financing, as well as foreign ownership. Read more here. (Source: The Canadian Press)
$400 million over three years through the Business Development Bank of Canada for a "venture capital catalyst initiative'' to make more venture capital available to Canadian entrepreneurs. Read more here. (Source: The Canadian Press)
A comprehensive spending review of "at least three federal departments,'' to be named later, to eliminate waste and inefficiencies, as well as a three-year review of federal assets and an audit of existing innovation and clean-tech programs. Read more here. (Source: The Canadian Press)
$225 million over four years, starting in 2018-19, for a new organization to support skills development and measurement. Read more here. (Source: The Canadian Press)
$395.5 million over three years for the youth employment strategy. Read more here. (Source: The Canadian Press)
Back in 2015, Liberal Leader Justin Trudeau promised his budgets would be half of Conservative prime minister Stephen Harper’s $20 billion deficits. “We will end the Harper legacy of chronic deficits and reduce Canada’s federal debt-to-GDP ratio each year,” the Liberals’ electoral fiscal plan states.
Morneau said the investments the Liberals are planning on skills and innovation are intended to help strengthen the economy.
The Grits’ innovation plan focuses on expanding growth and jobs in six key areas: advanced manufacturing, agri-food, clean technology, digital industries, health/bio-sciences and clean resources.
The 2017 budget includes a strong focus on skills and access to post-secondary education for not only young people but also disadvantaged communities such as indigenous peoples, those studying part-time or on employment insurance, or parents with children. The budget also includes several measures to spur innovation, although not as much as many expected.
Ministers will look at finding savings
Instead of providing details on the government’s plan to invest $950 million to create superclusters in the economy, for example, the budget notes that cabinet ministers will review the $22.7 billion Ottawa already spends on innovation across all departments and study the programs’ effectiveness.
Ministers will also be busy reviewing government spending and public assets with an eye at finding savings.
But there is still no plan to return to balance. “Our plan is to continue to be responsible every step along the way. That is what you are seeing here,” Morneau said.
He noted that the government still projects the debt-to-GDP ratio to drop, although different private-sector forecasters cited in the budget suggest that the number may rise. Perhaps, that explains why Morneau declined to repeat the Grits’ campaign pledge.
While the federal government plans more spending, Canadians who mind their own pocketbooks might be upset to discover that Morneau will eliminate the public transit tax credit, increase taxes on booze, and tax ride-share programs such as Uber.
Kevin Page, former parliamentary budget officer, appears at Commons finance committee on Parliament Hill on April 26, 2012. (Photo: Sean Kilpatrick/The Canadian Press)
There are no large tax hikes in this budget, although EI premiums are expected to increase five cents in 2018-2019. A government review of tax planning strategies also suggests changes are coming that will affect top income earners who use private corporations to shield some of their income.
Former parliamentary budget officer Kevin Page told The Huffington Post Canada the 2017 budget actually looks like an “austerity budget.”
There is a lot of spending identified, but it’s mostly small numbers, he said.
The Liberals have a sound strategy focused on skills and innovation, he said, but there aren’t a lot of programs to meet their ambition.
Kevin Page: 'The clock is ticking'
“There is a lot of strategy but not much money behind it.”
Page, who now serves as president of the Institute of Fiscal Studies and Democracy at the University of Ottawa, also wondered why the Liberals are still reviewing innovation programs.
“Why didn’t they already do that? We’ve known since budget 2016 that this was going to be a skills and innovation budget. …
“The clock is ticking. We are now in the second year of this mandate,” he added. “There is still no sense of a plan.”
“We are still adding significant amount of debt, and I think Canadians will still be asking: ‘What do we get for this?’”