Finance Minister Chrystia Freeland said housing affordability, a “green transition” and jobs will be priorities as the government launched public consultations ahead of the 2022 federal budget.
Ms. Freeland made the announcement as the House of Commons resumed sitting after a six-week break. The consultations, which include an online questionnaire that allows Canadians to select their top three priorities from a list of policy options, will be open until Feb. 25.
“As we look to the years ahead, our focus must be on jobs and economic growth, priorities that will form the foundation of the budget,” she said.
The release of the 2022 budget will be a key moment for the government to reveal how it will transition federal fiscal policy away from the short-term focus on the COVID-19 pandemic – which included massive deficit spending to fund emergency support programs for workers and businesses – and toward a longer-term economic plan.
The date of this year’s budget has not yet been announced, however federal budgets are usually released in March or April. Ms. Freeland tabled her first budget as Finance Minister on April 19 of last year. This year’s launch of consultations is slightly later in the calendar year than in the past two years.
One of the main elements of the 2022 budget will be to provide details as to how the spending plan outlined in the Liberal Party’s 2021 campaign platform will be translated into government policy. That platform provided a budget-style costing breakdown outlining $78-billion in proposed new spending over five years, as well as about $25-billion in revenue from various tax hikes aimed at corporations and the wealthy.
That platform said this new spending can be accommodated while also reducing the federal debt-to-GDP ratio, though the Liberal document projected the ratio would only decline slightly, to 49.2 per cent from 51.2 per cent, over five years.
Ms. Freeland’s December fall economic and fiscal update projected the deficit for the current fiscal year would be $144.5-billion, down from $327.7-billion the previous year. The government projected the deficit for the 2022-23 fiscal year, which begins on April 1, would be $58.4-billion.
“We’re committed to reducing the federal debt-to-GDP ratio and to unwinding the COVID-19-related deficits,” Ms. Freeland said Monday.
Political platforms are written with the assumption of having the free hand of a majority government, yet voters elected a minority Parliament in roughly the same seat breakdown as had been the case before the election.
That means the Liberal budget will need to be written in a way that will secure the support of at least one other party, most likely the NDP or the Bloc Québécois.
At a news conference Monday, NDP Leader Jagmeet Singh said the government needs to increase support for health care systems, which he said have been “plunged to the brink” of collapse over the past two years.
“It is inexcusable that that is allowed to continue,” Mr. Singh said while pointing to “underfunding” at the federal level.
Prime Minister Justin Trudeau has promised to discuss increased health funding with provincial and territorial premiers, who have long called for an increase to the Canada Health Transfer, or CHT, sent by Ottawa to provinces and territories for health care costs. The transfer is worth $43.1-billion this year.
The premiers will be focused on this issue when they meet virtually for the Council of the Federation on Friday.
While new CHT funding is unlikely to be announced in the budget, Ms. Freeland will need to account for potential large new transfer commitments as part of Ottawa’s overall fiscal plan.
Mr. Singh said Monday that he has communicated clearly to Mr. Trudeau that an increase to the CHT cannot wait until after the pandemic. He said increasing the CHT is a top priority for the NDP. “We support the call for premiers to increase the health care transfers,” he said.
The government’s prebudget consultations are separate from the House of Commons finance committee’s prebudget consultations.
The committee began hearing from expert witnesses, including Parliamentary Budget Officer Yves Giroux. Conservative MPs asked Mr. Giroux whether deficit spending can contribute to inflation.
“If the additional spending is not to increase the productive capacity of the Canadian economy – so if it’s purely to stimulate demand – it does indeed create inflationary pressures,” Mr. Giroux told MPs. He also said the risks of deficit spending must be considered in relation to the strength of the economy over all.
“If the deficits are relatively small, they can still be sustainable if the economy keeps growing,” he said.
In reference to his office’s recent reports, Mr. Giroux told MPs that by the government’s own metrics – such as labour force data – the original case for “stimulus” spending to support the economy has weakened.
Ms. Freeland acknowledged concern over inflation Monday, but attributed it to a “global phenomenon.”
“Despite impressive economic resilience in many parts of the economy, we are mindful of elevated inflation and its impact on the cost of living for Canadians,” she said.
With a report from Kristy Kirkup in Ottawa
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