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2018 federal budget highlights: 12 things you need to know

FEDERAL BUDGET 2018

Federal budget highlights: Twelve things you need to know

From gender equality and parental leave, to research funding and small business tax reform, here are the key items in the federal budget

Current budget breakdown

Direct program

expenses

Public debt

charges

127.6

24.1

EXPENSES

$311.3-billion

Major

transfers to

other levels

of government

Major

transfers

to persons

90.9

68.7

Income tax

193.0

REVENUES

$293.5-billion

Other

revenues

Excise

taxes/duties

27.1

E.I. Premiums

51.3

22.1

DEFICIT: $17.8-billion

THE GLOBE AND MAIL, SOURCE: BUDGET 2018

Current budget breakdown

Direct program

expenses

Public debt

charges

127.6

24.1

EXPENSES

$311.3-billion

Major

transfers

to persons

Major

transfers to

other levels

of government

90.9

68.7

Income tax

193.0

REVENUES

$293.5-billion

Excise

taxes/duties

51.3

Other

revenues

E.I. Premiums

27.1

22.1

DEFICIT: $17.8-billion

THE GLOBE AND MAIL, SOURCE: BUDGET 2018

Current budget breakdown

Direct program

expenses

Income tax

Public debt

charges

193.0

127.6

24.1

REVENUES

EXPENSES

$311.3-billion

$293.5-billion

E.I.

Premiums

Major

transfers to

other levels

of government

Excise

taxes/

duties

Major

transfers

to persons

22.1

Other

revenues

27.1

51.3

90.9

68.7

DEFICIT: $17.8-billion

THE GLOBE AND MAIL, SOURCE: BUDGET 2018

In the federal Liberals' first budget, in 2016, the word "gender" appeared twice. This time around, "gender" was used 358 times.

As expected, gender equality was a major theme of the 2018 federal budget, such that "every single decision on expenditure and tax measures was informed" by a gender-based analysis, according to the government.

To that end, the budget included new measures aimed at encouraging greater participation of women in the work force, along with a "use-it-or-lose-it" program to encourage more men to take paid parental leave.

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The budget included a host of other proposals, including final details on taxing passive investment income, a pharmacare advisory council and bulked-up funding for research.

Here are 12 things you need to know about the budget.


1. Budget balance

Federal budget balances, by fiscal year

In billions of dollars

$5

Proj.

0

Liberal

platform,

2015

-5

Budget 2018

(current proj.)

-10

Budget

2016

-15

-20

Budget

2017

-25

-30

-35

‘14

FY ‘10

‘12

‘16

‘18

‘20

‘22

Federal budget balances, by fiscal year

In billions of dollars

$5

Proj.

0

Liberal

platform, 2015

-5

Budget 2018

(current proj.)

-10

Budget

2016

-15

-20

Budget

2017

-25

-30

-35

‘14

FY ‘10

‘12

‘16

‘18

‘20

‘22

Federal budget balances, by fiscal year

In billions of dollars

$5

Liberal Party

platform, 2015

Projections

0

-5

Budget 2018

(current proj.)

-10

Budget

2016

-15

Budget

2017

-20

-25

-30

-35

2014

FY 2010

2012

2016

2018

2020

2022

This year's budget is mostly in line with previous estimates from Finance Canada that, for the foreseeable future, the federal government will be running a deficit. Budget 2018 revises the government's deficit projections downward by an average of $167-million each year compared with the fall update. At this point, the closest Ottawa will come to a balanced budget will be in fiscal year 2022, with a $12.3-billion deficit. Finance Minister Bill Morneau has repeatedly emphasized in past budgets that the government considers the federal debt-to-GDP ratio just as important as the overall balance. That measure is projected to continue to decrease, from 30.4 per cent in 2017-18 to 28.4 per cent by 2022-23.

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2. Gender equality

Impact of women’s participation in the

work force on real GDP per capita

$60,000

55,000

Diff.

33%

50,000

45,000

Actual real

GDP per capita

40,000

35,000

Real GDP per capita

without higher female

employment inclusion

30,000

1976

1983

1990

1997

2004

2011

THE GLOBE AND MAIL, SOURCE: BUDGET 2018

Impact of women’s participation in the

work force on real GDP per capita

$60,000

55,000

Diff.

33%

50,000

45,000

Actual real

GDP per capita

40,000

Real GDP per capita

without higher female

employment inclusion

35,000

30,000

1976

1983

1990

1997

2004

2011

THE GLOBE AND MAIL, SOURCE: BUDGET 2018

Impact of women’s participation in the work force on real GDP per capita

$60,000

55,000

Difference

33%

50,000

45,000

Actual real

GDP per capita

40,000

Real GDP per capita

without higher female

employment inclusion

35,000

30,000

1976

1983

1990

1997

2004

2011

THE GLOBE AND MAIL, SOURCE: BUDGET 2018

The budget proposes pay-equity legislation for employees in the federal government and federal-regulated sectors but fails to put a dollar amount on that plan. The legislation, which will draw on models from Ontario and Quebec, will ensure that men and women receive the same pay for equal work. The government says it will continue to consult with employers, unions and other stakeholders over the coming months as it works to develop the pay-equity legislation, which will be included in the budget bill. Preliminary estimates suggest the legislation could reduce the gender-wage gap by about 2.7 cents on the dollar for the federal government and 2.6 cents for the federal private sector, according to the budget.

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3. Parental leave

The government is proposing $1.2-billion over five years to create a new five-week "use-it-or-lose-it" incentive for new fathers to take parental leave. The Employment Insurance Parental Sharing Benefit would increase EI parental leave to a maximum of 40 weeks in cases where the second parent agrees to take at least five weeks off. The benefit covers 55 per cent of the second parent's income for as much as 12 months.

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In cases where families have opted for the extended parental leave of 18 months, the second parent would be able to take as much as eight weeks of additional parental leave, paid out at 33 per cent of their income.

The benefit would also be offered to adoptive and same-sex couples and will be made available starting in June, 2019.

It is meant to encourage parents to share the responsibilities of raising a child and to provide greater flexibility for mothers so they can return to the work force sooner.

The budget also proposes $90-million over three years to ensure that claimants continue to receive timely and accurate benefit payments, plus another $127.7-million over the same period to improve EI call-centre accessibility.

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4. Indigenous issues

The government is proposing to invest $447-million over five years to create a new Indigenous Skills and Employment Training Program. The program, which will replace the Aboriginal Skills and Employment Training Strategy, will help close the employment and pay gap between Indigenous and non-Indigenous people by focusing on training for higher-quality, better-paying jobs.

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The budget also proposes more than $1.4-billion over six years for First Nations child and family services. Indigenous children under the age of 14 comprise 7.7 per cent of all children in Canada but represent more than half of all children in foster care. The money will help alleviate pressures on child and family services agencies and increase prevention resources in First Nations communities so families can stay together.

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5. Canada Workers Benefit

Ottawa wants to increase the take-home pay of low-income workers through a revamped tax credit. The budget unveiled the Canada Workers Benefit, which takes effect in 2019 and is essentially a "more generous" and "more accessible" version of the Working Income Tax Benefit, according to the government. The proposal calls for maximum benefits to increase, as well as raising the income level at which the benefit is phased out. A single parent or couple earning $25,000 a year could receive as much as $717 more from the program in 2019 than in 2018.

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6. Pharmacare

Eric Hoskins, who resigned his position as Ontario's health minister Monday, will chair an advisory council tasked with performing an economic assessment and running consultations on the feasibility of a national pharmacare program.

National pharmacare could represent significant savings for both patients and the government. A 2016 Parliamentary Budget Office analysis estimated that of the $28.5-billion spent on prescription drugs in 2015, $24.6-billion would be eligible for coverage under a national pharmacare program and that a true national prescription drug program would cost $20.2-billion. In other words, national pharmacare could represent a savings of roughly $4.2-billion annually, in large part because governments would have a stronger position in price negotiations.

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7. Small business tax reform

How passive income will affect

private corporations

$600,000

500,000

400,000

Income eligible to

be taxed at small

business rate

300,000

200,000

100,000

0

0

25

50

75

100

125

$150

Investment income,

in thousands of dollars

THE GLOBE AND MAIL, SOURCE: BUDGET 2018

How passive income will affect

private corporations

$600,000

500,000

400,000

Income eligible to be taxed

at small business rate

300,000

200,000

100,000

0

0

25

50

75

100

125

$150

Investment income, in thousands of dollars

THE GLOBE AND MAIL, SOURCE: BUDGET 2018

How passive income will affect private corporations

$600,000

500,000

400,000

Income eligible to be taxed

at small business rate

300,000

200,000

100,000

0

0

25

50

75

100

125

$150

Investment income, in thousands of dollars

THE GLOBE AND MAIL, SOURCE: BUDGET 2018

The budget unveiled new details on the taxation of passive investment income inside private corporations.

When companies earn between $50,000 and $150,00 in a given year from passive investments, a reduced amount of their active business income will be eligible for the small business tax rate, which will be 9 per cent in 2019. (The upper limit for business income that can be taxed at the small business rate is $500,000.) The reduction will occur on a straight-line basis, with eligible income decreasing by $5 for every $1 of passive income above the $50,000 threshold.

Companies exceeding $150,000 in passive income will no longer be eligible for the small business tax rate. Those with passive income under $50,000 will not be affected, as was mentioned in a revised proposal.

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8. Research and innovation

In total, the budget commits $3.8-billion more over the next five years to support science. A large share of this will be aimed at stepping up funding in physical and life sciences, social sciences and health for fundamental research at universities and other institutions. By 2023, scientists will have roughly half a billion more for fundamental research than they do today. That's a far cry from the $1.3-billion increase that an independent review of Canada's fundamental science ecosystem recommended last year, but it's enough for the government to claim that it has just made its largest increase to fundamental science ever – about 25 per cent.

More than $600-million of the new science funding will be directed toward beefing up the government's own laboratories and bringing together federal scientific activities across departments. Significantly, it includes a reimagined role and partial return to high-risk, far-reaching research bets for the National Research Council, an agency previously seen as needing a new direction.

As for innovation, the Liberals have slashed the number of business innovation funding programs but increased overall funding, including $700-million in new funding for the Industrial Research Assistance Program over the next five years. They've also increased funding for female entrepreneurs, committed $85.3-million to the intellectual property strategy laid out in last year's budget and set aside $572.5-million to give researchers "open and equitable access" to advanced computing and big data resources, a field in which Canada is a world leader.

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9. Cybersecurity

The 2018 budget has allocated $508-million, spread out until 2022-23. The funds will be used primarily by the Communications Security Establishment to create a new Canadian Centre for Cyber Security, as well as a National Cybercrime Coordination Unit for the RCMP. In the weeks leading up to the budget, news reports suggested the government could invest as much as $1-billion in cybersecurity resources and infrastructure. Wesley Wark, a professor at the University of Ottawa and an expert in cybersecurity, said he expects "they'll spend a lot more than they're suggesting" in the budget. "It's just a first shot in what will have to be a longer term and more expensive effort" as Canada shifts its national security priorities from terrorism to cyber aggression. Cyberattacks have become increasingly common as state espionage and warfare moves online, and the Canadian government has been targeted for cyberattacks several times. Since 2011, the Treasury Board, the Department of Finance and Defence Research and Development Canada have all been hit by attacks originating from Chinese internet addresses. Observers say Canada's cybersecurity strategy was due for a refresh after having last been updated in 2010.


10. Phoenix pay system

The federal government announced in the budget that it will eventually move away from its problem-plagued Phoenix pay system - which has overpaid, underpaid or completely failed to pay tens of thousands of public servants - and invest $16-million over two years to develop a new pay system.

In the meantime, Ottawa is planning to continue to invest in Phoenix for years to come. The budget proposes the government invest $431.4-million over six years to deal with ongoing issues. The money will help hire more staff at the Phoenix pay centre in Miramichi, N.B., and satellite offices across Canada, as well as additional payroll support staff in government departments.


11. G7 summit funding

Canada is planning to spend $594-million on its 2018 presidency of the G7 and the corresponding leaders' summit it will host in Charlevoix, Que., this June, according to the budget. The funding will also cover security and logistics for other high-profile G7 ministerial meetings across Canada throughout 2018.


12. Journalism

As expected, the government will explore ways for news outlets to benefit from non-profit status. It also proposed providing $50-million over five years to one or more non-governmental organizations supporting local journalism "in underserved communities." The funding is far less than what some groups had wanted. News Media Canada, an association representing more than 800 outlets across the country, has called for a journalism fund with $350-million of annual funding.

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Miscellaneous items

  • The budget proposes $81.4-million over five years to create a redress system for Canadians whose names falsely match those on the no-fly list. Parents of children unfairly targeted by the no-fly list have been advocating for a redress system for more than two years. They are hoping the system will give wrongly flagged Canadians a redress number so they no longer face delays and discrimination at airports.
  • The budget proposed funding to replace VIA Rail’s cars and locomotives for use in the Windsor-Quebec City corridor, though amounts were not released due to “an upcoming procurement.”
  • With legalization of cannabis set for late summer, Ottawa is spending another $62.5-million on public education campaigns on the dangers of drug use and $10-million on research, including assessing the impact of legalization on mental health. The new funding for public education – on top of a previously announced investment of $46-million – will target communities at risk and Indigenous organizations.
  • The budget included vague details on improving federal election leaders’ debates. The government claims “the way leaders’ debates have been negotiated have put at risk the structure and potential usefulness of leaders’ debates.” As such, it proposed providing $6-million over two years, repeated every election cycle, to “support a new process that would ensure that federal leaders’ debates are organized in the public interest.” The budget also floated the possibility of legislation on this matter.
  • The government is spending $191-million over five years to help to defray the cost of NAFTA and WTO legal challenges related to the ongoing softwood lumber dispute.

More reading:


With reports from Ivan Semeniuk, Barrie McKenna and Sean Silcoff


FEDERAL BUDGET 2018: OPINION AND ANALYSIS


CANADA'S ECONOMY: MORE FROM THE GLOBE AND MAIL

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