The federal government is planning a major stimulus program worth as much as $100-billion over three years to jolt the Canadian economy once the pandemic is under control, a pledge that is in addition to the hundreds of billions of dollars it has already spent to support workers and businesses through the COVID-19 crisis.
Finance Minister Chrystia Freeland announced the new figures Monday in a wide-ranging fall economic statement that is essentially a mini-budget, complete with billions in new spending and targeted tax measures.
The update pushes the projected size of this years deficit to $381.6-billion, up from the $343.2-billion forecast in early July. The report notes that the deficit could be just shy of $400-billion if the pandemic worsens, leading to more restrictions.
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Details of the stimulus plan will be developed over the coming months, ahead of the 2021 budget, and the government says the trajectory of the pandemic will influence its size and timing.
Ms. Freeland made the case for big spending now, calling the winter ahead one of loneliness and grief for many families and warning of hard slogging still to come.
In a speech to the House of Commons, she said the governments economic recovery plans will help ensure the country emerges from the pandemic on a stronger footing.
We are better prepared today than we were last spring, she said.Canadians and Canadian businesses now have access to a comprehensive package of federal support measures to help them weather shutdowns ordered by public health authorities.
Underscoring her governments whatever it takes pandemic approach, Ms. Freeland said that eight out of every $10 spent on fighting the pandemic in Canada has come from Ottawa.
We will invest in every necessary and helpful public health measure. And we will support Canadian families and Canadian businesses, in a deliberate, prudent and effective way, she said. Echoing her governments previous comments, she said Ottawa plans to make the post-pandemic economy more innovative, inclusive and resilient than the one that preceded it.
Mondays update is the governments first attempt at putting a price on the wide-ranging spending plan it outlined in Septembers Throne Speech, which promised a recovery plan focused on fighting climate change and reducing inequality.
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The update also provides the latest projections for the billions in emergency spending programs that have been announced throughout the year to support individuals and businesses during the pandemic.
The government said the stimulus of between $70-billion and $100-billion will be budgeted over the three fiscal years that start April 1, 2021. Before accounting for that stimulus, the update projects a deficit of $121.2-billion in 2021-22 and $50.7-billion the following year.
As a percentage of GDP, the federal debt, before including stimulus, will climb from 31.2 per cent last year to 50.7 per cent this year and 52.6 per cent next year. It is then forecast to decline slightly.
Including stimulus measures and a worsening pandemic, the update shows the federal debt-to-GDP ratio could reach 58.5 per cent. By way of comparison, the debt-to-GDP ratio reached 66.8 per cent in the mid-1990s, when the concern of bond-rating agencies forced Ottawa to approve deep spending cuts to bring the deficit under control.
Critics of the governments deficit spending have urged Ms. Freeland to announce a fiscal anchor, which would include a plan for reducing the debt and deficit. She said that will come in time.
When the economy has recovered, the time-limited stimulus will be withdrawn and Canada will resume a prudent and responsible fiscal path, based on a long-term fiscal anchor we will outline when the economy is more stable, she said in an opening note to the update. Until then, the government will rely on fiscal guardrails such as the employment rate and total hours worked. At a press conference in Ottawa, Ms. Freeland acknowledged that the specific details for her planned guardrails arent yet available, but she said more information would be released in the months ahead and the government is taking the winter to finalize its post-pandemic stimulus plan.
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Mondays update included several significant policy announcements.
The government is moving ahead on a promise to require international digital companies such as Netflix to collect and remit federal sales tax on digital sales. The government is also planning restrictions to the stock option deduction.
A plan to offset the cost of energy retrofits for homeowners will receive $2.6-billion over seven years, and an existing program to build electric vehicle charging stations will receive an additional $150-million.
The government is also increasing the maximum Canada Emergency Wage Subsidy rate from 65 per cent to 75 per cent, starting Dec. 20 and continuing until March 13, 2021.
The current subsidy rates under the Canada Emergency Rent Subsidy will be extended until March 13, 2021, and a new Lockdown Support program will allow for an additional 25 per cent top-up until Dec. 19, 2020.
For Canadas hardest-hit businesses, such as tourism, hospitality, hotels, arts and entertainment, the update announces a Highly Affected Sectors Credit Availability Program. This will offer government-backed loans at below-market interest rates. The update said more details on that program will be announced soon.
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For the live-events and arts sector, the update said Canadian Heritage will receive $181.5-million in 2021-22 to provide work opportunities in these sectors.
While the government continues to negotiate an aid package for Canadas major airlines, the update announced support for large and small Canadian airports. An Airports Capital Assistance Program will receive $186-million over two years, and a new direct transfer program to large airports will be worth $500-million over six years. This can be used for transit projects such as the planned light-rail link to Montreal airport.
The government said Monday that it is exploring options to enhance the Large Employer Emergency Financing Facility. The Globe and Mail recently reported that the federal government has spent almost $5-million on outside consultants to help manage the program, yet it has only delivered two loans since launching six months ago.
On child care, the government will spend $20-million over five years on a new Federal Secretariat on Early Learning and Child Care for policy analysis and $70-million over five years for Indigenous participation in developing a Canada-wide child-care system. The government said it would provide a plan for affordable, accessible, inclusive and high-quality child care in the 2021 budget.
Quebec can show us all the way on child care, Ms. Freeland said. I say this both as a working mother, and as a Minister of Finance: Canada will not be truly competitive until all Canadian women have access to the affordable childcare we need to support our participation in our countrys workforce.
The total estimated price tag of all policy measures related to COVID-19, including spending and loans, is now $490.7-billion, up from an estimated $403.3-billion in the July fiscal snapshot.
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The government has not released a federal budget since March, 2019, months before the Liberals were reduced to minority status in the fall 2019 election.
Missing from Ms. Freelands speech was any mention of the Liberal promise to establish a national pharmacare program. And the economic statement did not announce new spending for the initiative.
Heading into the economic update, the provinces and territories called for permanent increases to the Canada Health Transfer. The Prime Minister has pledged to meet with the premiers in December to discuss their request, but no changes to the funding formula were announced in Mondays update.
The government did signal support, however, for another provincial request, which is to reform the Fiscal Stabilization Program. The transfer kicks in when a province experiences a sudden drop in revenue due to economic factors. The government said Monday that this change will lead to billions in additional provincial support next year.
The federal government has come under intense scrutiny for its vaccine plan, which, compared to Canadas peer countries, has fewer details on the timing of the rollout and how Canadians will get their jabs. The fiscal document underscored spending on vaccines and medical research, noting that $1.1-billion has already been spent and another $13.1-billion will be spent this year and next year. Every Canadian can be confident that a safe and effective vaccine will be available to them and their family, free of charge, Ms. Freeland told the House of Commons. Safe, effective and plentiful vaccines are on the way.
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Finance Minister Chrystia Freeland announced the new figures Monday in a wide-ranging fall economic statement that is essentially a mini-budget, complete with billions in new spending and targeted tax measure
