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2017 FEDERAL BUDGET

Federal budget highlights: 10 things you need to know

From deficit and defence to an Uber tax, Laura Stone and Gloria Galloway explain the key points from the Liberals’ second budget under Justin Trudeau


Graphics reporting by Matt Lundy and Tom Cardoso


Finance Minister Bill Morneau and Prime Minister Justin Trudeau leave the Prime Minister’s office holding copies of the federal budget in Ottawa on March 22, 2017.


The Liberals’ second budget builds on the work of the government’s first fiscal plan, with a wide range of targeted and often relatively small measures.

Finance Minister Bill Morneau says his aim was to put Canadians to work, and to make Canada more innovative and more globally competitive.

It’s also a budget that’s infused with initiatives that appeal to Liberal interests, such as the more than $3-billion targeted toward Indigenous people and a massive investment in child care, and which the government says has been filtered through its own gender-analysis to ensure the lives of men and women are made more equal.

But it’s also a fiscal plan to spread out much of its spending over the long term, with some of its promises extending 11 years into the future.

Below are some of the highlights.

More reading:

Budget ‘business as usual,’ says TD’s chief economist




1. Budget balance and debt

The budget still doesn’t include any plans to balance the books.

The deficit projection for 2016-17 is $23-billion, rising to $28.5-billion by 2017-18 and down to $18.8-billion by 2021-22. But the budget shows the bottom line is sensitive to economic-growth projections.


The federal debt-to-GDP ratio is projected to be 30.3 per cent by 2021-22. The more positive outlook projects the budgetary balance to improve by $5.8-billion a year, resulting in a debt-to-GDP ratio of 28.4 per cent by 2021-22.

The more pessimistic projections believe the balance will worsen by $6.2-billion per year, on average, and the federal debt-to-GDP ratio would be two percentage points higher by 2021-22.

Federal debt-to-GDP ratio projections

under various economic growth scenarios

33%

Projected

Weaker

growth

scenario

32

31

Average

growth

scenario

30

29

Stronger

growth

scenario

28

FY

‘15

‘16

‘17

‘18

‘19

‘20

‘21

THE GLOBE AND MAIL, SOURCE: BUDGET 2017

Federal debt-to-GDP ratio projections under

various economic growth scenarios

33%

Projected

Weaker

growth

scenario

32

31

Average

growth

scenario

30

29

Stronger

growth

scenario

28

FY ‘15

‘16

‘17

‘18

‘19

‘20

‘21

THE GLOBE AND MAIL, SOURCE: BUDGET 2017

Federal debt-to-GDP ratio projections under various

economic growth scenarios

33%

Projected

Weaker

growth

scenario

32

31

Average

growth

scenario

30

29

Stronger

growth

scenario

28

FY 2015

2016

2017

2018

2019

2020

2021

THE GLOBE AND MAIL, SOURCE: BUDGET 2017

Federal budget deficit projections under

various economic growth scenarios

In billions of dollars

$0

Projected

Stronger

growth

scenario

-5

-10

Average

growth

scenario

-15

-20

Weaker

growth

scenario

-25

-30

FY

‘15

‘16

‘17

‘18

‘19

‘20

‘21

THE GLOBE AND MAIL, SOURCE: BUDGET 2017

Federal budget deficit projections under various

economic growth scenarios

In billions of dollars

$0

Projected

Stronger

growth

scenario

-5

-10

Average

growth

scenario

-15

-20

Weaker

growth

scenario

-25

-30

FY ‘15

‘16

‘17

‘18

‘19

‘20

‘21

THE GLOBE AND MAIL, SOURCE: BUDGET 2017

Federal budget deficit projections under various economic growth scenarios

In billions of dollars

$0

Projected

Stronger

growth

scenario

-5

-10

Average

growth

scenario

-15

-20

Weaker

growth

scenario

-25

-30

FY 2015

2016

2017

2018

2019

2020

2021

THE GLOBE AND MAIL, SOURCE: BUDGET 2017

During the 2015 federal election campaign, the Liberals repeatedly promised they would run deficits no greater than $10-billion a year, and would balance the budget by 2019, in time for the next election.

Asked when his government plans on balancing the books, Mr. Morneau said: “Our plan is to continue to be responsible every step along the way. That’s what you’re seeing here. You’re seeing that we’ll be able to show a decline in net debt to GDP, which is what we focused on as a fiscal anchor and will continue to take that approach moving forward.”

More reading:

(Return to top)




2. Skills training

Canadian population, in millions

Age 65 and older

14 and younger

12

Projected

10

8

6

4

2

0

‘95

‘00

‘05

‘10

‘15

‘20

‘25

‘30

Labour force participation rate

Actual

Trend

70%

Projected

68

66

64

62

60

58

‘76

‘85

‘95

‘05

‘15

‘25

‘35

‘45

THE GLOBE AND MAIL, SOURCE: BUDGET 2017

Canadian population, in millions

Age 65 and older

14 and younger

12

Projected

10

8

6

4

2

0

1995

‘00

‘05

‘10

‘15

‘20

‘25

‘30

Labour force participation rate

Actual

Trend

70%

Projected

68

66

64

62

60

58

1976

‘85

‘95

‘05

‘15

‘25

‘35

‘45

THE GLOBE AND MAIL, SOURCE: BUDGET 2017

Canadian population, in millions

Labour force participation rate

Age 65 and older

14 and younger

Actual

Trend

12

70%

Projected

Projected

10

68

8

66

6

64

4

62

60

2

58

0

‘95

‘00

‘05

‘10

‘15

‘20

‘25

‘30

‘76

‘85

‘95

‘05

‘15

‘25

‘35

‘45

THE GLOBE AND MAIL, SOURCES: BUDGET 2017

Due to demographic challenges in the labour market, skills training initiatives were expected to play a key part in Wednesday’s budget. Employment insurance premiums are going up in 2018, raising approximately $1.4-billion over five years to partly offset some of the government’s skills-training promises and expanding EI benefits so they’re more flexible for parents and caregivers. Premiums will rise from $1.63 to $1.68 per $100 by next year.


More reading:

Opinion: John Ibbitson: Liberal budget touts innovation, but really offers nothing

(Return to top)



3. Gender statement

One of the most striking aspects of Budget 2017 is a 26-page statement on gender equality and a discussion of the ways in which the government has run its policies, and its spending commitments, through a gender-based analysis.

To reduce inequity, the government says it is proposing key investments in areas where gender imbalances persist. They include enhancements to student financial assistance and training that the government says will disproportionately benefit women, $7-billion over 11 years for early learning and child care, $11.2-billion over 11 years for a national housing strategy, more flexible benefits for family caregivers, more supports for Indigenous women, and $101-million over five years to support a national strategy to address gender-based violence.


Women in the work force: A snapshot of where Canada is right now




More reading:

(Return to top)




4. Indigenous peoples

Indigenous communities, which were big winners in the Trudeau government’s first budget, have been promised an additional $3.4-billion over the next five years as the Liberals continue their efforts to improve the socio-economic conditions of Canada’s first peoples.

Funding for indigenous communities

In billions

0

2

4

6

8

10

12

14

$16

Federal spending

on programs for

First Nations, Inuit

and Métis people

Fiscal

year

2015

27%

increase

Federal spending

on programs for

First Nations, Inuit

and Métis people

FY

2021

Previously planned

funding increases

Budget

2016

Budget

2017

THE GLOBE AND MAIL, SOURCE: BUDGET 2017

Funding for indigenous communities

In billions

0

2

4

6

8

10

12

14

$16

Federal spending

on programs for

First Nations, Inuit

and Métis people

Fiscal

year

2015

27%

increase

Federal spending

on programs for

First Nations, Inuit

and Métis people

FY

2021

Previously planned

funding increases

Budget

2016

Budget

2017

THE GLOBE AND MAIL, SOURCE: BUDGET 2017

Funding for indigenous communities

In billions

0

2

4

6

8

10

12

14

$16

Federal spending

on programs for

First Nations, Inuit

and Métis people

Fiscal

year

2015

27%

increase

Federal spending

on programs for

First Nations, Inuit

and Métis people

FY

2021

Budget

2017

Previously planned

funding increases

Budget

2016

THE GLOBE AND MAIL, SOURCE: BUDGET 2017

Most of the new money is directed at infrastructure and health.

The budget allocates $300-million over the next 11 years to build housing in the northern territories. And there is $225-million over the same time frame to provide affordable housing for Indigenous people who do not live on reserve.

On health, the government is promising to spend $828.2-million over the next five years to improve medical outcomes of the First Nations and the Inuit.

That money will be used to expand health resources on reserves, where children sometimes die of treatable illnesses and where supports such as palliative care are often non-existent, and to decrease the gap in life expectancy for Indigenous people, which is currently years below the average for other Canadians.


In addition, there is new money for child care, postsecondary education, employment initiatives, language and culture preservation, alternative sentencing, rehabilitation of Indigenous offenders, environmental fisheries (which get another $250-million over five years), help for urban aboriginals, land-claims settlement, and meeting the oversight recommendations of the Truth and Reconciliation Commission.

More reading:

(Return to top)




5. Defence

Despite calls from the United States for Canada to increase its contributions to international military efforts, there is no increase in defence spending in the 2017 budget. In fact, the Department of National Defence is reallocating $8.48-billion that it expected to spend on capital projects, such as planes, ships, trucks and large infrastructure, before 2036 to future years when it will be used to purchase fixed-wing search-and-rescue aircraft and new light-armoured vehicles.

(Return to top)




6. Veterans

The budget reiterates the promise, with no dollars attached, that the government will allow injured veterans the option of receiving a disability award through a lifetime pension rather than through a lump-sum payment. The details will be released this year.

In more concrete commitments, it goes some distance toward making life easier for the families of those who have been wounded in service. Most importantly, it offers $187.3-million over six years to create a Caregiver Recognition Benefit, which will provide veterans’ caregivers, including spouses or other family members, with $1,000 tax-free per month.

The government will eliminate the one-year time window in which spouses of veterans who are permanently injured, or who have been killed while on duty, must decide whether they will apply for vocational rehabilitation. There is an additional $147-million over six years to expand Military Family Resource Centres. And there are new funds for veterans and family well-being, and emergencies.

The budget also commits $17.5-million over four years to create a new Centre of Excellence on Post-Traumatic Stress Disorder and related mental-health conditions.

More reading:

(Return to top)




7. Housing

Teranet House Price index

for six major cities

260

Index, 2005 = 100

Vancouver

240

220

Toronto

200

180

160

140

120

100

Composite 6

index

80

2006

2008

2010

2012

2014

‘16

THE GLOBE AND MAIL, SOURCE: TERANET

Teranet House Price index for six major cities

Index, 2005 = 100

260

Vancouver

240

220

Toronto

200

180

160

140

120

100

Composite 6

index

80

2006

2008

2010

2012

2014

2016

THE GLOBE AND MAIL, SOURCE: TERANET

Teranet House Price index for six major cities

260

Index, 2005 = 100

Vancouver

240

220

Toronto

200

180

160

140

120

100

Composite 6

index

80

2006

2008

2010

2012

2014

2016

THE GLOBE AND MAIL, SOURCE: TERANET

Soaring home prices in some of Canada’s biggest cities have prompted calls for further government intervention. The budget promises to give Statistics Canada almost $40-million over five years, and $6.6-million per year after that, to develop and implement a Housing Statistics Framework. The nationwide database of all properties in Canada would provide up-to-date information on purchases and sales, including the degree of foreign ownership, and information about demographics and financing. Statistics Canada is expected to start publishing initial data in the fall of this year.

More reading:

(Return to top)




8. An Uber tax

Starting July 1, commercial ride-sharing services from Web applications will be subject to the same taxes as taxis. All taxi operators are required to register for GST/HST and charge tax on their fares. The budget says it will amend the definition of a taxi business to require ride-sharing services to register for GST/HST and charge tax on their fares in the same way taxis do.

(Return to top)




9. Opioid treatment

The budget also proposes listing naloxone, a drug used to treat fentanyl overdoses, to the list of GST/HST-free non-prescription drugs that are used to treat life-threatening conditions. The drug, and its salts, is already tax-free when prescribed, but since March 22, 2016, Health Canada removed the requirement for a prescription when the drug is used for emergency situations outside of a hospital.


More reading:

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10. No changes to capital gains

The business community is sure to be relieved there are no tax increases in the budget, including on capital gains. The tax would have applied to the earnings from investments such as stocks or real estate, potentially costing businesspeople or entrepreneurs millions of dollars. But tobacco and alcohol are in the crosshairs: The budget proposes to adjust tobacco excise duty rates to bring in $55-million next year alone, and to increase excise duty rates on alcohol by 2 per cent, for revenue of up to $160-million by 2021-22.

More reading:

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THE GLOBE’S VIEW



CANADA’S ECONOMY IN THE TRUMP ERA: MORE FROM THE GLOBE


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