Rise in projected federal COVID-19 spending eases after exceeding $150-billion

Open this photo in gallery:

The sharp rise in projected federal spending due to COVID-19 took a pause over the past two weeks and is starting to level off at just above the $150-billion mark, according to the latest report from the federal Finance Department.

The biweekly report also shows the federal government now expects to spend about $3-billion less on its two main income support programs than it projected two weeks ago. That estimate is likely to change, however, as the government said it is still calculating the projected cost of the recent announcement to extend the duration of the federal wage subsidy by three months.

Total spending announcements to date now add up to $152.8-billion, which is slightly more than a billion dollars higher than the $151.7-billion total announced two weeks ago on May 13.

Prior reporting showed a much steeper rate of increase. The first such report on April 1 showed a total of $105-billion in spending announcements. That rose to $107-billion as of April 14, then $145-billion according to the April 29 report.

Prime Minister Justin Trudeau continues to hold near-daily news conferences in Ottawa, but they no longer feature as many large spending announcements as during the government’s initial response to the pandemic.

That doesn’t mean spending announcements are over, however. The federal government still faces a long list of demands, including from cities facing budget shortfalls and provinces looking for extra health funding. Economists and policy experts are also speculating about how Ottawa could stimulate the Canadian economy once all businesses are allowed to open.

Thursday’s report reveals new cost projections for the government’s two main income support programs: the Canada Emergency Response Benefit (CERB) and the Canada Emergency Wage Subsidy (CEWS). The latest report shows the CERB will cost more than the CEWS, reversing earlier projections.

Thursday’s report says the CERB is now expected to cost $60-billion and the wage subsidy will cost $45-billion, for a total of $105-billion. Two weeks ago, the department was projecting the CERB would cost $35-billion and the CEWS would cost $73-billion, for a total of $108-billion.

The CERB provides eligible individuals with $2,000 a month for up to four months. Applicants must reapply each month and attest that they are earning less than $1,000 a month because of a loss of income related to COVID-19. The wage subsidy provides up to $847 a week for as long as 12 weeks to workers through their qualifying employer.

Thursday’s report says that, as of May 25, 8.21 million applicants have received a total of more than $40-billion in payments through the CERB. That’s up from $30.5-billion in payments to 7.8-million applicants reported in the previous report two weeks ago. The government says $7.9-billion has been paid out to date through the wage benefit.

On May 15, Mr. Trudeau said the duration of the wage subsidy will be extended by three months until the end of August. Thursday’s report said the cost of this extension is “to be determined” based on consultations with employers.

The government’s pledge to report every other week to the House of Commons finance committee on its pandemic spending was part of an agreement with the opposition parties when Parliament was suspended for the first time in March.

The suspension of regular sittings was extended in April over the objections of Conservative MPs. A third extension – which suspends regular sittings until Sept. 21 – was approved by a House of Commons vote Tuesday over the objections of Conservative and Bloc Québécois MPs.

Tuesday’s motion includes a provision that the House will sit on June 17 to approve the government’s latest spending estimates after no more than four hours of debate.

Finance Minister Bill Morneau cancelled plans to release a 2020 budget in March and has repeatedly declined to provide a timeline for when a budget or fiscal update will be scheduled. A senior public servant in the Finance Department told a Senate committee earlier this month that officials were preparing a fiscal update, but said that no announcements have been made on the timing of when an update will be released.

Parliamentary Budget Officer Yves Giroux has said the new spending, coupled with lower tax revenue, means this year’s deficit could exceed $250-billion, up from the government’s prepandemic projection in December that it would be $28.1-billion.

Conservative MP Gérard Deltell told MPs Thursday during a committee meeting that the government must keep the deficit in mind.

“Almost every day for weeks, the Prime Minister has announced spending for Canadians. We support that. But it’s hundreds of billions of dollars without any idea of its impact on the deficit," Mr. Deltell said. "That’s why we are ringing the alarm and inviting the government to be prudent, because the Prime Minister needs to know that you can’t play Santa Claus every day. The January bills come hard and fast.”

Know what is happening in the halls of power with the day’s top political headlines and commentary as selected by Globe editors (subscribers only). Sign up today.