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Federal Budget 2022: What we're watching for

This budget could herald the beginning of a Pearsonian period of progressive policy making

April 6, 2022

6-minute read

Although it seems like a long, long time since the federal election last fall, Thursday’s federal budget will be the first budget this re-elected government will table—and it’s certainly the first budget under the new Liberal-NDP agreement to sustain minority government until 2025.

There isn’t wide expectation that this budget will contain many surprises. We can expect the budget to contain promises laid out in the Liberal election platform, with the inclusion of a few NDP policies from their platform, such as dental care.

Of course, we’ve proposed our own plans for this budget in our Alternative Federal Budget 2022 (AFB) so, where appropriate, we’ll also look at AFB details for context.

Health care

Dental care

The biggest item that will almost certainly be included on the health care front is for dental care. Of all the items in the Liberal-NDP agreement, this one was among the most specific. It would start by covering children under 12 years of age in 2022, then expand in 2023 to cover seniors and people with disabilities.

By 2025, all families with income under $70,000 will be fully covered under Canada’s new national dental care plan and those with income under $90,000 will be partially covered.

This closely matches the plan costed out by the Parliamentary Budget Office (PBO) two years ago. Given the short implementation period and that it’s a key NDP demand in the agreement, this is an item we’ll definitely see in this budget. There are plenty of details to be worked out with the provinces, since this is within their jurisdiction, but negotiations on the child care file shows it’s possible.

Pharmacare

Pharmacare played a prominent role in the NDP election platform and it’s another key demand in the Liberal-NDP agreement. However, the text in the agreement with the Liberals is more regulatory and doesn’t have to involve spending this year, but we’re still holding out hope. We’ve seen how important free COVID-19 vaccines have been during the pandemic and pharmacare has been studied to death. This should be a time for action. We’ll see.

Long-term care

The atrocious COVID-19 death rates in Canadian long-term care facilities were a wake-up call to public policy makers that dramatic, system-wide improvements are needed, stat. While the Liberal-NDP agreement didn’t specify new amounts to this end, both the Liberal and NDP platforms addressed this and so it’s almost certain there will new money for long-term care in this budget—although its form is uncertain.

The NDP’s platform thrust was to push for-profits out of long-term care (those for-profit operators saw big profits in 2020, despite the pandemic).

The CCPA’s Alternative Federal Budget (AFB) reiterated that what’s needed is national standards of care, with the federal and provincial governments coming together to fund it: here’s what this might look like for Ontario.

There will also likely be additional short-term health care transfers to the provinces related to COVID-19. General improvements in health care transfers were mentioned in the Liberal-NDP agreement, but targets weren’t specified. We calculated in the AFB that it would take roughly $20 billion more a year to have the federal government reach the 35% of total health care spending that the provinces are seeking. The federal government got close to that in 2020, with short-term COVID-19 transfers. In 2022, it may look more like a one-time $6 billion surgery backlog transfer—something that was already in the Liberal platform.

Taxation

There will almost certainly be an excess profits surtax on big corporations in this budget. Something along those lines appeared in the Liberal-NDP agreement and in both party platforms. Such a tax would certainly apply to Canada’s big banks and possibly to other sectors that are bringing in excess corporate profits, such as oil and gas. The amounts of excess profits for the banks is $16.1 billion and for oil and gas sector it’s $24.2 billion. Those excess profits are likely also playing a role in rapid inflation.

While very profitable companies will likely pay an excess profits tax, rich individuals who did well during this pandemic likely won’t . That would be a missed opportunity, in our opinion. In the AFB we proposed a new top personal income tax bracket, a wealth tax, and closing tax loopholes for the rich. That did show up in the NDP platform, but not in the Liberal-NDP agreement. There’s plenty of public appetite for these sorts of measures to address entrenched income inequality in Canada.

Employment Insurance

The wholesale replacement of Employment Insurance (EI) with the Canada Emergency Response Benefit (CERB) during the first part of the pandemic was an important reminder of how out of date our EI system is. Improving benefits for those who are eligible for benefits and extending the system to self-employed workers were key improvements implemented through CERB. Will the federal government take those lessons learned and build them into EI reforms?

For those who are already eligible for EI, it doesn’t seem like there will be much change in this budget, although we’ve got plenty of ideas in the AFB. We could create a floor on benefits (like $500 a week), pay higher replacement rates, continue benefits up to 50 weeks, or lower entrance requirements from 420 to 360 hours.

For self-employed workers, one major problem is that many companies should be paying into EI but they pretend their workers are independent contractors. This is relatively easily resolved through legislative changes, although there seems to be little political interest in making those changes. On the broader issue of including legitimately self-employed workers into EI, there will likely be money in this budget to do exactly that, starting in 2023—this was in the Liberal platform and consultations are going on right now.

Child care

Both the Liberals and the NDP seem fairly happy with the child care plan in last year’s budget (it was in both platforms). And they should be—it’s a good plan, although I suspect that negotiations with the provinces have highlighted the need to rapidly expand the number of child care spaces so that much lower fees don’t result in long wait lists. That’s something Quebec learned the hard way in the 1990s when it introduced $5-a-day child care. Look to this budget to spell out new federal infrastructure dollars that child care centres might use to do just that.

Housing

The cost of housing has gone up by another 30% since last year. These costs are a hot button issue and are one of the more important drivers of inflation in Canada. In many major markets, investors are now buying a quarter of all homes, crowding out first-time homebuyers who are priced out. We’re likely to see some minor new measures, like a house flipping tax. Oddly, the much stronger measures—like requiring substantially higher down payments from investors—seem to be off the table for now.

Affordable housing construction itself often plays second fiddle to home ownership and we may see that again in this budget. The Rapid Housing Initiative, which provided money to buy and convert hotels to affordable housing, was explicitly in the Liberal-NDP agreement and will likely be in this budget. However, a broader push to expand the National Housing Strategy by an additional $4 billion a year, as proposed in the AFB, likely won’t be included in this budget. However, such an investment could drive up the new unit goal from 250,000 to 350,000 new affordable housing units and that would start to make real progress on this front.

Climate Change

On climate, the budget is expected to deliver on the $9.1 billion in new investments that were laid out in last week's Emissions Reduction Plan. The biggest ticket items are $2.2 billion to renew the Low Carbon Economy Fund, which funds various climate action initiatives by the provinces and other institutions, and $1.7 billion to extend federal purchase incentives for zero-emission vehicles. Another $900 million is allocated for electric vehicle charging infrastructure.

The biggest omission will likely be details on the highly anticipated oil and gas sector emission cap. The policy, which was promised in the last election, would place a firm and declining limit on emissions from the production of fossil fuels, which currently account for more than a quarter of Canada's overall emissions. Unfortunately, the government announced last month that implementation of the cap will be pushed back until at least 2023 while it conducts more consultations, presumably with the fossil fuel industry.

Conclusion

The new federal government’s first budget in this mandate will set out key priorities for the coming years. With the agreement in place between the Liberals and the NDP, it will hopefully be a more transparent look toward the future than we normally get. The two-party agreement was designed to create sustainability; transparency is critical to that goal. There is also the possibility that the agreement could herald the beginning of a Pearsonian period of progressive policy making. This budget will provide important clues in that regard.

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