Federal Budget 2024: A high stakes spending plan ahead of an election year

Today, surrounded by limestone walls and a cloud of political tension, Chrystia Freeland, Deputy Prime Minister and Minister of Finance, unveiled the Liberal’s fiscal roadmap with Budget 2024: Fairness for every generation marking a pivotal moment for the trajectory of the nation ahead of an election year.

Some early bird announcements included $1 billion towards a national school food program, $1 billion in loans and grants to expand childcare support, and over $23 billion towards a new housing plan.

With these priorities, Trudeau’s government aims to target two key demographics—young voters and women—both of whom supported the Liberal’s majority win back in 2015. It’s undeniably an early election strategy for the minority Liberals.

These announcements, coupled with the contents of today’s budget, total $52.9 billion in new federal spending—some of which is loan-based—partially offset by $18.1 billion in new tax revenue.

Although the Parliamentary Budget Office (PBO) warned of a narrow spending window ahead of today’s announcement, the Liberal’s proceeded with this significant agenda.

With new spending, the federal deficit is projected at $39.8 billion in 2024-2025, with debt at $1.3 trillion this fiscal year.

To put it all into perspective, the federal debt stood at $649 billion in the Liberal’s first budget in 2016.

While Freeland has ruled out raising taxes on the middle class, new tax measures are being placed on the richest Canadians. The outlook for income tax revenues has been revised upwards by $7.0 billion annually on average, largely reflecting stronger anticipated personal and corporate income tax revenues.

Budget 2024 increases the capital gains inclusion rate from 50 per cent to two thirds.

Political analysis

Public opinion polling leading to budget day revealed that most Canadians remain worried about the national deficit and want to see the government rein in overspending (and overpromising).

But that’s just one side of the loonie.

Conversely, increased funding remains popular among Canadians when budget line items are broken down—with most Canadians vying for increased spending targeted at healthcare, housing, and Canada’s military.

With the government seeking to gain traction in public opinion, it’s unsurprising that all three areas received increased funding in Budget 2024.

The Liberal’s navigation of these dynamics will be crucial over the coming months as strategies behind spending begin to roll out. The Liberals—now more than ever—need to communicate the outcomes of their spending more effectively. The post-budget roadshow is the perfect place to start.

While overspending concerns remain high, the Liberals have quietly moved up in the polls towards the Conservatives who have been behind the wheel since September.

The Conservatives were riding on a 20-percentage-point advantage prior to this shift—now dropping to a 12-point lead ahead of the Liberals.

This is the first positive sign of momentum for the Liberals since the fall.

What Budget 2024 means to you

Housing affordability

It’s clear that Canada is facing a housing crisis characterized by skyrocketing prices, dwindling rental vacancies, and a growing affordability gap. The crisis is emphasized in urban centres where housing prices have outpaced income growth.

The Liberals’ 28-page housing plan is the government’s most recent effort to set a direction on affordability as it remains last in the ranks of trusted federal parties to address the crisis.

With additional funding, the Liberals plan to build 3.9 million homes by 2031—leasing public lands as one tactic to achieve this.

With over 20 housing and affordability announcements shared prior to today’s budget, it seems as though the Liberals heard the message (and polling data) loud and clear that investments were needed.

Here are some funding highlights:

• $6 billion for new Canada Housing Infrastructure Fund—$1 billion for municipalities and $5 billion for provinces and territories, contingent on specific requirements. This will support housing infrastructure like water, wastewater, stormwater, and solid waste infrastructure.
• $1.5 billion for new Canada Rental Protection Fund to preserve rental homes—making them more affordable.
• $400 million to top up Housing Accelerator Fund—launched in 2023—to fast-track 12,000 new homes over three years.
• $1.5 billion for Rental Protection Fund.
• $1 billion for Affordable Housing Fund.
• $1.5 billion Co-operative Housing Development Program.

Defence

$8.1 billion over five years—and $75 billion over the next 20 years—have been promised under the new Our North Strong and Free: A Renewed Vision for Canada’s Defence under increasing pressures from international partners and rising global tensions.

Price tags are attached to some commitments, including $18.4 million over 20 years for new tactical helicopters and $2.8 billion for cyber operations; however, specific details on other promises remain unclear—like the specific submarine fleet Ottawa wants and for what price.

With Defence Minister, Bill Blair, consulting with Canada’s defence insiders on preferred equipment, it’s clear that more details need to be spelled out in the coming months to restore clarity.

Even with billions more in funding, Canada is still falling short of its promise to meet NATO defence targets. The Liberals are only reaching 1.76 per cent instead of the 2 per cent commitment made last year to NATO partners.

Unsurprisingly, the opposition was quick to fire back on the Liberal’s plan—arguing that much of the promised spending won’t roll out in the short term to support current troops requiring updated equipment and training in the short-term.

Additional spending lines

AI infrastructure

$2.4 billion funding package, including:

• $2 billion to build and provide computing capabilities and tech infrastructure for AI research, start-ups, and scale-ups.
• $200 million to support Canada’s Regional Development Agencies to boost AI start-ups.
• $100 million in NRC IRAP AI Assist Program to help businesses scale and increase productivity.
• $50 million to Sectoral Workforce Solutions Program to provide new skills for workers disrupted by AI (including creative industries).
• $5.1 million for Office of the AI and Data Commissioner to strengthen and enforce Artificial Intelligence and Data Act.

Healthcare

Here’s some funding offered in today’s budget:

• $562.5 million in 2024-2025 to support medically necessary services through the Non-Insured Health Benefits Program, which supports a range of benefits for First Nations and Inuit people, including mental health services, medical travel, medications, and more.
• $1.5 billion over 5 years to help Canada support a national Pharmacare plan. Ongoing negotiations and discussions between levels of government while implementing the following promises are crucial for ensuring effectiveness of Canada’s healthcare system.

Clean energy and technology investment tax credits

Unfinished policy initiatives, including the package of clean energy and technology investment tax credits proposed in 2023, received a soft status update in today’s budget, which provided further details on the timelines for the tax credits, and new design and implementation details of the Clean Electricity tax credit. Key updates include:

• The government will soon introduce legislation to deliver the Clean Hydrogen investment tax credit and Clean Technology Manufacturing investment tax credit. Draft legislation for the Clean Technology Manufacturing investment tax credit will be released for consultation in summer 2024 and the government targets introducing legislation in fall 2024.
• Clean Electricity investment tax credit: would be available only to Canadian corporations that meet labour and investment criteria.

Opposition reactions

It’s no surprise that early budget announcements have given opposition parties time to plan their public counterattacks to spending.

Conservative Leader Pierre Poilievre has already launched his party’s staunch opposition to the spending plan, promising a four-point plan under his leadership beginning with “axing the tax,” building homes, fixing the budget, and stopping crime.

With recent concessions made with the New Democratic Party (NDP), including negotiated parliamentary motions and a detailed pharmacare package—Budget 2024 is expected to pass with their continued support. However, given the government’s minority status, opposition reaction is increasingly relevant as the next federal election nears.

NDP Leader Jagmeet Singh expressed support for certain measures in the budget, including the renter protection fund. The NDP party strongly believes that the cost of living is fuelled by corporate greed and sought to have this greed capped in the 2024 budget.

The Green Party isn’t supporting this budget, outlining that it doesn’t address major issues—such as wealth taxation—and doesn’t address the urgent need for climate action.

Final thoughts

As the sun sets on Budget 2024, the political landscape resembles a busy intersection. The Liberals have stepped on the gas, announcing ambitious plans, while the Conservatives maintain a steady lead in the polls, commanding the road ahead.

The Liberals find themselves in a carpool with the NDP. It’s a delicate balance of cooperation and competition, with each party vying for control of the steering wheel.

Concrete strategy and action are the fuel that will propel the Liberals forward, and only time will tell if they have what it takes to navigate the twists and turns ahead.

Still unsure on how to prepare for the future? NATIONAL’s team of Public Affairs experts can help you navigate through these changes.