Finance Minister Chrystia Freeland will present a budget on Thursday that promises $ 10 billion to make housing more affordable for Canadians, provides $ 8 billion in new defense spending, and aims to boost economic growth through green initiatives to reduce small businesses. Defense and housing spending will be available for about five years, a senior federal source said. Business leaders have called on Freeland in recent days to cut back on spending to fight rising inflation and present an urgent budget action plan that makes economic expansion and productivity a top priority. Mrs Freeland’s financial message will be that spending on housing projects and the green economy – outlined in last year ‘s Liberal campaign platform – encourages economic growth. The financial housing plan is the focus of the budget. The top federal source said it addresses cost of living concerns and will help attract skilled migrants at a time when businesses are facing huge labor shortages. In addition to the platform’s priorities, there will also be new money for the Canadian military and action to address NDP priorities, such as dental care, that were part of a March co-operation agreement between the Liberals and New Democrats. The source said that Ottawa will increase its defense spending by $ 8 billion in about five years, mainly to upgrade the North American Aerospace Administration (NORAD), the continental defense system, and to purchase weapons for Ukraine in the war. against Russia. The extra money will not be enough to boost Canada’s military spending from the current level of 1.34 percent of GDP to the 2 percent requested by NATO. David Perry, president of the Canadian Institute of World Affairs, has said that Canada will have to spend an additional $ 17 billion a year to achieve its NATO goal. The source said that the budget will also include tax relief for small businesses. This will lead to a relaxation of the existing phasing-out rules related to access to the small business tax rate. Small businesses currently benefit from a 9 percent tax rate on the first $ 500,000 of active business income, compared to the corporate tax rate of 15 percent. Access to this small business tax rate under current rules starts to be phased out when the taxable capital exceeds $ 10 million and is phased out to $ 15 million. The top federal source said the budget would adjust the phasing-out schedule, but gave no further details. Dan Kelly, president of the Canadian Federation of Freelancers, said his organization had long called for such a change. Mr Kelly said Wednesday that this would be “welcome news” and would encourage more small businesses to grow into medium-sized ones. In view of the 2022 federal budget, corporate Canada wants Ottawa to act on economic policy – not just talk about it A dose of fiscal discipline is the non-sexy necessity of the Liberal budget As promised during last year’s election campaign, the source said, the budget is aimed at tackling rising house prices. The Liberals will spend $ 4 billion to build 100,000 new homes in urban areas by 2025 and $ 2.7 billion on low-cost, cooperative housing. Ottawa will also set up tax-free savings accounts to allow first-time home buyers to save up to $ 40,000 and a rental plan. The total cost is $ 10 billion over five years, the source said. The source added that Ms Freeland’s budget would also honor the Liberals’ election promise to pass legislation to impose a two-year ban on foreign nationals from buying homes while not living in Canada. The Globe and Mail did not specify the source because they were not authorized to discuss fiscal measures in public. Economists say the money for low-cost housing will have a significant impact on affordability for lower-income Canadians. But they worry that providing money to first-time homebuyers and other such measures will push up prices in an already overheated housing market. Other budget measures include removing bureaucracy to facilitate companies’ access to federal R&D funds. Ottawa will also spend more than $ 3 billion on rapidly developing the production and processing of critical minerals needed to make electric vehicle batteries. On climate change, a second senior government source said Ottawa would provide tax incentives to oil and gas companies to invest in carbon sequestration and storage. The fiscal measures will also include incentives to increase the use of hydrogen and renewable fuels and to persuade Canadians and businesses to switch to zero-emission vehicles. The Globe did not specify the source, who was not authorized to comment on the budget. RBC and Scotiabank CEOs say Ottawa is not doing enough to boost long-term economic growth and have called for an adjustment to the 2022 budget. of Thursday. On Tuesday, Mr Trinto said his government was financially accountable and that the budget would keep its debt-to-GDP ratio down. That “will always remain one of our key fiscal anchors,” he said. The size of the federal debt has almost doubled, in dollar terms, during the pandemic and is projected to reach $ 1.25 trillion in fiscal year 2022-23, which began on April 1. The ratio of federal debt to GDP has risen from 30.7% to 47.6% during the pandemic. The government fiscal briefing in December said the debt-to-GDP ratio would decline slightly over the next five years, reaching 44 percent by 2026-27. Private-sector economists say stronger revenue forecasts from December probably mean the trend could be sharper, but it will depend on how much new spending is announced in Thursday’s budget. Goldie Hyder, chairman of the Canadian Business Council, said she was concerned that more federal spending would add inflation fuel to an already overheated economy. “The last thing you want to do is boost the economy,” he said. “You start inflation and inflation disproportionately hurts the middle class and the poor.” Mr Haider said he expected Ms Freeland to set a specific fiscal anchor that would put the debt-to-GDP ratio on a downward trajectory. “Better to be a real fiscal anchor, not something they made,” he said. William Robson, president and CEO of the CD Howe Institute, said the cost of federal borrowing is cheap now, but interest rates are rising and it will cost the Canadian economy. “It just does not make sense for the debt to go up and not make it go down,” he said. “The Bank of Canada should raise the overnight interest rate much more than most people think.” Other important budget items include dental care and pharmaceuticals, which were key elements of the Liberal-NDP agreement. The dental plan for low-income Canadians will start covering children under 12 in 2022 and will be expanded next year to cover the elderly and people with disabilities. All households with an income of less than $ 70,000 will be fully covered and those with an income of less than $ 90,000 will be partially covered. Former Liberal Finance Minister John Manley, who also served as deputy prime minister in Jean Cretien’s government, said public funding of dental and pharmaceutical care could erode the benefits of private sector companies. Private-sector plans are “already more generous than the new government plan is likely to be,” he said, adding that he was concerned that employers could limit what they were offering employees in the hope that public-sector plans would cover it. For subscribers: Receive exclusive political news and analysis by subscribing to Political information.
