Fiscal update plans for more spending
Estimated $100 billion tacked on to balloning deficit in battle against pandemic
OTTAWA — After running a deficit of more than $380 billion in the fight against COVID-19, the government is pledging to spend as much as $100 billion more over the next three years to ensure the pandemic’s economic scars aren’t permanent.
Finance Minister Chrystia Freeland presented the numbers in her long-awaited fiscal update Monday afternoon in the House of Commons, pledging to ensure Canada was positioned to come out of the pandemic stronger.
“The job we have to do right now is to be sure that our economy is not scarred, to be sure that our economy is not wounded, so that we can come out of this crisis roaring back.”
With COVID numbers on the rise, Freeland said Canadians should know that there is a plan to get the country back to normal.
“I want Canadians to know that we have a plan to get through the winter,” she said. “We have a plan to provide vaccines to Canadians. And we have a plan to build our economy back in the spring.”
The government will run a deficit of at least $381 billion, according to its estimates, but warns with a resurgence in the virus and escalated lock down measures, that number could grow further still to nearly $400 billion. Either way the astounding sum, will be the highest relative to the economy since the Second World War.
In the government’s last update in July, the deficit was estimated at $343 billion, but more measures have been added since then.
In subsequent years, the government is predicting ongoing deficits with the country expected to be at least $121 billion in the red next year and $24 billion in deficit five years from now.
In concrete measures, Freeland announced the government’s wage subsidy would be boosted to 75 per cent of employee wages until March next year, to help businesses through some of the slower months at the start of 2021.
The government will also spend $2.6 billion over the next seven years for home energy retrofit grants of up to i$5,000 and spend more than $3 billion to plant two billion trees.
There will also be more money to help shore up longterm care homes from the worst impacts of the virus. Low and middle income parents of young children under the age of six will get an additional $1,200 top up under the Canada Child Benefit next year.
There are no firm details, but the government is also pledging to move toward a national childcare system, using the system in Quebec as a model.
“Just as Saskatchewan once showed Canada the way on healthcare and British Columbia showed Canada the way on pricing pollution, Quebec can show us all the way on child care,” Freeland said in her speech.
After COVID, Freeland said the government will spend between three and four per cent of GDP, between $70 and $100 billion over the next three years to spur the economy back into action.
The government’s spending has previously been constrained by fiscal anchors or guardrails, though the Liberals missed some of their own targets on this front. Freeland said the amount of spending will be guided by rules again, with a focus on employment measures like unemployment and hours worked.
According to the government’s numbers, about 80 per cent of the jobs lost early in the pandemic have come back. Freeland declined to cite specific numbers or targets, but said employment will be their guide.
“As we build our growth plan and as we deploy it, the measure we’re going to be looking at to see if we’ve got the job done is really around jobs,” she said.