Date of publication: 7 Apr 2022 • 14 minutes ago • 5 minutes reading • 165 Comments Canadian Finance Minister Chrystia Freeland receives applause as she delivers the 2022-2023 budget to the House of Commons in Ottawa, Ontario, Canada on April 7, 2022. Photo from REUTERS / Blair Gable
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Treasury Secretary Chrystia Freeland on Thursday unveiled a much wiser budget than expected due to “uncertainty” in the world.
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The Liberals slashed some of their campaign promises last fall and will not meet NATO’s defense targets to provide a declining debt-to-GDP ratio. The federal deficit is now at $ 52.8 billion for 2022-2023, slightly less than expected in last fall’s financial update at $ 58.4 billion. Although the government benefited from an additional $ 14.3 billion thanks to inflation and high prices that generate tax revenue, Freeland chose not to spend all the extra money. “The word ‘uncertainty’ is a big part of our thinking, the thinking of the government in shaping this budget,” said a senior government official, speaking in the background. “The minister talked about a budget back to basics. I think that’s exactly it. I think it is mediocre, it probably reflects some of the uncertainty in the economic environment, especially with geopolitical risks. “The fiscal plan, the spending strategy, seems to be somehow aligned with this risk,” said Sahir Khan, executive vice president of the Institute for Fiscal Studies and Democracy.
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Since last fall, the government has announced $ 1.3 billion in new policies. The budget adds $ 7.4 billion mainly to housing, reconciliation and climate change promises. Taxing the big banks, as promised, will also bring in an additional $ 2 billion this year alone. The debt-to-GDP ratio is also falling, according to government forecasts. will be a rate of 45.1 percent in 2022-2023 and will gradually decrease to 41.5 percent by 2026-2027. The deficit is also expected to gradually decline to less than $ 10 billion over five years. But all this could change depending on the impact of the Russian invasion of Ukraine that continues for the second month now, the impact on supply chains due to the resurgence of COVID-19 in China and other economic uncertainties due to inflation and the impact of growing interest rates that could significantly disrupt current federal budget forecasts.
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The budget envisages “alternative economic scenarios”, one of which envisages an increase in the debt-to-GDP ratio as early as next year, if the war in Europe continues, supply chain disruptions continue and monetary policy tightens rapidly. This would lead to weaker economic activity and stronger inflation and worsen the fiscal balance. The other scenario, assuming that there is a rapid de-escalation of tensions in Ukraine with minimal supply disruptions from the conflict and the pandemic, presents a more rosy picture, with a sharper reduction in debt to GDP and reduced deficits in the coming years. . Freeland has come under increasing pressure to spend billions more on NATO defense goals in the light of war and to commit to the many liberal promises on last year ‘s campaign platform. It also had to include elements from the recent agreement with the New Democratic Party that included dental care, among other social expenses.
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The budget includes more than $ 10 billion in housing, slightly less than promised on the campaign platform. It also does not contain the billions in targeted health care resources promised in the provinces and regions for long-term care, mental health and hiring more health workers, a recent campaign. By contrast, most of the new funding for health care went to the newly established $ 5.3 billion dental care program and the recent $ 2 billion addition announced for operating room delays. “Provinces will not be happy,” said Genevieve Tellier, a professor of public finance at the University of Ottawa. “There is nothing about health transport,” he added.
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In terms of defense, the federal budget envisions $ 8 billion, but details of Canada’s commitment to NATO and NORAD will remain pending a defense review. That puts Canada well below NATO targets, once again, with 1.5 percent of its GDP on defense spending this year alone. “There has been a lot of talk in recent days about 2% and we are not in it. “It’s a modest, gradual increase, which probably reflects exactly the reality of absorbed capacity in the defense department,” Khan said. In terms of carbon capture and storage, a measure widely expected by the oil and gas industry, the federal government is providing $ 2.6 billion over five years and $ 1.5 billion annually by 2030. These tax cuts will may cover some of the investments in CO2 capture equipment and during transport, storage and use.
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Freeland appeared in the House of Commons to present her budget on Thursday, wearing a bright blue dress that is obviously not a sign of her support for conservative-style budgets, but rather a sign of her support for the Ukrainian people. “Inflation – a global phenomenon – is making things more expensive in Canada,” he said. “Cracked supply chains have driven prices higher at the checkout. Buying a home is unaffordable for many Canadians. “And now, Putin’s barbaric war is making food and gas even more expensive.” After saying the federal government had spent money “mostly and prudently” over the past two years to support Canadians during the pandemic, he added that this approach was over. “But our ability to spend is not infinite. “The time for emergency support for COVID is over.”
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The Conservatives, forging the need for controlled spending, still found ground to criticize Freeland’s budget after it was tabled. “Justin Trinto is basically taking money he was collecting from Canadians who are suffering from inflation. “And he uses it to pay for the promises he made to the NDP, and in turn, they will support him,” interim Conservative leader Candice Bergen told reporters. “We went to the polls because this government said that some important choices and investments had to be made. Well, here it is! ” mocked Bloc Québecois leader Yves-François Blanchet, holding this year’s budget, which is quite small compared to last year’s big pandemic document.
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Both the Conservatives and the Bloc have confirmed that they will not vote in favor of the budget. The NDP has already confirmed that it will do so, due to the supply and trust agreement that is set to last until 2025. That did not stop NDP leader Jagmeet Singh from boasting that his party had used its “power” to “provide” dental care in this year’s budget. Speaking to reporters, Freeland rejected the proposals that she had set aside some campaign promises in order to fulfill the Liberals’ agreement with the NDP. He said this was “the first of four budgets” and that Canadians “are not going to see everything we aspire to do in the first budget” after the election. “This is the first of four chapters. So yes, we will do more in the next three budgets. “However, we will do these additional things, we will fulfill these further promises within a fully responsible financial framework,” he said.
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