In just a few days, the curtain will rise, and the spotlight will shine on the 2024 federal budget. Against a backdrop of rising inflation and global uncertainty, Budget 2024 will need to perform a high-stakes tightrope walk—one that delicately balances competing priorities, unfulfilled promises, and fiscal constraints.
With its minority status and an opposition eager to exploit any missteps, the pressure for Trudeau’s government to deliver a budget that satisfies all stakeholders is immense.
The recent drip of Liberal announcements leading to budget day seems to be a defence strategy—gradually allowing for the government to unveil policies and initiatives while pre-emptively addressing concerns to gain much needed support. However, their efforts have been met with continued pressure from the Conservatives, specifically on the carbon tax. Conservatives (and several premiers) have been vocal in their opposition to the tax, emphasizing concerns around its impact on businesses and consumers.
This dynamic sets the stage for a contentious budget day, with tensions high between the two parties over fiscal and environmental policies—to name a few.
The Liberals are challenged to stand up new responses to Canadians’ priorities while maintaining its pact with the New Democratic Party (NDP) to extend the life of its minority mandate. This dynamic has required concessions to the NDP that have introduced new pressures on the government. The main concession bolstering this deal being the recent pharmacare legislative package. The second being the recently negotiated parliamentary motion on the Israel-Hamas war. Both concessions have not been without their trade-offs. The pharmacare proposal has raised the ire of the provinces while the Israel-Hamas motion resulted in internal divisions.
While concessions were necessary to secure the Liberal’s mandate, it underscores the delicate balance that the government must strike between advancing its own agenda while maintaining political stability.
With the impending budget top of mind, concessions could set a precedent for future negotiations, including those related to budgetary matters. Depending on public and political reactions to concessions, the government’s ability to secure support for its budgetary priorities may be impacted—further complicating efforts to achieve consensus in its fiscal plan.
Unmet promises and premiers’ dissent
Complicating matters is the legacy of unmet promises casting a shadow over Budget 2024.
Despite assurances of progress from the Liberal’s, critical initiatives—including defence and infrastructure investments—continue to suffer from inaction.
In Canada, a growing number of current and former defence officials—including Air Force Commander Lt. Gen. Eric Kenny—have issued warnings around the state of Canada’s military. From equipment shortages to personnel strains, these voices underscore the need for sustained investment in defence resourcing. With ongoing geopolitical conflict, international allies are also increasing pressure for Canada to deliver on its pledge to invest in defence.
Some media outlets have reported that the “sticker shock” over the cost of new submarines, drones, and tanks have paralyzed the government from moving forward with necessary defence procurement decisions. To date, the government has yet to clarify its plans around Canada’s readiness to address emerging security challenges.
We hate to be the bearers of bad news—but it’s unlikely that this promise will be addressed in Budget 2024.
There’s speculation that they may unveil the defence policy update during NATO’s 75th anniversary at the upcoming summit in July—however, only time will tell if this promise finally gets delivered.
In terms of infrastructure spending, the Liberal’s recently revealed $6 billion to create a new Canada Housing Infrastructure Fund—however, some of this funding may not be accessible if premiers don’t agree to prescribed conditions.
This may not bode well for premiers who expressed concerns around the allocation and distribution of infrastructure funds—calling for greater flexibility and autonomy in a recent open letter to government. Already, Ontario and Quebec have said they reject the fund as an intrusion on their jurisdiction, and some other provinces have expressed concerns. While it's safe to assume the federal government will successfully strike deals with the provinces, it’s clear that Ontario and Quebec won’t be first in line.
The premiers’ public dissent underscores the need for the government to effectively manage expectations and communicate its budgetary priorities to stakeholders. The call for increased infrastructure spending (promised in 2022) may now clash with competing demands for resources, such as deficit reduction efforts.
With provincial leaders speaking in unison, the government may face heightened expectations and scrutiny regarding the need for infrastructure spending in Budget 2024.
Finally, the Liberal’s signature investment in Budget 2023 was a package of Clean Energy and Technology Investment Tax Credits (ITCs). Despite positioning the ITCs as a necessary response to ensure Canada’s competitiveness in the wake of the U.S. Inflation Reduction Act, these measures have been left to languish in an ongoing consultative process.
Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland face unprecedented pressure to deliver tangible results in the face of mounting public skepticism, adding to the already daunting task of budgetary planning without fiscal room ahead of an election year.
Fiscal realities
Amidst the clamor for action and the weight of unmet promises, the government must contend with fiscal realities. The Parliamentary Budget Office’s (PBO) warning this spring of a narrow spending window underscores the need for prudent financial management and constraint. The PBO has cautioned that there is only $6-7 billion available before taxes need to be raised, the margin for error is slim.
In the face of PBO’s cautions, the Prime Minister and his cabinet have criss-crossed the country with a flurry of pre-budget announcements, amounting to billions in new spending. Meanwhile, ministers have evaded journalists’ questions around the possibility of new taxation measures.
As Budget 2024 approaches, and questions about the possibility of a recession continues to percolate, Canadians and corporations alike await clarity on the federal government’s economic plan.
NATIONAL’s Public Relations’ expert Public Affairs team will be delving into Budget 2024 and will provide a detailed analysis on April 16, 2024.
