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Seven things Canada could do with an ambitious federal budget in 2023

We’re not expecting many bells and whistles in this federal budget. It doesn’t need to be that way.

The 2023 federal budget is probably going to be unremarkable—a stay-the-course budget that doesn’t introduce many new ideas. It comes in the context of the Liberal-NDP supply-confidence agreement having achieved most—though not all—of its major goals.

In this context, all signs point to the federal government using this year’s budget to highlight past initiatives, rather than starting many new ones.

It doesn’t need to be this way. An ambitious federal government could use this year’s budget to implement historic new measures that dramatically improve Canadians’ lives—and they could do it now. Here are a few measures that the federal government would have the power to do, if it had the will.

1) Expand child care availability across the country

The national child care plan—one of the Liberals’ signature policies, which has been in the works since even before the Liberal-NDP deal—has been very effective at reducing fees for child care. Some provinces and territories—particularly Yukon and Manitoba—are dropping fees significantly faster than they are required to. It has been a pretty resounding success on that front.

But there’s a problem—lower fees without more spaces means longer wait lists. Those wait lists were already too long before the $10-a-day plan, and they’re getting a lot longer. What we need is a rapid expansion of the system. That means we need capital to build the spaces, funding to staff them, and dramatically improved wages and working conditions for early childhood educators to combat poor pay and long hours that drive workers out of the sector.

The federal government was ambitious on affordability—it’s time they got ambitious on availability too. —David Macdonald

2) A transition fund for fossil fuel communities

The latest report from the Intergovernmental Panel on Climate Change reiterates the gravity of the climate crisis and the inadequacy of current climate policies. To have any chance of limiting global warming to 2°C above pre-industrial levels, we must make “rapid, deep and in most cases immediate greenhouse gas emission reductions” across all sectors of the economy, the report warns. For Canada, that means an aggressive wind-down of oil and gas extraction—the biggest source of emissions in the country.

Spending What it Takes, a recent co-publication from the CCPA and Climate Action Network - Reseau action climat Canada (CAN-Rac), shows how a $287 billion public investment program could move Canada in the right direction. One of the key items in the plan is a new $15 billion per year economic diversification fund to help fossil fuel-dependent communities transition to greener industries. If the federal government is serious about its climate plan, it will include a measure like this. We aren’t expecting it to be included.

Canadian history is rife with examples of mismanaged resource busts. A reckoning is coming for the oil and gas sector, but we will have learned nothing from the past if we do not give those workers and communities other options to turn to before it’s too late. Scaling up publicly-owned green industries while we phase out fossil fuels will ease the transition and set every region of the country up for long-term prosperity. —Hadrian Mertins-Kirkwood

3) A disability benefit

A government bill aiming to lift Canadians with disabilities out of poverty is working its way through the Senate after MPs voted unanimously to pass it in early February. The new Canada Disability Benefit can’t come soon enough for more than one million people with disabilities living in poverty, forced to make daily decisions as to whether to fill prescriptions, pay their utility bills, or use precious energy to take public transit to the local food bank.

Such a benefit has the potential of lifting people with disabilities out of poverty while redirecting billions in provincial funding to provide much-needed community support services. The CCPA’s Alternative Federal Budget proposes a benefit that would provide $11,040 a year until recipients make up to $15,000 a year in earnings, phasing out at $37,000 in individual employment income. We would couple that with automatic tax filing and benefits enrollment to make sure that all who are eligible quickly receive support.

Ensuring that people with disabilities live a life of dignity and financial security is perfectly possible. What’s needed now is a heightened sense of urgency to move promises into transformative action. —Katherine Scott

4) Expand the excess profits tax beyond just banks and insurance companies

    All that extra money you’re paying due to inflation is going somewhere. About half of every “inflation dollar” spent is ending up as profit in just four industries: Oil/gas/mining, manufacturing (which includes oil refining), real estate, and banking.

    Last year, the federal government put a corporate surtax on banking and insurance companies because it determined they’d been profiting from the pandemic and inflation. The federal government could expand that excess profits tax into other pandemic and inflation profiteers, and use it to redistribute some of the cost of inflation.

    More than anyone else, the oil and gas industry is really laughing all the way to the bank due to inflation. With skyrocketing energy costs, their profits have never been higher. Maybe it's time to take a page from last year’s budget and charge all of corporate Canada a little more on their inflation profits, with oil and gas at the front of the line. —David Macdonald

    5) Targeted student debt elimination

      Student debt has expanded over three decades to become a leading financial challenge for Canadians. Around half of graduates today are saddled with average debts of $27,000 to $30,000—with women and students from low- and middle-income families more likely to have more debt.

      The federal government already writes off approximately $180-$200 million of federal student debt every year, out of $22.3 billion total (2020). The federal government, students, and society more generally are already paying for the impact of student debt.

      Targeted student debt forgiveness would be actually surprisingly affordable. The Parliamentary Budget Officer priced the NDP's plan for cancelling up to $20,000 in debt for low- to moderate-income households at $3.95 billion over five years, compared to $2.7 billion over five years just to eliminate interest on federal loans for everyone—which mostly benefits middle-high income households.

      The federal government is uniquely positioned to make an impact with progressive debt relief policies—not to mention reversing institutional underfunding and the downloading of costs onto students and their families while addressing the reliance on (cheaper) precarious labour and contract work—but it requires political will. —Erika Shaker, Ryan Romard

      6) Decarbonize Canadian trade, regionalize production

        With half of the value of Canadian exports coming from high-emission products like oil, SUVs and meat, Canadian trade is a carbon bomb. Transitioning from this toxic economic model to something more sustainable should be our top priority. Care economy expansion, smart electrification of transportation with an emphasis on public transit, and a rapid shift to renewables are all part of that. But highly subsidized “green” industrial strategies in the U.S. and Europe have the potential to drain investment from Canada’s “clean” technology sector, forcing Canada’s hand.

        As markets dry up for high-carbon Canadian exports, the government has a role to play to incentivize new production models, including for “clean” goods and services, in all parts of Canada. For example, the federal government should beef up the $3 billion public transit fund and accelerate transfers. Local sourcing and hiring requirements on funded urban transit projects, or electricity grid upgrades in the 2023 budget, are allowed under Canada’s WTO procurement obligations. Environmental criteria that incidentally favour lower-carbon Canadian construction materials—i.e., sustainable procurement policies of the kind the government introduced federally in February—are also allowed under Canada’s trade obligations.

        But Canada also needs to diffuse trade-related hurdles to a just transition. In March, a U.S. company hit Canada with a monster $20-billion USD NAFTA lawsuit for not getting a permit to build a LNG facility on the St. Lawrence Seaway. Investor-state dispute settlement (ISDS), a feature in dozens of Canadian trade and investment treaties, is chilling climate action globally. The federal government should invest $1 million in a new Global Affairs Canada action group tasked with renegotiating or terminating trade and investment treaties containing ISDS, as the Australian government recently announced it would. —Stuart Trew

        7) New funding for non-market housing

        Launched in 2017 amid much political fanfare, the National Housing Strategy (NHS) has become an unfulfilled promise. Detailed analysis by CCPA’s Senior Economist Marc Lee showed the NHS delivered very little affordable housing. “If anything, the NHS is supporting the ongoing financialization of Canada’s housing stock by emphasizing low-interest loans to private developers building market rental housing,” Lee argued.

        When inflation started to rise, and the Bank of Canada increased interest rates, the NHS offered no protection to tenants except for a confusing, one-time $500 housing benefit to very low-income tenants.

        Non-market housing providers were also left to fend for themselves. In a recent release, the Canadian Housing and Renewal Association (CHRA) stated that amid increasing costs and decreasing federal funding, “it has become much more difficult, and in some cases impossible, to create affordable community housing using National Housing Strategy programs.”

        Tweaks won’t cut it. The federal government must change its approach. Instead of providing ever more incentives to the private sector, expecting the market to fix the problems it brings about, the NHS must be about creating non-market housing through construction and acquisitions. The federal government must elbow ahead on behalf of those providing truly affordable housing. This federal budget could be a new start. —Ricardo Tranjan

        Budgets are a time for ambition

        If the federal government really wants to tackle the cost of living crisis—along with the climate crisis, the housing crisis, and all of the overlapping crises in Canada right now—then its leaders need to be ambitious. We aren’t expecting this budget to accomplish that, but budgets are among the most powerful tools that governments have to envision solutions to society’s problems.

        What would it mean for a federal government to actually be ambitious? Unfortunately, we don’t know for sure. But if anyone is looking for ideas, they’re welcome to look at the Alternative Federal Budget—a document that the CCPA puts together every year.

        The ideas are out there. We know what needs to be done. What we’re lacking isn’t ideas or capacity—it’s political will. —Jon Milton

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