Budget 2021: Part economic recovery catalyst, part election blueprint

The federal Liberals delivered their first budget in the last two years this afternoon in Ottawa. And with a third COVID-19 wave upon the bulk of the country, the economic stakes for Canada’s recovery couldn’t be higher.

The federal government’s November 30, 2020 Economic Statement—and the release of new Ministerial mandate letters in January 2021 by the Prime Minister—collectively provided the backdrop for decisions announced as part of Budget 2021.

Both recent milestones also highlighted their political DNA: a progressive, centre-left ideology, one on which it has unapologetically leaned since their election in 2015. And since their re-election in October 2019, the Trudeau team has further reinforced their commitment to their areas of strategic focus since day 1, including: the environment, Indigenous affairs and reconciliation; diversity and inclusion; international engagement; and assessing issues through a feminist lens.

Today’s unveiling of Budget 2021 is no different. It is, first and foremost, a political document designed to highlight deliberate choices on the best path out of COVID-19’s long-standing grip on the country.

And the initiatives announced today highlight that the Trudeau Government remains comfortable “in the red” while leveraging significant public spending, and simultaneously building pan-Canadian legacy-type programs like their newly-announced childcare initiative (worth $30B over five years).

Yet from a political perspective, Budget 2021 was curated to do multiple things at once, including:

• Beat back COVID-19 and stand with provinces and territories to fight the latest onslaught of the pandemic;
• Rebuild the economy and directly support sectors that are currently on life support, while also empowering those that have stayed the course and could be primed to lead our road to full recovery.
• Reassure Canadians whose mental health and pocketbooks have been challenged like never before; and
• Unveil a draft of a likely Liberal Party electoral platform in a context—where a majority mandate is potentially in reach—by finding commonalities with the NDP and the Green Party and offering distinct policies to Quebec voters.

The top line: Budget 2021 at a glance

• Budget 2021 forecasts $101.4B in new spending
• Budget deficit will sit at $354.2B in 2021-2022
• Canada’s debt-to GDP ratio will reach 51.2 per cent in 2021–2022
• Canada committed to its largest funding towards Indigenous Peoples
• $17B will help drive Canada’s “green recovery”

Analysis/Key commitments

The expectations for Deputy Prime Minister and Minister of Finance Chrystia Freeland and the government were incredibly high moving into today, particularly given the multiple audiences to address and expectations from stakeholders.

Some of their key decisions, to this end, included the following:

• In addition to funding pledged earlier this month through C-25 (billions funneled through the Canada Health Transfers), the government has pledged robust new funding towards two areas which have defined the pandemic: long-term care ($3 billion over five years) and mental health ($100 million over three years)
• The various relief programs that were so instrumental in keeping Canadians afloat (Canada Emergency Wage Subsidy and Canada Emergency Rent subsidy) are prolonged until next fall. 
• The government also introduced a brand new Canada Recovery Hiring Program, to help companies that used to receive the Canada Emergency Wage Subsidy (CEWS) hire new employees or extend hours for those already on the payroll.
• Sectors that have been on life support for more than a year now finally received some much-needed help: air travel, tourism, received a shot in the arm and in the process, their first tangible sign that help is on the way.

Various core elements of the Liberals’ ideology were also featured, and they are all rooted in the devastating impacts of the pandemic.

• Deputy Prime Minister/Finance Minister Chrystia Freeland had been hinting for months that the government would seek to improve childcare systems across the country and address the “she-cession” and the disproportionate impact COVID-19 has had on women. With a $2 billion commitment, the Liberals send the message that the federal government will play a role in ensuring a better work-life balance for all, while also helping various marginalized segments of the population enter/re-enter the job market.
• Additionally, the $18 billion over 5 years committed to Indigenous Peoples sends a clear message that reconciliation will continue to guide the government’s steps, building on previous federal budget commitments.
• New skills training programs, with $470 million over three years to a new Apprenticeship Service.
• Finally, rumours have been swirling for months now over how the government would articulate its vision for a green recovery of our economy. With a commitment worth $17.6 billion for green investment, the government will soon introduce a green bond framework to help climate change initiatives a framework that will anchor other measures, such as funding for home retrofits and a 50% reduction of the income tax of businesses that manufacture zero-emission technology (2022) but these measures won’t be implemented just yet: they constitute a pledge for when Canada can truly afford the luxury to ponder its future.

This budget also contains a few surprises, including:

• The introduction of a federal minimum wage of $15 per hour.
• A pledge to launch negotiations with credit-card companies in an effort to reduce the swipe fees that merchants must pay, a situation made even more necessary by one of this pandemic’s most understated impact: the rise of online shopping.
• And measures targeting Canada’s real estate sector; Budget 2021 contains provisions for first-time homebuyers as well as tax credits to encourage people to make their homes more energy efficient.

Federal election timing

Speculation around a prospective federal election will likely pick up in the next few months. But for now, the Trudeau government reminded us of its important role: ensure our collective health and safety while protecting the very foundation of our economy.

As customary, the tabling of this budget constitutes a de facto motion of confidence, a situation that takes a whole new meaning in a minority government setting: the Liberals need an opposition party to support Budget 2021. All signs point to the NDP, and the party has indicated it will vote in favour of the proposed plan.

With a vaccination roll-out across Canada still in motion, opposition parties will need to choose between putting an end to a legislature that has proven extremely volatile and a national campaign during a pandemic. While certain provinces have gone to the polls during COVID-19, the chances of Budget 2021 triggering a federal election soon are seemingly remote.

Opposition party reactions

• “Justin Trudeau’s ‘reimagined’ economy is a risky ‘Ottawa-knows-best’ approach that picks winners and losers by deciding which jobs, sectors and regions of our countries will be prosperous. This unproven and incompetent economic approach threatens the personal financial security of Canadians”. —Erin O’Toole, Leader of the Conservative Party of Canada
• “Justin Trudeau chooses to continue to give his rich friends a free ride, he chooses to continue to fail young people who are facing crushing debt, he chooses to continue to protect the profits of big pharmaceutical companies and for-profit long-term care providers, he chooses to continue to spend billions on a pipeline and fossil fuel subsidies, and he chooses not to do what is needed to fix the housing crisis and historic injustices faced by Indigenous people.” —Jagmeet Singh, Leader of the New Democratic Party
• “There is some good in this budget, I cannot say that there is only bad (…) (but) there are things that we do not know exactly how they will be articulated.” —Yves-François Blanchet, Leader of the Bloc Québécois

NATIONAL: Pan-Canadian Public Affairs reach and expertise

Budget 2021 will have significant implications for multiple sectors. And the implications of the new investments and planning priorities will only become clear in the coming days. NATIONAL’s pan-Canadian Public Affairs and Government Relations team with senior experts in all our offices, is here to help. We look forward to hearing from you.

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