Housing a priority, but deficit balloons in federal budget

Finance Minister Chrystia Freeland’s second pandemic budget turned Canada’s fiscal focus to making life more affordable for people and giving a long-needed boost to Canadian productivity.

But Freeland wrapped Thursday’s budget in copious amounts of yellow caution tape, warning of extreme economic uncertainty posed by Russia’s invasion of Ukraine and the lingering effects of COVID-19.

She made clear the budget is winding down pandemic-related spending that headlined the last two years, and shifting to social economic drivers like housing, immigration and child care.

That should help the Liberals pass the budget easily given their new deal with the New Democrats, with multiple NDP priorities such as dental care, green jobs and a tax on excess bank profits making the cut.

Freeland warned heavily about the security threat posed by Russia’s aggression in Europe, responding with more than $8 billion in new defence spending and up to $1 billion more in new loans for Ukraine.

While the injection of new military spending will be welcome, most of the money isn’t earmarked to be spent until later years and the budget doesn’t say what the majority will be spent on.

Federal spending falls to $452 billion in the new fiscal year, which includes more than $31 billion in new spending over the next five years.

It’s targeted at speeding the flow of goods through the country’s supply chains, boosting housing supply and jolting businesses out of an anemic period of investment.

But the deficit balloons to $52.8 billion, above earlier estimates of $44.1 billion, the lowest since the pandemic started but nowhere near pre-pandemic levels.

Health

The government put forward a spending plan to launch dental care for low- and middle-income families in 2022, which is a key element of the Liberals’ confidence and supply agreement with the NDP to prevent an election until 2025.

The plan is to begin with children under 12 in 2022 at an initial cost of $300 million, with an expected annual cost of $1.7 billion once the program is fully implemented.

There was little in the way of new funding for Canada’s struggling health-care systems overall.

Health transfers to the provinces will increase by nearly five per cent this year, but only because the economic outlook is sunnier than expected.

As previously announced, the government also plans to send provinces $2 billion to help them work through the massive surgical backlogs that mounted over the course of the pandemic.

Housing

In the hopes of easing the housing crisis, the budget includes more than $10 billion in funding meant to speed up home construction and repairs.

The commitments are part of a raft of promises that also include a two-year ban on foreign investors buying homes and tax measures meant to reduce speculation.

Increasing housing supply is the clear focus of the spending commitments, which include $4 billion for municipalities as part of a housing accelerator fund, $1.5 billion for affordable housing and $4.3 billion for Indigenous housing.

Energy

Ottawa has unveiled a tax credit worth $2.6 billion over five years to help Canada’s energy sector invest in carbon capture and storage technology.

The technology traps greenhouse gas emissions from industrial sources and stores them deep in the ground to prevent them from being released into the atmosphere.

There are only a handful of carbon capture projects currently up and running in Canada, one being SaskPower’s Boundary Dam project.

Companies will be able to claim a tax credit of up to 60 per cent for eligible projects, starting in 2022.

Indigenous affairs

Expectations were high and the Assembly of First Nations alone had asked to see $44 billion in the budget to address current housing needs, which include issues around repairs and overcrowding.

The 2022 spending plan released Thursday gives $4 billion, including $652 million this fiscal year, to Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs to speed up work on the issue, including $2.4 billion for on-reserve housing.

The budget also fulfils a Liberal campaign pledge to put $300 million over five years toward building an urban, rural and northern Indigenous housing strategy.

The government is also preparing to spend about $210 million more over five years on helping communities contend with the harmful past of residential schools, including searching for unmarked graves and making sure the federal government hands over related documents.

New investment

The measures unveiled in the 2022 federal budget would see $15 billion over five years put into a fund designed to alleviate risks for private companies to make it more palatable to spend on research and technology.

The cash for what the Liberals call the “Canada Growth Fund” will come through existing dollars baked into the government’s fiscal framework.

The fund and a sister agency to help commercialize new discoveries add to the handful of arm’s-length agencies the Liberals have created over the years, which experts say have a mixed track record.

Saskatchewan premier reacts

In an emailed statement, Premier Scott Moe said the budget didn’t create incentives to stimulate the economy to pay for the federal government’s programs.

It also didn’t meet Saskatchewan’s expectations, notably in the energy sector.

“While it appears federal NDP and Liberal priorities have been addressed, this budget misses the mark for provincial priorities when it comes to the Canada Health Transfer and initiatives for the energy sector, like enhanced oil recovery and a concrete plan for carbon capture utilization and storage,” Moe wrote.

“The Trudeau government had an opportunity to make a clear commitment to North American energy independence, but of course, that’s something we will never see in an NDP-Liberal budget.”

— With files from The Canadian Press