Budget 2023 offers billions for dental care, plus spending cuts and tax hikes to tame deficit

Finance Minister Chrystia Freeland tabled a federal budget Tuesday projecting a deficit about $10 billion higher than initially forecast — an increase driven by a worsening economy and new spending on initiatives like a national dental care program.

Freeland’s fiscal plan projects the deficit will be $40.1 billion in 2023-24 — up from the $30.6 billion she said it would be just last fall.

Freeland’s relatively brief 250-page budget is being pitched as a focused plan to address inflation — there will be another one-time GST rebate for low-income Canadians — and to position the economy for the future through multi-billion-dollar tax credits to stimulate the clean energy sector.

A faltering economy means Ottawa will collect $5.7 billion less in revenue this fiscal year than it initially projected — a development that blows a big hole in the federal treasury.

To keep a lid on mounting deficits, Freeland is proposing a series of tax increases on the rich and large corporations and cuts to government spending.

All told, Freeland is planning to slash some $15.4 billion in spending over the next five years through “targeted reductions,” including an effort to curb the use of “professional services” and management consultants and a reduction in travel expenses.

She’s promising to levy a two per cent tax on stock buybacks, to hike the “alternative minimum tax” to make the wealthier pay more and to tax dividends received by financial institutions — three initiatives that are projected to raise $11.6 billion over the next five years.

The budget is also increasing the air travellers security charge by 32.85 per cent to address the sorry state of Canada’s airports. That works out to a $34.82 levy on international flights.

Air passengers will be on the hook for some of the costs associated with improving security and baggage screening.

In a speech to MPs after tabling her budget, Freeland said the document maintains Canada’s “proud tradition of fiscal responsibility.”

With economic growth expected to flatline this year (Ottawa is projecting a 0.3 per cent increase in GDP), Freeland said Ottawa needs to follow an economically prudent path while spending more in some areas.

“By exercising fiscal restraint, we are ensuring that we can continue to invest in Canadians and in the Canadian economy for years to come,” she said.

Kevin Page, the former parliamentary budget officer, told CBC News the government clearly has grown “more pessimistic” about Canada’s economic outlook since the fall mini-budget.

“We’re looking at flat real growth in 2023. The unemployment rate is going to tick up. You really can’t make the case that they’ve loosened the purse strings all that much in this budget,” he said, adding the planned spending increases are relatively “modest.”

Missing from Freeland’s document is any major new initiative to help ease the housing supply crunch — a problem that has only gotten worse as the country absorbs hundreds of thousands of new arrivals who are all looking for a place to live.

Canada added more than a million people last year. Housing starts haven’t kept pace.

“In terms of a housing affordability, we’re in real trouble,” said Armine Yalnizyan, an economist and Atkinson Fellow on the Future of Workers.

“I think it’s remarkable that this government is importing over a million people, temporarily and permanently, and every one of those people needs a place to live and we’re not accelerating our building of affordable rental housing.”

The government’s long-promised home savings account will roll out this year, offering tax savings for first-time buyers.

The “housing accelerator fund,” an incentive announced in last year’s budget to encourage municipalities to make home construction easier, will also unleash roughly $925 million in funding this year to spur construction.

The Financial Consumer Agency of Canada is also drafting some sort of “code of conduct” to protect Canadians with mortgages who are facing “exceptional circumstances.” The budget offered no details.

Roughly 70 per cent of the $43 billion in net new spending announced in this year’s budget is earmarked for health and dental care over the next six years.

Children are among the most vulnerable for dental care, which is why many publicly funded, more universal models around the world cater to them.

The program will continue to roll out this year, extending dental services to lower income Canadians who don’t already have access to a dentist.

The program’s price tag is steep: $13 billion over five years.

When the program is fully operational in 2025, nine million uninsured Canadians with an annual family income of less than $90,000 will qualify for coverage. There will be no co-pays for those with a family income under $70,000.

The program will be run by Health Canada with a “third-party benefits administrator” charged with actually managing program benefits — a structure that essentially leaves the provinces and territories out of the mix.

“No Canadian ever again will need to choose between taking care of their teeth and paying their bills at the end of the month,” Freeland said. “There are significant and necessary investments.”

While the Liberal Party promised a dedicated mental health transfer in the 2021 federal election campaign, Freeland’s budget offers little to help Canadians grappling with depression, anxiety, post-traumatic stress disorder and other ailments.

The largest budget line-item on this file is $158.4 million over three years to launch the 988 suicide prevention phone hotline.

To fight the opioid crisis, the budget is providing $359.2 million over five years to support a “renewed Canadian Drugs and Substance Strategy.” That includes new money to help prevent substance abuse and streamline the establishment of new “supervised consumption sites.”

The government signed a landmark deal with the premiers earlier this year — a major fiscal commitment that will substantially boost the Canada Health Transfer in the coming years.

But the budget doesn’t really address how provinces and territories will maintain current health-care staffing levels and recruit new workers for a system on the ropes after years of pandemic-related disruptions.

“It’s a very striking gap in the document. We’re talking about agricultural workers, truck drivers, critical mineral miners, but there’s nothing in here about the people who provide us with critical services — doctors and nurses,” said Yalnizyan.

“That’s a problem because our system is crumbling as we speak. They gave the provinces so much money but the feds didn’t ring-fence a single penny to ensure it doesn’t get wasted on agency nursing and for-profit care.”

A senior government official, speaking on background to reporters during a budget briefing, said Ottawa needs a robust response to U.S. President Joe Biden’s recent Inflation Reduction Act — a bill that, despite its name, is really a climate change plan that promises hundreds of billions of dollars in funding to stimulate clean energy development and a greener manufacturing sector.

If the federal government doesn’t step up with a plan of its own, Canada will be left behind, the official said.

To that end, the federal government is introducing an investment tax credit for clean energy and clean tech to build a “prosperous low-carbon future.”

The budget offers a 15 per cent refundable tax credit for eligible investments in “non-emitting electricity generation systems” like wind, concentrated solar, hydro, wave, tidal and nuclear projects. That’ll cost the federal treasury $6.3 billion over four years.

To stimulate clean technology manufacturing, the budget proposes a refundable tax credit equal to 30 per cent of the cost of investments in new machinery and equipment. That credit will cost an expected $4.5 billion over five years.

That will be useful for companies looking to extract, process or recycle critical minerals like lithium, cobalt, nickel, graphite, copper and rare earth elements — products that are in hot demand around the world as electric vehicle (EV) manufacturing ramps up dramatically.

Conservative Leader Pierre Poilievre panned the budget as a spending “bonanza” and a “full frontal attack” on taxpayers.

Poilievre said the billions in new government spending announced today will “pour fuel on the inflationary fire.”

He also pounced on the government’s inaction on housing in this budget.

“We have an NDP government that is running inflationary deficits, bankrupting households and keeping young people living in their parents’ basements,” Poilievre said. He promised a government led by him would get unspecified “gatekeepers” out of the way to build “millions of new homes.”

The Canadian Alliance to End Homelessness also said the government unfairly ignored housing in this budget.

“It’s clear the federal government does not see the scale and urgency of this crisis and [has] offered no solutions,” said Tim Richter, the group’s president and CEO.

The Residential Construction Council of Ontario, the industry group that represents home builders, said the feds are “nibbling around the edges of the problem” by reallocating some money previously earmarked for public housing repairs to new construction.

“The budget doesn’t fully address the systemic problems that are delaying construction of much-needed housing. We need to get more housing underway quickly as demand is expected to continue,” said Richard Lyall, the group’s president.

NDP Leader Jagmeet Singh praised a budget that has his fingerprints all over it.

His party pressured the government to renew the GST rebate and stand up a pharmacare plan — two conditions of the supply and confidence agreement that the NDP signed with the Liberal government last year.

Singh said his MPs would vote for the budget, which means the minority government won’t soon fall on a confidence vote.

“We’re proud that we’ve been able to force this government to deliver things,” he said. “Let me be clear. There would not have been dental care in this budget without New Democrats.”

SOURCE: https://www.cbc.ca/news/politics/federal-budget-2023-1.6792507