Finance Minister Chrystia Freeland will unveil the 2023 federal budget on March 28.
What can we expect? Ms. Freeland has said the budget will focus on green technology, health care and new spending aimed at easing cost-of-living concerns. The budget will also outline plans to save about $7-billion over five years through cuts to reduced outsourcing and federal travel, according to a senior government source.
“Taken together, inflation and higher interest rates are really challenging for a lot of people,” Ms. Freeland said at a prebudget event. “That means that one of my government’s principal responsibilities, and one of my principal responsibilities, is not to pour fuel on the flames of inflation. So fiscal responsibility is really important.”
Here’s everything we know ahead of Tuesday’s announcement.
When will the 2023 federal budget be announced?
Finance Minister Chrystia Freeland will deliver the 2023 federal budget in the House of Commons on March 28 at 4 p.m. ET.
What will the federal budget cover?
Clean energy technology
According to a senior government official, the budget will announce a clean manufacturing tax credit worth more than $3-billion over five years. Companies will be able to use the 30-per-cent tax credit to offset the cost of equipment for mining and processing critical minerals, which are in high demand as the global economy seeks to expand the use of renewable energy and electric vehicles.
In a prebudget event, Ms. Freeland said the federal government will “invest aggressively” in clean technology to ensure Canadian industry can compete with U.S. programs and tax breaks aimed at reducing carbon emissions. Introduced last year, the lucrative U.S. subsidies sparked widespread concern among industry associations and business groups that the spending package would leave Canadian companies at a deep disadvantage as they try to compete for capital.
According to government sources, the budget is also expected to include new spending commitments to help modernize and expand the capacity of Canada’s power grids, which is critical to meet future clean-electricity demand. This investing could come in the form of tax credits, grants and financing mechanisms.
Ms. Freeland has said the budget will account for the federal government’s recently announced 10-year plan to increase health transfers to the provinces and territories. In February, Ottawa announced $46.2-billion in new health care funding, with just under half of the money going toward baseline funding and the remainder earmarked for bilateral deals with individual provinces and territories.
In response to higher costs of living, the budget is expected to include billions in increased spending in areas such as dental care and direct support for low-income Canadians. The budget is also expected to to include an extension of the six-month increase to the GST rebate, which is a quarterly direct payment for lower-income Canadians. The doubling of the GST credit took effect in November and is set to expire in May.
Opinion: If Ottawa got real about coming fiscal challenges, a GST hike would be part of the conversation
Savings on outsourcing
According to a senior government official, the budget will announce plans to save about $7-billion over five years through reducing outsourcing and related areas, with a particular focus on using fewer management consultant firms such as McKinsey & Co. Reports by The Globe and Mail highlighted how federal spending in this area has spiked under the Liberals, from $8.4-billion in 2015-16 to an estimated $21.4-billion this current fiscal year.
The budget is also expected to announce that the government will move ahead with reforms to the alternative minimum tax, which has been in place since 1986. The tax is designed to ensure that high-income earners who claim significant tax breaks still pay a minimum level of tax. In their 2021 campaign platform, the Liberals proposed a 15-per cent minimum tax on taxpayers in the highest tax bracket, in addition to the current AMT.
Other potential items to look for in the budget:
Consumer fees: The budget is expected to include plans to work with regulatory agencies to combat hidden or unexpected consumer fees. Often referred to as “junk fees,” they can include those tacked on to the initial price of a product or service that hide, and inflate, the total cost.
Enhanced benefits and credits: Personal finance and tax columnist Tim Cestnick said he expects an increase in some benefits and tax credits, such as the Canada Worker’s Benefit, Old Age Security and Guaranteed Income Supplement benefits, climate action incentive and the Canada Housing Benefit.
NDP dental plan expansion: Mr. Singh, the NDP Leader, told The Globe last week that his party will be expecting to see cost-of-living support in the budget, including a previously promised expansion of a dental-care program for lower-income Canadians. Mr. Singh, however, said his expectations for national pharmacare aren’t turning out as he’d hoped – and will likely not be a part of the March 28 budget.
What is the projected federal budget deficit for 2023?
The Parliamentary Budget Officer’s economic and fiscal outlook report projects that the deficit for the current fiscal year will be $36.5-billion – down from $90.2-billion the previous year. The PBO projects the deficit will then rise to $43.1-billion in the fiscal year that begins April 1, before declining steadily in future years.
However the PBO’s figures show the federal government will still have a deficit of $8.7-billion in 2027-28. Ms. Freeland’s fall economic update had projected a $4.5-billion surplus that year, though it also said it could be an $8.3-billion deficit under a “downside scenario” of weaker economic growth.
What will inflation and high interest rates mean for the federal budget?
Ms. Freeland has acknowledged that a slowing economy could leave the federal government with less tax revenue to spend, and emphasized the importance of being fiscally prudent.
Economists expect the economy to stall or even slip into a minor recession in 2023 because of the lagging impact of the Bank of Canada’s efforts to cool inflation with a series of interest-rate hikes over the past year.
What’s the feeling from business leaders?
Economists and business groups have cautioned that Canada can’t compete dollar-for-dollar with the billions in subsidies now on offer south of the border. A Congressional Budget Office report estimated that the measures in the Inflation Reduction Act add up to about US$400-billion over 10 years.
Business Council of Canada CEO Goldy Hyder told The Globe and Mail that Canada’s response should be about one-tenth of the size of the U.S. package, given that Canada’s population is about one-tenth that of the U.S.
Economists also warn that the budget should be careful not to fuel inflation.
“The fiscal situation is very tight right now,” said Conference Board of Canada chief economist Pedro Antunes. “We essentially have overspent through the pandemic. We have a higher debt load. We have interest rates coming up. We have, already, a bunch of commitments. I think we need to keep that in mind. And certainly we don’t want to spend more when inflation is on a tear.”
More reading from The Globe’s editorial board:
Child care: Ottawa must follow through on subsidized system
Health care: Provinces need more tax room, not blank cheques
Defence: Canada’s indefensible military spending
With reports from Bill Curry, Adam Radwanski and Tim Cestnick