Finance Minister Bill Morneau tabled the Liberal Government’s 2018-19 Budget in the House of Commons, the third of Prime Minister Justin Trudeau’s four-year mandate. Budget 2018 seeks to reassure Canadians that the Liberals remain firmly committed to improving outcomes for Canada’s “middle class” – the party’s signature claim since taking office in 2015.
The Trudeau Government has long argued that the critical element informing their government’s overall economic agenda is “inclusive growth.” The Liberals contend that economic growth must be complimented through measures and policy initiatives that ensure middle-class Canadians reap the benefits.
In today’s budget, the government has gone beyond their stated priority of helping the “middle class”: they have clearly stipulated that women must be at the forefront of this inclusive growth agenda so they can more easily contribute toward and benefit from the Canadian economy.
To this end, the government has proposed in Budget 2018:
- New legislated proactive pay equity regime in federally regulated sectors;
- $3 million over five years, starting in 2018–19, to implement pay transparency;
- $1.2 billion towards a new EI Parental Sharing Benefit including “use it or lose it” parental benefits, when both parents agree to share parental leave;
- An additional $86 million to expand Canada’s Strategy to Address Gender-Based Violence; and,
- New legislation to make gender budgeting a permanent part of the federal budget-making process.
Other major initiatives from this budget include:
- The creation of an Advisory Council towards the implementation of National Pharmacare Plan;
- The introduction of the Canada Worker’s Benefit to take effect in 2019. This is an expansion of the existing Working Income Tax Benefit which supplements low-income worker earnings;
- $1.7 billion towards Canadian researchers through granting councils and research institutes;
- Funding towards a new National Cyber Security Strategy;
- As part of Finance Canada’s ongoing tax planning reforms, Budget 2018 introduces an additional eligibility mechanism for the small business deduction, based on passive investment income;
- $2 billion towards the creation of a new Indigenous Skills and Employment Training Program;
- $500 million from the federal government towards a new $1 billion Nature Fund aimed at meeting United Nations' targets on protecting more of Canada's lands, inland waters and oceans.
Today’s budget stands apart from the previous two budgets of the Liberal mandate, in that there is targeted focus on areas like gender equality with comparatively less funding for broad-based social programming. That said, the priorities of the government have been firmly entrenched in past budgets, and today is no exception.
Creating incentives and instituting policies for long-term “inclusive growth,” has been a key rationale for this government with budget 2016 and 2017: the expansion of the Canadian Pension Plan (CPP2), the introduction of a monthly child tax benefit (Canada Child Benefit), reducing the income tax rate for “middle class Canadians”, increasing the Guaranteed Income Supplement for Canada’s retirees, and, expanding the Working Income Tax Benefit.
With today’s commitment to explore national program options to cover the cost of prescription drugs, and policies to increase female participation in the workplace, paired with regulations aimed at more equitable parenting, it is clear that the government is dedicated to implementing structural changes and offering benefits that they believe will spur long-term economic growth. It is to be determined, however, how these measures can insulate the Canadian economy in anticipation of major demographic shifts, technological disruptions and uncertainty from the ongoing negotiation of the North American Free Trade Agreement.
- Total new spending over the next year comes in at $5.4 billion, of $338.5 billion in overall planned spending.
- The federal government is projecting an $18.1 billion deficit in 2018-19, dropping to $17.5 billion in 2019-20.
- Canada’s debt-to-GDP ratio is projected to fall from 30.4 per cent in 2017-18 to 30.1 per cent in 2018-19.
- The GDP growth rate is projected to slow from 3.0 per cent in 2017, to 2.2 per cent in 2018, bottoming out at 1.6 per cent in 2019.
- Budget 2018 includes a $3 billion adjustment for risk in 2018-19 and following years.
In Budget 2018, every single decision on expenditure and tax measures was informed by GBA+, the government’s Gender Based Analysis introduced in Budget 2017. Placing woman and gender equity at the forefront is not a one-off for this government. Since 2015, and the appointment of the first gender-balanced federal cabinet in Canadian history, the Trudeau Government has introduced a series of policies and key initiatives aimed at improving gender equality both domestically and internationally: instituting a Gender Based Analysis across the federal public service, announcing Canada’s Feminist International Assistance Policy, and pledging funding for increased childcare spaces for the provinces). These measures illustrate the Liberals commitment to gender-equality; today’s budget solidifies the Trudeau Government as champions for the cause.
The Trudeau Government has also made a critical policy – and political – decision today in the context of Budget 2018: to tackle the thorny issue of a national pharmacare program. To this end, Ontario Health Minister Eric Hoskins left his post yesterday to serve as the federal “czar” on the issue, and will be charged with developing a pan-Canadian approach in advance of the 2019 election. The Hoskins move brings yet another former Queen’s Park appointee into the federal fold. He also arrives with a tangible result under his belt, having led Ontario’s push for their new youth-targeted pharma program. The move is also seemingly designed to steal some political thunder from the federal NDP given the prominence new leader Jagmeet Singh has given to the issue. It also signals what will undoubtedly be a new plank in the Liberals’ 2019 election platform.
While a budget is, of course, an outline of the government’s fiscal plans for the year ahead, it is also widely considered first and foremost to be a ‘political’ document. Further, Budget 2018 helps to set the political stage for what will be their final political blueprint and pre-election platform – Budget 2019– before facing the voters later that Fall.
Budget 2018’s focus on increased worker productivity as opposed to big spending and investment is markedly different from the first two Trudeau budgets. Budget 2018 demonstrates a rare showing of fiscal restraint for the Liberal Government: while Budgets 2016 and 2017 committed billions in infrastructure and innovation, total new spending for 2018-19 comes in at $5.4 billion, but with $338.5 billion in overall planned spending.
While the Liberals have long abandoned their promise of balancing the budget before the end of their four-year mandate, Finance Minister Morneau has firmly committed to a healthy debt-to-GDP ratio. Certainly, an increased focus on encouraging productivity vs. financial investment better serves this fiscal commitment. The Liberals understand that as the 2019 federal election draws closer, so too will the calls of a mismanaged economy from the Conservative Opposition – failing to decrease the country’s debt-to-GDP ratio will only buttress these calls. From a tax perspective for private corporations, specifically on holding passive investments, Finance Canada is continuing with its controversial “tax fairness” proposals but now in a revised, more targeted, and simpler manner.
Looking ahead to the election late next year, it is clear at this point in Justin Trudeau’s mandate that the Liberal Government has decided it is not going to go after “blue Liberals” or “red Tories” – voters closer to the centre of the Canadian political spectrum. Instead, with a focus on gender equity, environment, indigenous Canadians and pharmacare, the government is signaling great comfort in focusing on “left of centre” voters heading into next year’s election. The Liberals are seemingly doubling down on the issues which brought them to power in 2015.
While the Liberals are surging ahead with their progressive agenda for this year and into next year’s election, the opposition parties have yet to clearly define their plan to usurp the still very popular Trudeau Liberals.
In 2017, Canada’s Conservative Party elected Andrew Scheer to lead the official opposition, and the NDP voted in Jagmeet Singh as its leader. Although Singh and Scheer are not new to the political arena (Scheer was the former Speaker in the House of Commons; Singh was previously a MPP in Ontario) both are relatively unknown to Canadians. As the 2019 federal election draws closer, the first challenge for the opposition parties is to get their leaders better known across the country. So far, both leaders have been relatively reactionary and piecemeal in their policy proposals. The exception being a recent announcement from Singh, and his party’s commitment to a universal pharmacare plan. With the tabling of today’s budget, the Trudeau Liberals have eclipsed this issue to make it their own.
- The last six months have been, politically speaking, very difficult months for the Finance Minister. It will be interesting to watch if his third budget is another step to political redemption.
- Today’s Budget also represents an opportunity in the short term for the Government to quickly change the channel on the fall-out from the recent trip to India and what most political observers agree to be one of the worst trade missions in recent memory.
- The government did not set aside any sort of NAFTA “contingency fund” in Budget 2018.