The 2023 Fall Economic Statement: Driving the affordability narrative

With its fall economic update, Trudeau’s Liberal government is proposing $15.7 billion in new spending commitments targeting housing and affordability—two areas where the federal government is seeking to meet Canadians where it matters. However, many of these new measures, including housing investments and spending reductions, won’t come into effect until 2025—the year of the next scheduled election.

Having just passed the eight-year mark governing, recent polling by Leger reveals dissatisfaction with the Prime Minister outnumbers approval by two-to-one, with the largest share of Canadians “very dissatisfied” with the federal Liberal government. On current issues, performance on affordable housing and high inflation have been driving Canadians’ dissatisfaction throughout the fall, despite the recent federal action on these concerns.

While silent on a new long-term infrastructure funding program, alongside new spending commitments, Fall Economic Statement (FES) commits to establishing a new federal department of Housing, Infrastructure and Communities, replacing Infrastructure Canada. The mini budget also outlines the timetable for delivering the clean energy and technology investment tax credit (ITC) package, first announced in the spring budget. The ITC package, which was meant to level the playing field with the U.S. Inflation Reduction Act, has been in a consultative limbo since the budget passage earlier in the year.

Still outstanding is the highly anticipated Liberal response to the New Democratic Party’s (NDP) demands for action on pharmacare. Behind-the-scenes negotiations between the two parties are ongoing, with Mr. Singh seemingly firm on his ultimatum. However, a deal appears increasingly unlikely and based on recent polling, neither party would fare well in a snap election—so some form of compromise is expected to emerge.

With the backdrop of Statistics Canada having announced a modest drop in inflation, the federal fiscal picture is still hampered with a substantial $40 billion deficit, despite the planned spending reduction efforts being pursued by the Treasury Board President, Minister Anita Anand. With the federal debt projected to be $1.2 trillion costing, and $46.5 billion service fees rising to $60 billion over five years, budgetary balance is beyond the Fall Economic Statement’s projections.

To this end, the fall economic statement provides the Conservative leader and his team plenty of fodder to continue its critique of the government’s economic record. And while Trudeau’s Liberal government is expected to withstand the confidence vote on its fall economic update, the turbulence of minority government—together with short-sighted political decision-making—will only increase as the inevitable election looms.

Key economic measures

Housing

• $15 billion in new loan funding, starting in 2025-26, for the Apartment Construction Loan Program, formerly known as the Rental Construction Financing Initiative.
• $1 billion over three years, starting in 2025-26, for the Affordable Housing Fund.
• In recognition of the relation between housing and infrastructure, the government proposes to introduce legislation that would establish the Department of Housing, Infrastructure and Communities (currently Infrastructure Canada) and clarify the department’s powers, duties, and functions.

Affordability

• Building on the measures in Budget 2023, the government is proposing new action on “junk fees” including amending the Air Passenger Protection Regulations to require airlines seat children under 14 with an accompanying adult at no extra cost.
• The FES announces plans to deliver legislation in Budget 2024 to “to establish a consumer-driven banking framework that would regulate access to financial data.”
• On payments modernization, the government will publish final regulations under the Retail Payments Activities Act on November 22 and intends to amend this legislative framework to expand eligibility in Payments Canada.

Implementation timeline for Budget 2023 Investment Tax Credits

• The FES commits to delivering the suite of Clean Energy and Technology Investment Tax Credits (ITC) in 2024 and announced that legislation to be tabled this fall will enable the Carbon Capture, Utilization, and Storage and the Clean Technology ITCs. Further, legislation to implement the labour requirements associated with the ITCs will be introduced in Parliament this fall.

Spending reductions

• Building on the $15 billion in “refocused spending,” 2023 Fall Economic Statement announces that the government is seeking additional spending reductions across departments of $345.6 million in 2025-26, and $691 million ongoing. The aim of this initiative is to return the public service spending closer to its pre-pandemic growth track.

Opposition reaction

In light of its minority status, Trudeau’s Liberal government will require the support of another party to pass the upcoming vote on the Fall Economic Statement and hold off an election call. Unsurprising, the main opposition parties have been quick to convey their dissatisfaction with the fiscal proposals put forward in Minister Freeland’s fall mini budget. Specifically:

• Conservative Leader Pierre Poilievre said that his party would vote against the legislation, criticizing the new tax measures and inflationary spending.
• NDP Leader Jagmeet Singh stated that it “doesn’t meet the urgency of what Canadians are going through…does not meet their needs…with most of the money being promised delayed.” However, Mr. Singh was quick to take credit for the Liberal government’s efforts on affordable housing and taking on grocery CEOs on the cost of groceries.
• Bloc Leader Yves-Francois Blanchet was critical of the economic statement for lacking investments in Quebec’s middle class, and senior population, and stated that the government is not acting urgently to address the issues facing Quebec. Additionally stating that the economic statement misplaced money in oil and gas industries instead of making long-term investments greener industries, he called investments in oil and gas expensive for Canadians and harmful to the environment.

What’s next?

With only four sitting weeks remaining before the House of Commons rises for the winter recess, Trudeau’s Liberals will be grappling with numerous competing priorities.

In this harried political climate, trust NATIONAL’s team of Public Affairs and communications experts to navigate the federal milestones ahead toward tangible outcomes.