With the federal government set to release its 2021 Budget next week, all eyes will be on Prime Minister Justin Trudeau as he mulls how to reenergize an economy badly damaged by the impact of COVID-19, but also how to ensure that the various needs of provinces and territories are met. Since March 2020, we’ve seen his government work largely hand in hand with the 13 provincial and territorial Premiers, as much of their collective attention has remained on combating the virus as well as establishing a path toward economic recovery.
One of the most important factors for the Prime Minister to consider is whether the time is right for his government to fight for a majority and take on Erin O’Toole and his Conservatives in a federal election. In many respects, the 2021 Budget will not only set the stage for how the federal purse is distributed, but also signal whether we are on the cusp of an election. Budget 2021 suddenly becomes a de facto electoral platform for the Liberal Government.
We’ve already seen the Trudeau Liberals begin to double down on some the central themes that got them elected in 2019, albeit to a minority government. Fired up after this past weekend’s National Convention, the Trudeau Liberals are looking at seizing its current momentum to signal, through Budget 2021, that they are primed to secure another mandate, should Canadians renew their faith in their overall plan.
Key themes to look for in the 2021 Budget:
While Canada’s unemployment is currently back under 8%, various sectors are still mightily struggling (retail, hospitality and air transportation, amongst others). This, combined with industries that need federal support to supplement capital investment (clean energy), those relying on foreign workforce (agriculture) and even non-for-profit industries which have been deprived of donations throughout the economy. Spending has never been an issue for a government whose core mantra is to invest massively for the future. The pandemic sparred very few sectors: how will the government ensure that each gets its share?
This sector embodies both short-term and long-term considerations. Evidently, the federal government will focus a sizable chunk of the budget on ensuring that provinces and territories are equipped to sustain another onslaught of the pandemic, through funding to accelerate vaccination campaigns and help with testing and contact tracing efforts. The Liberal National Convention saw party delegates double down on their wish to see Canada embrace a national pharmacare framework, but also national standards for long-term care and improvement to health services in rural and remote areas. However, provinces have banded together and expressed numerous times, in no uncertain words, that Ottawa ought to significantly enhance its contribution to the Canada Health Transfer (CHT) from 22 per cent to 35 per cent, to help them shoulder the cost of their respective networks. So far, Prime Minister Trudeau has not budged as he has stated his willingness to visit this topic once the pandemic is behind us. Will he stick to his guns?
Rebuilding for the better
The Liberals seem keen to rebuilding an economy centred on the people and the planet. Through rumours around the prospect of an enhanced federal minimum wage or even progressists’ wildest dream of a universal basic income framework, the federal government wants to protect and promote Canadians. Deputy Prime Minister Chrystia Freeland has purposefully mentioned numerous times the merits of a childcare system, modelled after Quebec’s system. These various policies signal that the government wants to spearhead a Canadian society which gives a fighting chance to all. Additionally, the pandemic has not altered Canadians’ appetite for bold climate actions. The Liberals will be hard-pressed to build on the policies they have already implemented (carbon tax, ban of single-use plastics, comprehensive climate change strategy) to further position Canada as a leader in the transition away from the fossil fuel economy.
What are the provinces looking for?
- Vaccination clarity: With British Columbia’s pandemic at its worst point to date in early April, there is growing concern about the rate of vaccinations in the province. Will the federal government develop enough vaccines quickly enough to fight the rapidly growing P1 and other variants?
- Infrastructure: There are a number of high-profile projects of varying levels of importance to the provincial NDP government, including a Langley SkyTrain extension and a George Massey Tunnel replacement. Municipal governments will also be looking for funding for local projects.
- Green priorities: The NDP’s CleanBC plan is a centrepiece of its environmental and economic policies. They will be looking for continued support to reduce GHGs in the province’s transportation network and economy through expanded EV programs and more clean energy transmission infrastructure.
- Vaccine supply: Having faced setbacks in the vaccine rollout in January, Alberta is looking for assurance of a sustained a predictable supply of the three currently approved vaccines and perhaps a fourth.
- Income supports and reopening the economy: With continued high unemployment and extreme pressure on small businesses from the ongoing pandemic, Alberta seeks a sustained COVID-19 support program throughout the recovery.
- Health: Alberta joins the other provinces in demanding a sustainable increase in federal healthcare transfers.
- Increased Canada Health Transfer (CHT): Premier Doug Ford has remained on course in challenging Prime Minister Trudeau and Health Minister Patty Hajdu for a significant increase to Ontario’s portion of the Canada Health Transfer. According to the Ford government, there is a $30 billion gap between what’s necessary and what’s provided through the $80 million in health transfer funding across Canada.
- Vaccine rollout: There is little doubt that Ontario, and more broadly, Canada, are lagging our neighbours down below with respect to rolling out an efficient and timely vaccination campaign. While the federal government has made some progress in comparison to the picture in early March, there is still a lot left to do.
- Small business support: The Premier has been noted as saying how appreciative he is to have a working and collaborative relationship with the federal government, and specifically with Deputy Prime Minister Chrystia Freeland. He’ll be hoping for further commitments to support small businesses and Ontarians that have seen significant financial impacts through the pandemic.
- Increased Canada Health Transfer (CHT): The Government of Quebec and the Premiers of all provinces and territories have formally demanded that the CHT be increased to 35% of healthcare spending by 2021-2022. For Quebec, this represents an additional $6B per year.
- Support for airlines and customers who have had their flights cancelled due to COVID-19: The federal government has committed to helping airlines get through the crisis while forcing them to refund customers who have had their flights cancelled. In Quebec, the difficulties faced by carrier Transat make this assistance from Ottawa even more urgent.
- Increasing the federal share of infrastructure funding: The federal government contributes to the funding of public infrastructure projects through various programs. Quebec estimates that for every dollar invested jointly with the federal government, its share exceeds 80%. The government is calling for an increase of the federal portion.
- Renewable energy projects: The Atlantic provinces are likely to be on the lookout for federal funding for renewable energy projects, including the creation of the Atlantic Loop and support for the Muskrat Falls hydroelectric project, thanks to a new environment-focused Premier in Nova Scotia and the construction of the Newfoundland Hydro project still underway.
- Health transfers: Another item Atlantic Canadians will likely be looking out for in the forthcoming budget is increases to federal health transfers. With the uptick in health spending due to COVID-19, growing demand for mental health services and aging populations, East coast provinces will be looking for more support.
- National Childcare Strategy: The economic downturn and job losses due to the pandemic are being felt everywhere, and the Atlantic region, despite its relative success maintaining low COVID-19 case counts, is no exception. Women are bearing a disproportionate impact, which is one reason why many of the Atlantic provinces are hoping for movement on a National Childcare Strategy in this budget.
NATIONAL will be monitoring the release of the 2021 Budget closely and will provide an in-depth analysis on April 19. As always, our team of Public Affairs and Government Relations experts is available at your disposal.