Finance Minister Chrystia Freeland delivered the 2022 federal budget yesterday at 4:00 p.m. This year’s budget was titled A Plan to Grow Our Economy and Make Life More Affordable. The delivery of this federal budget marks the first budget announcement since the 2021 federal election.
BUDGET THEMES: THE THREE PILLARS
Freeland announced the Liberal government’s plan to decline the debt-to- GDP ratio and grow the economy. The government proposes to do this with a three pillar approach.
Pillar One: investing in the people to grow our country by investing in housing, immigration and skills, and childcare.
Pillar Two: investing in a green transition through a plan that is driven by our national price on pollution and a new Canada Growth Fund which aims to lure the billions of dollars in private capital needed to strengthen our economy swiftly.
Pillar Three: investing in productivity and innovation by encouraging Canadian companies to get bigger and help Canadians and Canadian companies develop new IP and turn ideas into businesses and create new jobs.
At the last hour and as anticipated, additional investments were made to military spending and plans were announced to initiate a defence policy review to prepare Canada for a more dangerous world due to Putin’s invasion of Ukraine.
SPENDING HIGHLIGHTS
As expected, this budget is funding some significant new programs and increasing spending in areas that the government deems important. All in the government announced over $56 Billion in new spending measures. They include:
Canada Growth Fund
$15 Billion over 5 years to Canada Growth Fund. This will be allocated toward restructuring supply chains, helping to achieve various climate- related goals, and investing in clean technologies.
Housing
$10 Billion over 5 years on various housing programs including $4 Billion over 5 years to launch a Housing Accelerator Fund. Also includes a one-time $500 payment to people struggling with housing affordability.
Defence
$8 Billion in new funding over the next 5 years. $875 Million will be focused on addressing cyber threats over the next 5 years. The government will also initiate a new defence policy review.
Dental Care
$5.3 Billion over 5 years to provide dental care for Canadians.
Child Care
$625 Million over 4 years for childcare to help provinces and territories build new facilities.
First Nations
$4 Billion in funding for First Nations children over 6 years.
Electric Vehicles
$1.7 Billion to extend incentives for electric vehicle purchases and $400 Million to build out more charging stations.
Support for Ukraine
$1.5 Billion to support Ukraine in its war with Russia including $500 Million in military aid.
TAXES
Additional measures to make the tax system fairer and introducing new taxes for some Canadians.
● Raising taxes on the wealthiest 1% of Canadians and cutting taxes for 20 million low and middle income citizens.
● New tax on vacant or underused housing owned by non-resident, non-Canadians.
● New taxes on luxury goods.
●Reforming the tax treatment of employee stock options to prevent it from disproportionately benefiting the very wealthy.
● Restricting large financial institutions from creating artificial tax deductions.
● Temporary Canada Recovery Dividend – banking and life insurance groups will pay a one-time 15 per cent tax on taxable income above $1 billion for the 2021 tax year.
● Permanently increase the corporate income tax rate by1.5 percentage points on the taxable income of banking and life insurance groups.
● Amendments to the Income Tax Act.
DEFICIT FORCAST
Buoyed by an increase in tax revenue (mostly from the oil sector) and a recovering economy, the government is budgeting for a deficit of $52 Billion – half of what it was last year and significantly lower than the $300+ Billion deficit incurred during the first year of the pandemic. While critics of the Liberal government continue to criticize large deficits the Trudeau Liberals are expecting to reduce the annual budget deficit to $8.4 Billion 2026/27.
OPPOSITION RESPONCE
The Official Opposition Conservatives immediately denounced the budget as “irresponsible”. In her remarks to the media Interim Leader Candice Bergen referred to the budget as a NDP spend and tax budget, highlighting the recent agreement the minority Liberal government made with the NDP to remain in power until 2025. While they welcomed additional spending commitments for Canada’s military, the Conservatives expressed doubt that the Liberal government would follow through with spending given their past track records. Ms. Bergen commented that the Liberal government announcements around housing wouldn’t likely get any houses built and expressed disappointment that there were no tax breaks for Canadians. She indicated that Conservatives would be voting against the budget bill.
NDP leader Jagmeet Singh stated that his party has critiques and criticisms about the federal budget, and that they are deeply concerned about the approach on the environment. None the less they will be voting in favour of it. The Green Party believes that the budget is socially progressive but it is “missing the mark for climate because these investments are based on the wrong targets”.
WHATS NEXT
With a commitment of support from the NDP, the Liberal government will look to govern as if they have a majority over the next 3 years. This budget, while light on specifics and details, continues to highlight the Liberal focus on some consistent themes: Climate Change Initiatives, Affordability for Canadians and First Nations Reconciliation. While not all the Liberal campaign promises were implemented in this budget, Minister Freeland stated that this budget was the first of many that would carry out all their previously made election commitments during their current term.
While the Liberals chose to focus on their core priorities, it’s clear disruptions from the ongoing pandemic as well as the war in Ukraine forced the government to prioritize investments they wouldn’t normally champion; most notably a sizable increase in defence spending. Many of the announcements were vague in specifics and it’s unclear exactly where the money will be spent. This provides an opportunity for stakeholders to actively lobby the government for their priorities.
The coming weeks and months provide an excellent opportunity to engage government officials on the announcements made and highlight how industry can partner with government to address their mutual needs.
Photo by StellrWeb on Unsplash 
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