23 Feb, 2018

Budget 2018 -The Bridge Budget

Budget 2017: Focusing on Canada's Middle Class -The Sequel
23 Feb, 2018

No, a “bridge budget” does not mean that Finance Minister Bill Morneau is investing billions of new dollars in bridges and other major infrastructure projects in the budget he tabled in Parliament on February 27. Been there, done that – see Budgets 2016 and 2017.  Rather, Budget 2018 can be characterized as a bridge between the ongoing implementation of the Liberal’s 2015 election commitments and initiatives foreshadowing 2019 election year promises.

The strongest example of the bridge connecting the Liberal’s 2015 promises with their 2019 election platform is the surprise appointment of Dr. Eric Hoskins, Ontario’s Minister of Health until his sudden resignation on February 26, to head the Advisory Council on the Implementation of National Pharmacare announced in this budget. We can expect national pharmacare to be a significant plank in the Trudeau government’s 2019 re-election plans. This is yet another in a very long list of social policy initiatives that a succession of Liberal governments have “borrowed” from the NDP.

As per usual, Minister Morneau received an abundance of free advice in advance of tabling his third budget. For example:

  • Demonstrate a return to fiscal responsibility with a realistic plan to shrink the deficit and reduce the debt-to-GDP ratio fiscal anchor.
  • Respond to the major tax cuts in the United States with tax cuts of our own to restore Canada’s competitive advantage.
  • Prepare for the potential demise of NAFTA with measures to address economic challenges that would follow.

What the economists, journalists and political pundits putting forth these ideas failed to recall is that budgets are inherently political documents. Accordingly, they did not factor in the fundamental political and public policy lenses through which all of the Trudeau government’s initiatives must flow, namely:

Inclusive Growth – ensure that the benefits of fiscal, economic and trade policies are shared by and with Canada’s middle class.

  • Strengthening and making more inclusive the Working Income Tax Benefit, which is being renamed the Canada Workers Benefit.
  • Indexing the Canada Child Benefit, effective July 2018.
  • Increasing the maximum payment under the Wage Earner Protection Program.

Gender Equality – a gender-balanced Cabinet and feminist Prime Minister are more than token symbols of a commitment to advancing the socio-economic interests of women.

Budget 2018 initiatives include:

  • Introducing pay equity legislation in federally regulated sectors.
  • Providing $1.2 billion over 5 years to introduce a new EI Parental Sharing Benefit.
  • Allocating $19.9 million over 5 years to pilot an Apprenticeship Incentive Grant for Women.
  • Introducing a Gender Results Framework to guide the government’s decisions and measure progress in achieving gender equality.
  • Making Status of Women Canada an official Department of the Government of Canada by introducing departmental legislation.

Climate Change – acknowledge the reality of climate change and seek to strike the right balance between environmental protection and sustainable economic growth.

Budget 2018 initiatives include

  • Creating a new $1 billion Nature Fund to conserve land and species.
  • Providing $109 million over 5 years to implement, administer and enforce the federal carbon pollution pricing system.
  • Extending the accelerated depreciation of energy efficient equipment.

Indigenous Relations – renew the relationship between Canada and Indigenous peoples based on recognition of rights, respect, co-operation and partnership.

Budget 2018 initiatives include:

  • Allocating $1.4 billion over 6 years for First Nations child and family services.
  • Providing $172.6 million over 3 years to improve access to clean and safe drinking water on reserve.
  • Investing $2 billion over 5 years to support the creation of a new Indigenous Skills and Employment Training Program.
  • Spending $1.5 billion over 5 years on Indigenous health programs and services.

Snapshot: Canada’s Fiscal Condition

Budgetary Deficit: The federal deficit will continue to keep pace at approximately 30 percent of the national GDP. Total federal program spending will click along, growing $10 billion per year, reaching $321 billion in the election year of 2019/20.

Taxes: While corporate tax revenue will remain stable at 2.1 percent of the GDP – personal income tax revenue will edge up from 7.1 percent of GDP for the current year to 7.4 percent of GDP in 2021/22. By then, over half of federal revenue will be derived from personal income taxes.

Budget Impact on Canada’s Business Community

TACTIX keeps a close watch on political developments and public policy issues of interest and importance to our clients. To that end, in the Annex we examine the contents of Budget 2018 as they relate to six key sectors of the Canadian economy:

  1. Agriculture and Agri-Food
  2. Defence, Security and Procurement
  3. Digital Economy
  4. Energy, Resources, Environment
  5. Infrastructure
  6. Advanced Manufacturing

In Closing

Prime Minister Trudeau and his Finance Minister built many bridges in Budget 2018, connecting their aspirational 2015 election promises to their 2019 re-election plans. In so doing, they have maintained their relentless focus on the four fundamental political and policy prisms through which all of this government’s actions must be understood: inclusive growth, gender equality, climate change, and Indigenous relations. Anyone wishing to engage with the Government of Canada ignores these core priorities at their peril.

The Trudeau government cultivates this ground for two reasons.  First, the core of this government believes wholeheartedly that these represent the best in what a country can and should do for its citizens.  Second, this focus yielded a comfortable majority government in 2015. The plan, as evidenced clearly by this budget, is to win again in 2019.

After all, isn’t that what political parties are supposed to do?

~The TACTIX Team