Freeland tables her fourth federal budget — this time with a tight focus on housing
Finance Minister Chrystia Freeland will table her fourth federal budget today, laying out the government’s plan to spend billions of dollars on housing to improve supply — a plan the Liberals also hope will boost their prospects with a crucial group of voters.
Unlike past budgets, which mostly saved their announcements for budget day itself, this one has been publicized piecemeal. Freeland, Prime Minister Justin Trudeau, Housing Minister Sean Fraser and other cabinet ministers have been touring the country for weeks, releasing details of key budget measures.
It’s part of a plan to pitch voters on key new programs that otherwise might have been buried in today’s news coverage of a budget document that’s expected to be physically bigger than in years’ past.
Freeland will table the budget around 4 p.m. ET. CBCNews.ca will carry her remarks in the House of Commons live.
Ottawa has announced roughly $38 billion in new financial commitments — including $17 billion in loan-based programs — before the budget’s release.
How the federal government intends to pay for all that new spending isn’t clear yet. Sources have told Radio-Canada that the budget will impose a tax increase on the richest taxpayers — one that senior Liberal sources say will affect less than 1 per cent of Canadians.
Some of the planned new spending is earmarked for future fiscal years — a manoeuvre that will give Ottawa some fiscal breathing room.
The economy is also marginally stronger than Ottawa initially projected, which could mean higher revenue to offset some of the planned new spending.
Polls continue to suggest the government is polling underwater with house-hunting voters — particularly those in the millennial and Generation Z cohorts.
In response, Freeland has freed up money to send more cash to municipalities through the housing accelerator fund, build more homes on underused public lands, cut cheques for new water and solid waste infrastructure in growing communities, offer tens of billions of dollars in loans to spur new rental construction and secondary suites, and help non-profits acquire existing rental homes and keep them affordable.
The government’s 28-page housing plan, unveiled last week, promises to maintain the already well-subscribed tax-free savings account, extend mortgage amortization terms and increase the RRSP withdrawal limit for some first-home buyers, among other measures.
It’s a dizzying array of new commitments meant to blunt the attacks of critics like Conservative Leader Pierre Poilievre, who has made housing the centrepiece of his policy playbook.
Speaking to the Canadian Chamber of Commerce on Monday, Trudeau said millennials and members of Generation Z, the people who now make up a majority of the country’s workforce, need a hand up as they grapple with “a cost of living crisis.”
“This is a resilient group but … they now feel like middle class stability is out of reach,” he said. “We need to meet this moment. Our country cannot succeed unless young people succeed.”
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Deputy Prime Minister Chrystia Freeland announced new measures on Thursday aimed at lessening the financial strain on first-time homebuyers, including 30-year amortization rates on insured mortgages for newly built homes.
Freeland also has announced a $500-million fund for youth mental health, $2.4 billion for artificial intelligence, $8.1 billion in new defence spending and $1 billion to expand school lunch programs.
“We recognize that there is an urgent need today to invest in Canada and Canadians, and we recognize in particular that we’re at really a pivotal moment for young Canadians, for millennials, for Gen Z,” Freeland said last week.
It’s a longstanding Canadian tradition for the finance minister to purchase a new pair of shoes before budget day.
On Monday, Freeland chose a pair of black pumps from Maguire, a Montreal-based firm owned by millennial women — a nod to the people the government is hoping to reach with its latest spending plan.
While the budget is expected to boost spending, Freeland has said it won’t increase the $40 billion deficit forecast last year. Today, the public will learn what the government’s projected deficit and debt levels are and how it plans to keep the country on a sustainable fiscal track.
The Trudeau government has run a deficit every year since it was elected.
It posted even bigger deficits during the COVID-19 pandemic as it scrambled to shore up an economy on the ropes during an unprecedented global health crisis.
On the Liberal government’s watch, the national debt has more than doubled to $1.2 trillion.
Now, with interest rates at a 20-year high, the cost to carry that debt has spiked from $20.3 billion in 2020-21 to $46.5 billion, according to Freeland’s fall economic statement.
That’s nearly double the amount Ottawa spends on the military. And debt service charges can be expected to march even higher in the years ahead.
Political watchers say Ottawa has no choice but to raise taxes in the upcoming federal budget to offset billions of dollars of new spending, but who will be getting the increase remains to be seen.
As economic growth stagnates and high inflation adds to the government’s spending pressures, Ottawa faces some tough choices.
Freeland’s preferred fiscal “guardrail” has changed over the years.
In the fall economic statement, Freeland said Ottawa would keep the deficit at about one per cent of gross domestic product (GDP) — essentially one per cent of the size of the national economy — and lower the debt-to-GDP ratio.
Tuesday’s document will reveal if Ottawa has kept that promise. The government’s decision to cut or “reprofile” some spending — with estimated savings of about $2.25 billion a year — has helped, but there may be more to do.
Canada flirting with a rating downgrade, RBC warns
In a recent report, RBC Royal Bank warned that Canada faces a possible ratings agency downgrade — which would be a bad development for the government and everyone else who borrows money in this country.
Canada is one of the select few countries with a AAA credit rating on its sovereign debt.
RBC said “Canada is at a greater risk of a downgrade than other top-rated peers” as Ottawa piles on more spending to tackle the housing crisis.
“Even though deeper deficits and higher associated sovereign borrowing costs may feel like a distant problem for many Canadians, the impact has the potential to trickle down to most households and businesses,” economist Rachel Battaglia said in the RBC report.
Experts are expecting the government to increase taxes.
Freeland last week ruled out a middle-class tax hike — but this government’s definition of “middle class” has never been clear.
“I’m pretty confident they will raise revenues because they’ve squeezed themselves on their fiscal situation and they continue to commit to spending that is not sustainable,” said Robert Asselin, senior vice president of policy at the Business Council of Canada and an adviser to Bill Morneau when he was finance minister.
Budget expected to target wealthy Canadians
Many experts have been predicting tax measures targeting wealthy Canadians or large corporations, or both.
“The problem for [the government] is either a surtax on big corporations or a wealth tax sounds very good, but in practice they’re terrible. They don’t work,” said Asselin.
“Let’s be honest. They have to raise taxes. I don’t think that’s a big secret. But can they do it in a thoughtful, provocative way?” said James Thorne, chief capital market strategist for Wellington Altus Private Wealth.
“If you do it on the high-income people, they’re just going to move their money offshore.”
Speaking to reporters on Parliament Hill Monday, NDP Leader Jagmeet Singh said he expects the government — his party’s partner in the confidence-and-supply agreement — to “take on corporate greed.”
“The wealthy should pay,” he said, adding that big business should also shoulder the burden.
“We do not want to see any pressure put on working people. We don’t want tax increases on working class people. We want to see big corporations start paying their fair share.”
At a conference in Ottawa last week, Poilievre — who has mocked Trudeau and his government as “not worth the cost” — said his party will fight tooth and nail against any tax increases.
“We believe that a dollar in the hands of a person who earned it is always more powerful than in the hands of a politician who taxed it,” he said.
