Finance Minister Chrystia Freeland is expected to deliver a budget Tuesday that will offer limited cost-of-living relief to the vulnerable and promote green investments as uncertainty continues to cloud the economic horizon.
“I don’t think people should get their hopes up too high at this being a sort of goodie bag budget,” Elliot Hughes, former deputy director of policy for former finance minister Bill Morneau, told CBC News.
“It certainly is not being spoken about in that way by both the prime minister and the finance minister and if anything, they’ve I think been … really leaning into the fiscal restraint piece for this budget.”
- Watch and listen to live coverage of the federal budget and what it means for you: CBC’s Chief Political Correspondent Rosemary Barton hosts special coverage starting Tuesday at 4 p.m. ET on CBC TV, CBC News Network, CBC Gem, CBCNews.ca, the CBC News App and YouTube, followed by a special edition of Power & Politics with David Cochrane on CBC News Network. On CBC Radio and the CBC Listen app, Tom Harrington and Catherine Cullen bring you live coverage and analysis at 4 p.m. ET.
Freeland has warned Canadians that while the budget will offer investments in green energy to address the U.S. Inflation Reduction Act, and targeted relief for those struggling with inflation and high interest rates, the cupboard is nearly bare.
“The truth is we can’t fully compensate every single Canadian for all of the effects of inflation or for elevated interest rates. To do so would only make inflation worse and force rates higher for longer,” she said last week.
Hughes said that while the Liberals want to use the budget to seize control of the political narrative for the coming year, that will be difficult with the economy uncertain and no federal election on the horizon.
“It is always tough to seize the narrative by saying we need to … be as boring as possible,” he said. “That said, there are going to be some good measures in here.”
Groceries and dental visits
Last year, under pressure from the NDP, the Liberal government doubled the GST tax credit for six months. Singles without children got up to $234 more from the credit, couples with children got up to $467 and seniors got an average boost of $225.
NDP Leader Jagmeet Singh has said he wants the budget to turn that one-time payment into at least a two-time payment. It looks like he’s going to get his wish.
CBC News reported Monday that while the program is being rebranded as a rebate on groceries, the Liberal government will be rolling it out again at a cost of $2 billion.
The move comes as the cost of food continues to rise year over year despite the fact that overall inflation has been easing for months now.
The budget also is expected to expand beyond children under age 12 the national dental care plan for low-income families and individuals.
The deal between the Liberals and the NDP that guarantees New Democrat support on confidence votes in the House of Commons requires that the Liberals expand the dental care program each year.
In 2023, the program is set to expand to cover Canadians under 18, seniors and those living with a disability. The program is to be fully implemented by 2025.
The government is planning also to crack down on so-called junk fees for consumers — hidden or unexpected consumer charges that are tacked on to the initial price of a product or service, inflating the total cost.
The Inflation Reduction Act response
The limit on what students can withdraw from their registered education savings plan (RESP) for post-secondary education will also be increased.
During the first 13 weeks of schooling, students can’t withdraw more than $5,000 of the education assistance payment (EAP) portion of the RESP. The federal government will increase that limit to $8,000 to reflect the rising cost of college and university.
There is no limit on post secondary education (PSE) withdrawals, which are contributions made by the subscriber.
The budget will contain measures to offset the impact of U.S. President Joe Biden’s Inflation Reduction Act, which Finance Canada officials have said amounts to “a gravitational black hole” that will draw green capital to the U.S. at the expense of Canada and other countries.
Washington’s multi-billion-dollar program earmarks government dollars for developing low-carbon energy in a way that boosts the American manufacturing sector while taking aim at China’s dominant position in the clean energy tech supply chain.
“I think we’re going to see some pretty deep investments in the green economy space,” Hughes said. “I think they’ve [got] a mix of tax credits and other sorts of ways to lure companies to Canada. Big focus on that.”
CBC News confirmed Monday that one of the bigger tax measures in the budget will be a tax credit for clean tech manufacturing worth 30 per cent of capital investment costs in manufacturing equipment.
The budget is also expected to offer more detail on two tax credits proposed in the fall economic statement — the Clean Hydrogen Tax Credit and the Clean Tech Investment Tax Credit.
Conservative Leader Pierre Poilievre has called on Prime Minister Justin Trudeau to pledge to halt any further tax rises, or the introduction of new taxes, and to put an end to deficit spending, which he says is driving inflation.
Hughes said getting spending back to balance is not likely in the short term.
The fall economic statement projected a balanced budget by 2028 — the first time the Liberal government had made such a prediction since 2015. It remains unclear whether the Liberals still look to set a date for achieving budgetary balance.
The cost of dealing with the pandemic, along with the additional cost-of-living supports, will make getting back to balance much more difficult than it would have been ten years ago, Hughes said. And any target date for returning to balanced budgets has to be plausible, he said.
“Whether or not people will sort of take the government at face value on that, on that outlook or on that projection, that’s a bit of a tougher one if you’re basing yourself on previous experience,” he said.
