Date of publication: 7 Apr 2022 • 17 minutes ago • 5 minutes reading • 63 Comments Secretary of the Treasury Chrystia Freeland announced a careful plan for Canada. Photo from REUTERS, archive
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What was widely expected to be an NDP budget is proving to be a budget that will appeal to many Conservatives.
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Finance Minister Chrystia Freeland has apparently been frightened by geopolitical uncertainties, devastating inflation and evidence that Canada’s future standard of living is threatened by poor economic productivity. Certainly, the NDP’s requirements for dental care and housing are on the budget. But they are overshadowed by a spending plan that is relatively — at least compared to its ungrateful predecessors — prudent and responsible. The budget paints a picture of a booming economy, with double-digit increases in commodity prices boosting government coffers. Over the next five years, Ottawa expects revenue to be $ 85 billion higher than was expected at the time of fiscal information last fall.
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The deficit for the current financial year was then projected at $ 144 billion. the revised amount is $ 113 billion. In previous budgets, the Liberals took their unexpected profits and spent a lot.
$ 62.4 billion in new spending
But in these uncertain times, Freeland chose to be careful. The budget reveals $ 62.4 billion in new spending in the years up to 2026/27, but the government is also projecting new revenue of $ 25 billion – from a host of new sources, including a new tax on “excess” bank profits – and overpriced . Budget banks were expecting savings of $ 6 billion from a pending policy review and $ 3 billion in reduced spending, a result of what they say is a stronger-than-expected recovery. About $ 7 billion already in the financial framework and earmarked for transit or infrastructure spending have been “redrafted” to mitigate the budgetary impact.
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The search for change in the back of the federal couch aims to maintain the only fiscal anchor that the Liberals continue to endorse – debt-to-GDP reduction. “It’s a line we will not cross and that will ensure that our finances remain sustainable,” Freeland said. Debt, as a percentage of the economy, is projected at 46.5 percent this year, falling to 41.5 percent in five years.
New tax on “surplus” bank profits
The more prudent approach also aims to ensure that government stimulus spending does not work for multiple purposes in relation to the Bank of Canada’s efforts to stifle inflation through aggressive interest rate hikes. While there is no shortage of spending, it often does not live up to what the Liberals promised in the 2021 election platform, when they pledged $ 78 billion in new “investment” in everything from modernizing the CBC ($ 400 million) to macro-reform. care ($ 6.5 billion). These measures are obvious due to their absence, which is likely to make some voters unhappy.
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It is possible that the political stability offered by the NDP agreement has given the Liberals the opportunity to turn to long-term economic issues that they have neglected so far. Officials noted a recent OECD report that ranked Canada as the deadliest of all Member States in terms of long-term per capita growth potential. The budget pointed out that this country is lagging behind in business research and development, compared to its G7 peers. “This trend needs to change,” he concluded. Freeland said Canada’s productivity and innovation is its “Achilles’ heel”. “It’s time for Canada to address this,” he said.
$ 2 billion in productivity
In fact, it’s been a long time coming – and it will take far more than the $ 2 billion in new money available in this budget to fix it.
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That said, resistance to crime is coming more slowly than ever. Freeland has placed its new enthusiasm for economic productivity as part of a supply-side development agenda, alongside the government’s housing, immigration, green transition and childcare policies. The budget described how the government hopes to address its innovation vulnerability – the Canada Growth Fund, a new federally funded public investment vehicle that will raise more than $ 15 billion over the next five years, and new Canadian Agency for Innovation and Investment. Robert Asselin, a former Liberal adviser to former Treasury Secretary Bill Morneau and now senior vice president of Canada Business Council, said the government had introduced a more responsible spending plan than expected, but added that he was disappointed with the creation. two new innovation institutions. “We have seen in the past with the Bank of Canada Infrastructure and others that this government is not good at implementing it,” he said.
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The government is aware of the need to attract up to $ 140 billion in investment each year to achieve net zero emissions by 2050, from $ 15 billion to $ 25 billion. A carbon capture and storage facility. Ottawa has allocated $ 2.6 billion over five years to fossil fuel companies to start emitting emissions. Photo by Reuters, archive
Tax deduction for carbon sequestration
A new initiative aimed at tackling the deficit is a 50 to 60 per cent tax credit on carbon sequestration and storage equipment to motivate oil and gas companies to bury emissions before they enter the atmosphere. The budget has $ 2.6 billion for the next five years, much to the disappointment of the NDP. The government has also promised to reconsider the problematic tax incentive program for Scientific Research and Experimental Development, which is scattering billions of dollars like fairy dust to recipients, but obviously does not have the desired impact on corporate R&D levels.
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Do not expect much from the review – as the Liberals have found from their failed tax reform, when there are more losers than winners, substantial change is difficult. However, efforts to expand Canada ‘s capacity and maintain a spending line are welcome, as are new defense spending commitments. The budget has allocated $ 6.1 billion in new money for the continental defense and other existing commitments, which will hardly make Putin tremble in the Kremlin. However, there is a sense of new urgency in the document, including a full review of defense policy to measure resources, roles and responsibilities. Critics of this government’s defense policy have long complained about the lack of political direction as well as the underspending, so any deviation from the benevolent neglect of the recent past is an improvement. Freeland gave voice to this new realism. “Putin’s invasion of Ukraine has reminded us that our peaceful democracy ultimately depends on defending hard power.” “We know that freedom does not come for free.” Just when it seemed that this liberal government was lost in pragmatism and common sense, it shows that it still has the power to surprise. [email protected] Twitter.com/IvisonJ
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