Federal budget: Chrystia Freeland’s leeway | Federal Budget 2022

The economic picture has changed a lot since Ottawa’s last budget, which contained a series of measures aimed at stimulating economic growth, helping workers and the unemployed, fighting the pandemic and, of course, setting up a daycare network at $10 a day.

A year later, the economy is back on track, and Canada is having to deal with a surge in the price of a barrel of oil, a significant increase in the grocery basket, inflation not seen in 30 years, a shortage of exacerbated labor force, a serious housing crisis, not to mention the effects of the war in Ukraine.

Chrystia Freeland, who will table around 4 p.m. in the House of Commons the first budget of the Liberal government of Justin Trudeau since his re-election, however, has some leeway to make his choices, since the deficit should be lower than expected.

The Parliamentary Budget Officer (PBO) said in early March that he forecast a $47.9 billion deficit for the next fiscal year due to higher-than-expected tax revenues. The Department of Finance forecast in December that the deficit would stand at $58.4 billion at the beginning of April, which represents a difference of $10.5 billion.

The Trudeau government might be tempted to invest in national defence. Radio-Canada News reports that $8 billion in new money would go into this niche.

It must be said that the war in Ukraine affects the inventory of the Canadian Armed Forces. Canada sent weapons, ammunition, devices and various equipment to Ukrainian troops to fight the Russian invader. This conflict has also highlighted a possible Russian threat in the Arctic.

In addition, Ottawa is under pressure from its North Atlantic Treaty Organization (NATO) partners to devote at least 2% of its gross domestic product to its military budget. Currently, the federal government spends the equivalent of 1.4% of its gross domestic product. We will increase our defense spendingrecently said Minister Anita Anand.

Moreover, the Prime Minister announced on March 28 that his government was entering into final negotiations with the American manufacturer Lockheed Martin to acquire 88 F-35 aircraft. Just to replace the CF-18s, which are 40 years old, Ottawa expects to spend close to $20 billion.

The influence of New Democratic Party

The agreement reached between the Liberal Party of Canada (PLC) and the New Democratic Party (NDP) on March 22, allowing the Trudeau government to stay in power until 2025, could also influence the content of the budget.

NDP Leader Jagmeet Singh and Prime Minister of Canada Justin Trudeau

Photo: The Canadian Press/Sean Kilpatrick

the New Democratic Party calls, among other things, for the launch of a universal drug insurance plan, the creation of a dental care plan for low-income Canadians, the implementation of measures to make housing more affordable and the improvement of the Allowance Canada for housing.

At the same time, the Freeland budget could contain a set of environmental measures aimed at combating climate change. Between 2018 and 2020, Canada provided 14.5 times more support to the fossil fuel industry than to the renewable energy industry. It is the only G7 country whose emissions have increased since the signing of the Paris Agreement in 2015.

A substantial reduction in the consumption and production of fossil fuels as well as the divestment of the private sector and the end of subsidies to this sector are necessary for the achievement of the targets of the Paris Agreement, underlined the Group of Intergovernmental Experts on Climate Change (IPCC) in its most recent report made public on April 4th.

It will be interesting to watch whether the federal government, which has just given its approval to the Bay du Nord oil project, intends to eliminate subsidies for the exploitation of fossil fuels, impose a 3% surtax on the profits of oil companies and create a carbon capture investment tax credit.

Remember that the provinces have been calling for an increase in health transfers for a long time. Will Ottawa hear their repeated pleas this time? On the other hand, new funds are not expected to fight the coronavirus. Will the federal government grant a special envelope to aboriginal people to solve the problem of access to drinking water and improve services for children? And the infrastructure?

Public finances

In her economic update presented on December 14, Minister Chrystia Freeland indicated that the budgetary balance should increase from $145 billion (2021-2022) to $58 billion (2022-2023). It set the return to equilibrium within a horizon of five to six years.

In it, the growth of the gross domestic product real estate has been revised slightly upwards to 4.2% in 2022. Forecasts of the debt-to-gross domestic productthey have been revised downwards to 48% this year. The debt should rise to 1250 billion in 2022-2023.

The Canadian economy is doing well, despite a marked increase in the cost of living. It rose 0.2% overall in January, according to Statistics Canada, which estimates a gain of 0.8% in February. The final data will be known at the end of April.

The job market is doing well. The unemployment rate fell from 6.5% in January to 5.5% in February, a rate even lower than the 5.7% recorded in February 2020, before the start of the COVID-19 pandemic in Canada.

Inflation rose to 5.7% in February from 5.1% in January. For its part, the average salary increased by only 3.1%. Food prices rose 7.4% in February, according to Statistics Canada; this is the largest annual increase since May 2009. Shelter costs rose 6.6% in February, the biggest increase since August 1983.

In such a context, the Minister of Finance could also decide to help taxpayers – whose purchasing power is diminishing – by reducing their tax burden.

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