Yesterday, Deputy Prime Minister and Minister of Finance Chrystia Freeland delivered the Government of Canada’s first budget in over two years. In what is arguably the most significant budget in recent history, it sought to address critical short-term needs related to the COVID-19 pandemic, while positioning the country for long-term economic recovery.  

The Fall 2020 Speech from the Throne and Fall Economic Statement set out clear priorities for the government:  weathering the pandemic through all means necessary, building back better with a green recovery, and creating a more inclusive Canada. Today’s budget – delivered by Canada’s first female Minister of Finance – has followed through on these priorities with ambitious spending that sets the stage for a campaign platform for a potential federal election later this year.  

With over $101 billion in stimulus spending, the budget lays the groundwork for sustainable growth, the creation of new jobs, and support for women and youth to get back to work, while extending support programs for individuals and businesses impacted by the pandemic.  

The Liberal government’s marquee commitment in Budget 2021 is a permanent national childcare and early learning program – portrayed as an essential social infrastructure and economic investment.  The $30 billion investment over five years seeks to provide subsidized $10/day daycare to all Canadians by 2025, and will require cooperation between the federal government and provinces. On the youth front, the budget outlined significant supports for students, including training and work experience programs, as well as initiatives to improve access to post-secondary education.  

Emergency pandemic supports including CEWS, CRCB, CRB and CERS have been extended until September 25, 2021. Other measures include extending EI sickness benefits from 15 to 26 weeks. Outside of emergency funding, the budget establishes new benefits to support small and medium sized businesses including a hiring credit for hard-hit businesses to hire more workers and helping small and medium-size enterprises to digitize. Significant investments were also pledged to help employers train and recruit workers, with $960 million over three years for a new Sectoral Workforce Solutions Program. Supports for upskilling and workforce planning were also announced.  

The government’s vision for a post-pandemic Canada is not without a cost. The budget outlined the full cost of pandemic spending to date and provided an updated deficit figure of $354.2 billion. The lack of a specific plan to return to balanced budgets was immediately criticized by the official opposition. Moreover, while Budget 2021 denotes $101 billion in new spending, real spending since the Fall Economic Statement (due to expanded emergency programs) stands at $143 billion.  

The government has been clear that it will spend whatever is needed to help Canadians through the pandemic and to create growth. Public opinion surveys have consistently shown Canadians’ support for government spending to address the pandemic, regardless of deficit figures, so the Liberals have calculated there was little political risk in presenting today’s ambitious spending plan.

In both the Speech from the Throne and the Fall Economic Statement, the government promised a transformational plan that would see Canada “build back better” with clean growth at the forefront. While not the sweeping transformation initially promised, the budget made significant investments in green retrofitting, clean tech, creating a federal clean electricity fund and investments in charging and fueling zero-emissions vehicles. The government also intends to create a green bond framework, with an inaugural federal green bond with an issuance target of $5 billion in 2021-22. Investing in the green economy is central to the government’s previously announced commitment to creating one million jobs by the end of this year – which they doubled down on today.  

As was expected, the budget did not include any significant changes to personal taxes, nor did it include an increase in the GST or the creation of a wealth tax. However, the budget fulfills a promise to propose a sales tax on digital platforms, a tax on global tech giants such as Facebook and Google, a luxury tax on purchases such as yachts, as well as a new tax on the value of “non-resident, non-Canadian owned residential real estate” that is deemed vacant or underused.  

Conservative Party Leader Erin O’Toole called the budget “a major let down” because it raises taxes, doesn’t support the oil and gas sector, and “does next to nothing to secure the Canadian economy.”  NDP Leader Jagmeet Singh criticized the budget’s lack of action on pharmacare and said the government is burdening families and communities with paying the price of the pandemic by not taxing the ultra-rich. Despite the criticism, Singh confirmed the NDP would vote in favour of the budget in order to avoid triggering an election that could exacerbate the pandemic’s third wave.

So what happens next? In the coming days Deputy Prime Minister Freeland will introduce legislation to enact the budget.  As per the House of Commons standing orders, a maximum of four sitting days will be scheduled to debate the budget legislation, which is expected to pass with the support of the NDP. Deputy Prime Minister Freeland and Minister Fortier, among others, will also be on the (virtual) event circuit to talk about the budget over the coming weeks.  

Subscribe to our weekly Public Affairs newsletter to stay up to date on next steps. As always, our Public Affairs team is here should you have any questions about how today’s budget impacts your business. Please get in touch with us here.  

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