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A hit-and-miss budget: Canada’s 2023 federal budget moves on climate and dental—but avoids almost everything else

Investments in a clean economy, dental care, and a GST top-up stole the show; many other needed investments have gone missing.

March 28, 2023

5-minute read

Today’s federal budget puts a handful of policies in the spotlight but leaves many crucial issues out in the cold.

The budget includes $56 billion in new corporate tax breaks for investments in the clean economy. It also substantially expands the federal dental care program while incorporating new health care spending announced in February.

While money in these areas is much needed, the budget drops the ball on support for underfunded public transit systems, affordable housing, pharmacare and high inflation.

“When it comes to health care, the piece of this budget with the most teeth is dental care,” says David Macdonald, a senior economist at the Canadian Centre for Policy Alternatives.

“Dental care funding got another huge boost—it’s becoming a major new part of medicare in Canada. It seems like the federal government decided that it had to choose between dental care or pharmacare, but not both—and dental care came out the winner.

“Progress has been rapid on dental, in contrast to pharmacare, which is moving at a snail’s pace.”

The 2023 budget is the first since the United States passed the Inflation Reduction Act in summer 2022, which injected nearly US$400 billion into the transition to a green economy. President Joe Biden visited Canada a week before the budget and Canada has been under pressure to respond to that legislation to remain competitive in a growing clean economy.

Finance Minister Chrystia Freeland promised a response to the Inflation Reduction Act in this federal budget. She delivered $56 billion in new tax breaks—part of an $80 billion incentive package—for private investment in the clean economy.

“The Inflation Reduction Act was a wake up call for Canadian policy-makers who have dragged their feet on green industrial policy for too long. We need a state-led industrial plan to cut our emissions, to create good, green jobs across the country, and to remain competitive in a changing global economy,” says Hadrian Mertins-Kirkwood, a senior researcher at the Canadian Centre for Policy Alternatives.

“While $80 billion is serious money that will help drive the transition to a lower-carbon economy, the federal government is handing the keys for climate action to the private sector,” says Mertins-Kirkwood. “At a moment when bold public leadership is necessary, the federal government is taking the back seat.”

One major omission in the budget, Mertins-Kirkwood says, is transit funding. Public transit systems in cities and towns across the country are in a funding crisis—and municipalities have been begging the federal government for help. This budget provides zero dollars to top up public transit systems.

“Without additional funding, public transit systems will have to either increase fares or cut service,” Mertins-Kirkwood says. “It’s a downward spiral—worse service leads to less riders, which leads to less funding, which leads to worse service and less riders. The only way to stop it is by stepping in with funding.”

"The federal government is handing the keys for climate action to the private sector.”—Hadrian Mertins-Kirkwood

Katherine Scott, a senior researcher at the CCPA, was disappointed that Budget 2023 was almost wholly silent on gender-based violence. “The crisis in violence has only intensified since 2020. A fully resourced National Action Plan on Gender-Based Violence that facilitates the actions of all governments is crucial.”

“While the budget provides additional funding support for the Women’s Program, and identifies important investments targeting violence against Indigenous women, girls and 2SLGBTQQIA+ people, this isn’t a substitute for properly resourcing a comprehensive, intersectional National Action Plan.”

Scott says that the pandemic provided a number of clear examples that targeted, gender-sensitive programming can reduce inequality and gender disparities.

“The reduction in poverty we achieved in 2020 was historic. The imperative now is to apply these lessons to ensure that the people who bore the brunt of the pandemic aren’t left behind again. The government doesn’t seem to be on the same page.”

For Stuart Trew, director of the Trade and Investment Research Project (TIRP), this year’s budget showed Canada borrowing from the Biden administration’s “worker-focused” trade agenda in the area of public procurement—but not fully embracing it.

“The federal government should find ways to incentivize domestic sourcing of materials and labour, and hiring from underrepresented groups, through social and environmental criteria in federal transfers for provincial infrastructure projects. It is good to see in this budget that the government will be considering preferences for Canadian-owned small business in public contracts. Wherever possible under Canadian trade deals, like for urban transit and highways, we should be attaching ‘Buy Canadian’ conditions on that money, too,” says Trew.

“On the flipside, I have concerns about a promise in the budget to enhance interprovincial trade through mutual recognition of standards and regulations across provinces. If we want to smooth out differences in provincial health, safety and consumer protection rules, then there are more democratic ways to do that. I’m worried the government intends to use a sledgehammer approach that would undermine our public protections.”

"The federal government could have used this budget as a tool to fix the EI system. It hasn’t."—David Macdonald

The pandemic also led to many lessons in how to organize financial support programs in general.

“The whole reason we had CERB was because the EI system broke under the strain of the pandemic,” says David Macdonald. “CERB showed what it would look like if we actually fixed EI by making it easy to access for all workers. That also includes freelancers, gig workers, and all the other workers who the EI system excludes.

“Following a year-long review, the federal government could have used this budget as a tool to fix the EI system,” he says. “It hasn’t—it’s decided to take the lessons of the pandemic and ignore them.”

Canada’s health care system is on the brink; the federal budget is a powerful tool to right the ship. Unfortunately, Macdonald says, this year’s federal budget did not make any additional investments beyond the commitments the federal government made in February, when it increased health transfer funding to the provinces. Those agreements will likely cap new health care investments this year and for several years to come.

“Canadians are justifiably concerned about holes in their health care system. The nursing shortage is illustrating how frayed this safety net has become,” Macdonald says.

“The federal government ponied up substantial new funds for the provinces. Unfortunately, almost half of that new money is untied—which means that although the label says ‘health care’, it's a free-for-all on how the provinces actually spend the money. Manitoba and Quebec have already started giving that money out as tax cuts for the rich rather than spend it on health care.”

Another missing piece of today’s budget: long-term care.

“One of the big missing pieces and hold-overs from the pandemic is a rethink of our long-term care systems in Canada. The development of national standards for long term care have been finalized, but it isn’t clear that funds already committed will be enough to implement those standards. Nor is it at all clear that the provinces would lose funding either if they don’t match those new standards. ” Macdonald says.

The new budget also fails to address acute and growing housing insecurity, says ​Ricardo Tranjan, political economist at the CCPA—in this realm, he says, the government fails to deliver anything significant.

Tranjan points out that the new tax-free saving mechanism will help some first-time homebuyers—at the risk of fueling overcharged demand that drives prices up. The Financial Consumer Agency of Canada does important work, he says, but its new guidelines for mortgage renewal is day-to-day business, not a budget announcement.

“While the Co-Investment Fund is a good place to inject funds, the hope, at this time of great need, was for considerable new investment, and not simply a reallocation from the repairs stream,” Tranjan says. “The $4 billion for a Urban, Rural, and Northern Indigenous Housing Strategy is the most prominent announcement, though the funding is over seven years, and does not start until 2024-25.”

By far the biggest disappointment concerns financialization, Tranjan says. Instead of regulation to protect tenant families, the government commits to "review whether the government needs to rebalance the housing market in favour of Canadians looking for a home to live in."

“We all know the answer already,” Tranjan says. “This stalling tactic illustrates the government’s unwillingness to confront the profiteering behind much of the housing insecurity we see in Canada today.

“If this government was serious about housing affordability, it would rein in rental markets and directly finance the construction and acquisition of large amounts of non-market housing. This budget doesn’t do that. It continues to tinker around the edges of the problem without actually addressing it head-on.”

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