THE CANADIAN PRESS/Justin Tang
THE CANADIAN PRESS/Justin Tang
Today’s federal budget is Chrystia Freeland’s third budget as finance minister and second since the last election in September 2021. It’s delivered at a time where latest polling indicates almost half of Canadians are saying their personal finances have worsened over the last year and as the Liberals find themselves slipping to second-party status.
The minority make-up of Canada’s federal parliament continues to be held together by an agreement between the Liberals and New Democratic Party (NDP). While cracks in this alliance are evident, the deal remains intact. The key question moving forward is for how long.
In the lead up to the budget, Minister Freeland sought to lower expectations for the possibility of new federal spending, telegraphing throughout the first quarter that higher interest rates and inflationary pressures are constraining the federal government’s spending power.
Despite this narrative, the weeks leading up to budget day saw the federal government delivering historic health spending commitments, promising $46 billion in federal health transfers, as well as promising to deliver major, new strategic investments in clean energy.
On healthcare: the federal government’s negotiation process with provinces/territories was once fraught with tension and significant posturing on both sides. Yet the discussions over 2022 and early 2023 ended with new bilateral agreements, following a meeting of all First Ministers in February 2023. Taken together, these new agreements constitute a significant portion of all Budget 2023 spending, while also simultaneously removing a significant source of political tension within the federation.
Entitled A Made-in-Canada Plan: Strong Middle Class Affordable Economy Healthy Future, Budget 2023 is delivered on the heels of the U.S. President Biden’s Ottawa visit last week, where Prime Minister Trudeau joined the President in renewing commitments to joint economic, trade, and defence interests. Bolstering commitments to continental trade and supply chains was high on the agenda and aligns with Minister Freeland’s vow in her budget speech to “build big things here in Canada—from a Volkswagen batter plant in Ontario, to the Galaxy Lithium mine in Quebec, to the TransMountain Expansion in Alberta to the Atlantic Loop, to the LNG terminal in Kitimat, BC.”
The budget totals $490.5 billion in federal spending including the following commitments:
- $198 billion over 10 years through the Canada Health Transfer, including $46 billion in targeted investments through bilateral agreements, to the provinces/territories
- $13.0 billion over five years, starting in 2023-24, and $4.4 billion ongoing to Health Canada to implement the Canadian Dental Care Plan, providing coverage to uninsured and lower-income Canadians
- a refundable tax credit equal to 30 per cent of the cost of investments in new machinery and equipment used to manufacture or process key clean technologies, and extract, process, or recycle key critical minerals
- a new 15% refundable Clean Electricity Investment Tax Credit, worth $6.3 billion over four years beginning in 2024-25
- committing $20 billion combined investment of the Canada Infrastructure Bank through its Clean Power priority area its Green Infrastructure priority area
- $3.0 billion over 13 years, starting in 2023-24, to Natural Resources Canada to recapitalize funding for the Smart Renewables and Electrification Pathways Program and renew the Smart Grid Program
- a one-time grocery rebate worth $2.5 billion in targeted inflation relief to lower income Canadians
- $40.4 million over five years to Global Affairs Canada and National Defence to establish the NATO Climate Change and Security Centre of Excellence
- reaffirms the over $55 billion over 20-year period in “foundational investments” announced over the past year in Canada’s national defence
- $13.5 million over five years to Public Safety Canada to establish a National Counter-Foreign Interference Office.
- $500 million over ten years to the Strategic Innovation Fund to support the development and application of clean technologies in Canada
- $333 million over ten years to establishing a new Dairy Innovation and Investment Fund to support investments in research and development of new products.
This carefully crafted budget has been designed in the context of a complex and charged political backdrop. The stakes could not be higher for the governing Liberals with the new Conservative Leader hedging out the Prime Minister in recent polling, concerns over Chinese interference in Canada’s political processes, uncertainty in the longevity of the Liberal-NDP Confidence and Supply Agreement, and a continued threat of a recession for the Canadian economy.
Latest polling by Abacus Data place the Liberals and Conservatives in a statistical tie for vote intentions, with Conservatives leading with 33%, two points ahead of the Liberals. Polling by the Angus Reid Institute finds that the Prime Minister’s approval rating has slipped to 37%, a six-point decline in the past three months. This decline is despite campaign-style spending commitments and announcements by the Prime Minister and Cabinet Ministers throughout the first quarter.
In the days leading up to the tabling of the budget, sparring between the Prime Minister and the Conservative Leader in Question Period became so heated, the Speaker advised Members of Parliament, “to take a deep breath and calm down.” The minority Parliament is unlikely to heed this advice.
Even a strong minority government such as this one is more turbulent than a majority mandate. Once again, the Liberals will require another party’s support in the upcoming confidence vote on the budget in the House of Commons. While expected to pass, the confidence vote carries the risk of seeing the federal parties head to the polls.
However, the NDP is expected to support the government for the budget vote, as they have since the 2021 election, though Mr. Singh is expected to increase pressure on the government for more social program spending. In light of uncertainty in the polls, the government will be open to concessions in order to secure the passage of the budget and see their mandate continue.
At the end of the week, Parliament goes on recess for two-week period, during which the Prime Minister, Finance Minister, and other Cabinet ministers will embark on an intensive cross-country tour engaging Canadians on the budget.
NATIONAL will be watching. And our pan-Canadian public affairs team will continue to monitor developments from Budget 2023 and report accordingly.