2020 Fall Economic Statement: Staying the COVID-19 course

Deputy Prime Minister and Minister of Finance Chrystia Freeland unveiled the Trudeau Government’s 2020 Fall Economic Statement this afternoon in Ottawa. This was Ms. Freeland’s first major move as Finance Minister, and the announcement today follows the Government’s Speech from the Throne on September 23, 2020.

The Statement was largely intended to meet key political objectives of the Liberals:

• Reinforce to Canadians that COVID-19 spending and the country’s pandemic response—and all that it has entailed—remains the Government’s number one priority for the country;
• Address select new spending priorities for specific sectors, in line with their stated Throne Speech commitments;
• Set the proverbial political stage and narrative for Budget 2021, which will likely be designed to address a more comprehensive “recovery” theme around COVID-19 and where they intend to allocate new spending;
• And reinforce the idea that, despite a global pandemic that is constantly top-of-mind, the Liberals are still intending to govern, and are looking to advance key elements of their policy platform and Ministerial mandate commitments.

Yet such financial updates are always more complicated—and politically nuanced—than a mere snapshot on Canada’s financial books. Today’s Statement was no different, particularly given that the Liberals remain in a tenuous minority parliament situation, requiring political support from opponents on the right or left to remain in power.

The approach taken today—with the Economic Statement as the vehicle—underscores this political reality, providing financial support to areas which are incredibly difficult to oppose politically. In essence:

• The Government allocated significant funding to struggling sectors that had not been recipients of federal relief measures so far.
• Furthermore, it leveraged new measures geared to protect Canada’s most vulnerable segments throughout the current wave of the pandemic.
• Finally, it laid out policies aimed at sketching the post-COVID society, with an economic growth fueled by innovative, green technologies, for a society keen to provide opportunities to all.

And after surviving a confidence vote in the House of Commons after their Throne Speech, the Liberals are undoubtedly betting that they will emerge unscathed this time again, setting the stage for a potential political battle around Budget 2021. The pandemic doesn’t appear to have slowed their resolve.

The details

Key highlights from the Economic Statement include the following:

• Canada’s deficit is projected to hit a new high of at least $381.6 billion this fiscal year, a significant increase from the $343.2 billion forecasted this past July. This projection is, however, a best-case scenario: the deficit could jump as high as $390 billion, depending on how quickly Canada vanquishes COVID-19.
• Ottawa committed to approximately $100 billion in new spending. This stimulus spending will focus on the economy of the future: green, innovative, inclusive and competitive. Political pundits and the Opposition are clamoring for more details on this spending. The government says it will be rolled out after Canada beats COVID-19 and life returns to normal. More details likely to come in Budget 2021.
• Canada Emergency Wage Subsidy will return to its previous ceiling of 75% starting next month.
• $52 billion will be allocated in support for coordinated federal, provincial and territorial measures. This funding will go, in part, to a retooled Employment Insurance program, brand-new sick leave and caregiver leave programs for Canadians who have to take time off work due to COVID-19, and more study on a national childcare system; Ottawa will provide up to $1,200 for each child under 6 years old. Long-term care facilities across the country will also benefit from a $1 billion investment to manage COVID-19 outbreaks.
• The government is creating a new Highly Affected Sectors Credit Availability program, aimed at some of our hardest-hit sectors. This new stream will provide access to 100-percent-government-backed loans: as much as $1 million, for up to ten years.
• Starting in 2022, Ottawa will force Internet giants to collect and remit the GST.

Opposition reactions

Not surprisingly, initial comments from federal opposition parties varied considerably. Yet proof of their true opposition will be tested in upcoming parliamentary and confidence votes on the Statement:

• “Canadians want their lives back. We need to get this country working again. There is no plan for the economy without a plan for rapid testing and vaccines—and the Liberals failed to provide that today.” —Erin O’Toole, Conservative Leader
• “One thing is clear with today’s economic statement: The ultra-rich and large corporations making profits off the pandemic should pay for the recovery—not your family.” —Jagmeet Singh, NDP Leader

Next steps

NATIONAL’s pan-Canadian public affairs team is assessing the Economic Statement through the lens of multiple sectors, including potential next steps regarding the federal government’s 2021 Budget, targeted for the first quarter of the new year.

We expect a confidence vote in the House in the coming two weeks, on which the government’s fate will rest before Parliament rises for the last time in 2020.

In the meantime, we welcome your feedback, and would be pleased to connect with your team to discuss your public affairs needs. We look forward to hearing from you.