The latest federal budget has been pitched as a plan to address inflation and make life more affordable for Canadians.
The 2023 federal budget is boringly titled “A Made-in-Canada Plan.”
It’s a Canadian response to global economic and supply side-woes in a post-pandemic environment, with a little bit of Canadian conviviality by the Liberals to keep the NDP voting with them by acceding to some of their fiscal demands.
- Net zero
- Health care
- Defence and veterans
- Seniors
- Indigenous communities
- Women
- Groceries
- Pensions and crypto
- Rich people
- Public sector spending reductions
- Odds and sods
The big headline for this document is that the government focused on the cost of living, health care and green initiatives, with big investments in other areas.
This budget showed government expenses declining with revenues increasing. Revenues increased by $2.9 billion or 8.2 per cent, due mainly to tax revenues. And program expenses were down $2.3 billion or 6 per cent largely driven by redeterminations of COVID-19 income support for workers.
Still, our net GDP declined despite a growth of revenues ($348.9 billion, up $34.6 billion or 11 per cent from the year before) as a product of the global economic slowdown.
Canada’s deficit increased by $2.4 billion this fiscal year, which is supposedly good because this keeps the deficit on a declining path.
Unfortunately, the balanced budget predicted in last year’s fall economic update has been punted to some time in the future, after the 2027-28 projections in this budget.
Paying that deficit got more expensive, with our public debt charges up $1 billion or 51.3 per cent, reflecting higher interest rates.
But according to the budget, Canada’s economic growth was the strongest in the G7 over last year.
“Inflation has fallen for eight months in a row, and the Bank of Canada predicts it will drop to just 2.6 per cent by the end of this year,” Finance Minister Chrystia Freeland said in her budget speech to the House.
The budget offered two predictions for the way Canada’s finances will go.
In the upside scenario, the Canadian economy manages to avoid a shallow recession as the continued easing of supply challenges, in Canada and globally, helps to bring down inflation even as economies remain stronger than anticipated.
In the downside scenario, the deficit would increase by about $7.2 billion annually.
On the positive side, Canada’s economy is now 103 per cent the size it was before the pandemic, and our unemployment rate is now at five per cent, just shy of the all-time low record of 4.9 per cent.
But private sector economists polled by the ministry predicted a shallow recession for this year, with growth falling from 3.4 per cent to 0.3 per cent, rebounding in 2024 to 1.5 per cent.
Proceeds from the pollution pricing framework were up $1.6 billion, or 35 per cent, reflecting higher carbon pollution pricing in 2022 and 2023. But that money leaves government coffers, returning to the provinces that spawned it.
On a high note, the federal portion of assessed cannabis excise duties increased by $43 million to $173 million over the April-to-January period.
With pandemic programs wrapping up, government spending will be reduced this year by $15 billion, even with pricey new line items.
Net zero
The biggest spend is the massive investment towards creating a net-zero carbon economy.
In the budget’s introduction, Freeland mentioned two fundamental shifts in the global economy — “the race to build the clean economies of the 21st century, and our allies’ accelerating efforts to friendshore their economies by building their critical supply chains through democracies like our own.”
This involves a shift from fossil fuels to electricity.
Health care
Through the recent health-care deal with the provinces, a $198 billion health-care investment over the next decade has been announced. The deal stipulates that the transferred money is not to be used by the provinces and territories in place of their planned health-care spending. This includes the $46.2 billion in new funding made through new Canada Health Transfer measures.
Despite being on the NDP’s wish list and likely a key component of the supply-and-confidence agreement, pharmacare was not mentioned in the budget. The confidence agreement commits the government to pass a Canada Pharmacare Act by the end of 2023.
In a CBC Radio interview following Freeland’s speech, NDP leader Jagmeet Singh said his party has been promised there will be some news about it in the 2023 fall fiscal update
And by the end of 2023, the government promises it will roll out a dental health-care plan that will eventually help up to nine million uninsured Canadians.
Budget 2023 proposes to provide $13 billion over five years, starting in 2023-24, and $4.4 billion ongoing to Health Canada to implement the Canadian Dental Care Plan. That includes $5.9 billion previously allocated. The new plan will provide dental coverage for uninsured Canadians with an annual family income of less than $90,000, with no co-pays for those with family incomes under $70,000. The plan would begin providing coverage by the end of 2023 and will be administered by Health Canada, with support from a third-party benefits administrator.
The other big health spend is in the collection and sharing of health data. The federal government will provide $505 million over five years, starting in 2023-24, to the Canadian Institute for Health Information, Canada Health Infoway and other federal data partners.
To support personal support workers or PSWs, a critical human resource in health-care delivery, budget 2023 proposes up to $50 million over five years, starting in 2023-24, to Employment and Social Development Canada to develop and test innovative solutions to strengthen the retirement savings of personal support workers without workplace retirement security coverage. The measure is expected to support recruitment and retention of these valuable workers.
The federal government will also provide $1.7 billion over five years to support hourly wage increases for personal support workers and related professions. The federal government started this during the pandemic to attract, retain and fairly compensate PSWs, particularly in long-term care settings.
For the opioid epidemic, Budget 2023 proposes to provide a total of $359.2 million over five years, starting in 2023-24, with $5.7 million ongoing and $1.3 million in remaining amortization to support a renewed Canadian Drugs and Substances Strategy.
And as of Nov. 30, 2023, Canadians will be able to call 988 for emergency suicide prevention and mental health support. Budget 2023 commits $158.4 million over three years, starting in 2023-24, to support the implementation and operation of 988.
Budget 2023 will also provide $36 million over three years, starting in 2024-25, to Health Canada to renew the Sexual and Reproductive Health Fund. This fund supports community-based organizations that help make access to abortion, as well as other sexual and reproductive health-care information and services, more accessible for vulnerable populations.
Defence and veterans
The budget promises Ukraine more financial support, an additional loan of $2.4 billion for 2023, which will be provided via the IMF Administered Account for Ukraine.
Another $200 million goes to our National Defence to compensate for equipment already sent or promised to Ukraine, including those eight Leopard tanks.
In response to recent news of foreign interference in Canada, Budget 2023 proposes $48.9 million over three years starting in 2023-24 to the Royal Canadian Mounted Police to protect Canadians and engage with them in this area.
Budget 2023 also proposes to provide $13.5 million over five years, starting in 2023-24, and $3.1 million ongoing to Public Safety Canada to establish a National Counter-Foreign Interference Office.
Turning to veterans, Budget 2023 notes progress made on veterans’ claims backlogs and that 350 staff have been hired since 2020 — although many of those roles have been temporary. Budget 2023 proposes to provide $156.7 million over five years, starting in 2023-24, and $14.4 million ongoing to Veterans Affairs Canada, the Royal Canadian Mounted Police and the Veterans Review and Appeal Board to reduce backlogs and support service delivery across several programs and services. However, no details were given on how the department will ensure the funds are used to work towards equitable outcomes for all veterans.
Seniors
While many older adults will benefit from broad investments in this year’s budget, including health care, pensions and affordability measures like the grocery rebate, seniors didn’t get offered much new money in terms of programming or direct transfers. In fact, most of the budget’s commentary on older adults related to general measures and touted spending as far back as 2015.
With the indexation of benefits to inflation, and the growing seniors population, OAS, GIS, and Allowance expenditures, Canada’s largest federal program, are projected to grow by close to 30 per cent to $96.3 billion in 2027-28 from 2023-24 — an increase of more than $20 billion per year and growing.
Elderly benefits are projected to reach $69.1 billion in 2022-23, up 13.7 per cent.
Over that forecast horizon, elderly benefits are projected to increase by an average of 6.9 per cent annually.
Budget 2023 proposes to provide $123.9 million over seven years, starting in 2023-24, to Employment and Social Development Canada to complete Old Age Security IT modernization.
Indigenous communities
Next on the big spends, Budget 2023 proposes an additional $4 billion over seven years, starting in 2024-25, to implement a co-developed Urban, Rural and Northern Indigenous Housing Strategy. To stimulate new home construction, the government is reallocating money from its repair stream into a new construction stream.
The budget also provides $2.8 billion as part of the Band Class settlement to establish a trust to support healing, wellness, education, heritage, language and commemoration activities. The government will also propose legislative amendments to exclude the income and gains of the trust from taxation.
Women
For a “feminist” government, Budget 2023 didn’t focus much on women. It proposes to provide $160 million over three years, starting in 2023-24, for the Women’s Program to fund organizations in Canada that serve women.
The government says it’s committed to maintaining historic funding levels for Canadian women's organizations and equity-deserving groups, with a particular focus on Indigenous women, women with disabilities, members of the 2SLGBTQI+ communities and newcomer, Black, racialized and migrant women.
But Budget 2023 did propose to make amendments to the Canada Labour Code to create a new stand-alone leave for workers in federally regulated sectors who experience a pregnancy loss.
Budget 2023 proposes to introduce amendments to the Canada Labour Code to improve eligibility for leave related to the death or disappearance of a child for workers in federally regulated sectors.
Groceries
For 11 million low-and modest-income Canadians and families, a one-time grocery rebate will provide eligible couples with two children with up to an extra $467; single Canadians without children with up to an extra $234; and seniors with an extra $225 on average. These measures will cost $2.5 billion and be delivered through the Goods and Services Tax Credit (GST Credit). The money won’t have to be spent on groceries.
Pensions and crypto
To protect Canadians’ investments and the security of the financial sector, Budget 2023 offered that the Office of the Superintendent of Financial Institutions (OSFI) will consult federally regulated financial institutions on guidelines for publicly disclosing their exposure to crypto-assets. Federally regulated pension funds will be required to disclose their crypto asset exposure.
In the fall 2023 fiscal update, the government plans to update Canadians on their crypto consultations.
There’s little else to transform Canada’s retirement security landscape in Budget 2023. In addition to measures to strengthen the retirement security of personal support workers and investing in IT modernization for Old Age Security, the budget specifies technical amendments to some pieces of pension legislation, including new frameworks for variable payment life annuities.
Rich people
To make the wealthiest Canadians pay their fair share of tax, Budget 2023 proposes legislative amendments to raise the alternative minimum tax (AMT) rate from 15 per cent to 20.5 per cent and further limit the excessive use of tax preferences. Supposedly, these amendments would generate an estimated $3 billion in revenues over five years, beginning in the 2024 taxation year. The tax would be 99 per cent paid by people who earn more than $300,000 a year, and 80 per cent by those earning more than $1 million annually.
Under the proposed reforms, the basic AMT exemption would increase more than fourfold, from $40,000 to $173,000, significantly raising the income level necessary to pay the AMT. This would result in a tax cut for tens of thousands of middle-class Canadians, while the AMT will more precisely target the very wealthy.
Public sector spending reductions
While the government did not commit to finally wrestling the Phoenix boondoggle to the ground, it has proposed funding for Public Services and Procurement Canada “to maintain pay system resources as the government continues its work to resolve public service pay issues.”
In an effort to sprinkle some austerity, Budget 2023 proposes to reduce spending on consulting, other professional services and travel by roughly 15 per cent of planned 2023-24 discretionary spending in these areas. This, they claim, will result in a savings of $7.1 billion over five years, starting in 2023-24, and $1.7 billion ongoing. The government will focus on targeting these reductions on professional services, particularly management consulting.
Budget 2023 also proposes to phase in a roughly three per cent reduction of eligible spending by departments and agencies by 2026-27. This plan is to reduce government spending by $7 billion over four years, starting in 2024-25, and $2.4 billion ongoing.
The government will also work with federal Crown corporations to ensure they achieve comparable spending reductions, which would account for an estimated $1.3 billion over four years starting in 2024-25, and $450 million ongoing.
In total, these proposals represent savings of $15.4 billion over the next five years.
The budget also proposes to reduce previously announced funding that remains unallocated or is no longer required, or to delay it where the pace of implementation is slower than originally envisioned. This will result in savings of $6.4 billion over six years, starting in 2022-23.
Odds and sods
Budget 2023 proposes to provide $1.1 billion over 14 years, starting in 2023-24, to the Canadian Space Agency to continue Canada’s participation in the International Space Station until 2030.
The federal government will also provide $1.2 billion over 13 years, starting in 2024-25, to the Canadian Space Agency to develop and contribute a lunar utility vehicle to assist astronauts on the moon.
And for the fixers amongst us, Budget 2023 announces that the government will work to implement a right to repair, with the aim of introducing a targeted framework for home appliances and electronics in 2024.
And finally, Budget 2023 proposes to provide $1.8 billion over five years, starting in 2023-24, to the Canadian Air Transport Security Authority (CATSA) to maintain and increase its level of service, improve screening wait times and strengthen security measures at airports.