Chrystia Freeland to present federal budget on April 16

Canadians will get a look at the state of federal fi‐ nances when Deputy Prime Minister Chrystia Freeland tables her budget next month.

The government has been trying to rein in spending af‐ ter years of big COVID-era budget deficits that more than doubled the national debt to roughly $1.2 trillion a debtload that is costing Ot‐ tawa tens of billions of dol‐ lars a year to finance in an era of higher interest rates.

Freeland's fall economic statement projected a budget deficit of $38.4 billion for the upcoming 2024-25 fis‐ cal year. That number could move higher - or lower - de‐ pending on how the govern‐ ment has planned for the penultimate budget of its mandate.

The budget will give Cana‐ dians some insight into the government's priorities in what could be one of the last spending documents before an expected 2025 election.

The NDP has agreed to prop up the Liberals until next year and a national vote could follow after the supplyand-confidence agreement between the two parties comes to an end.

Freeland has been in‐ volved in months of formal pre-budget consultations with interested parties who are jockeying to get more federal cash.

While it has pushed to cut spending - the main esti‐ mates tabled last week sug‐ gest the government wants to "refocus" or divert spend‐ ing worth about $4.8 billion a year by 2026-27 and beyond - it's likely the government will reveal some new funding for its priority files.

The government has tried to tackle the housing supply crunch with a series of initia‐ tives, including the housing accelerator fund that sends extra money to cities that change their municipal plan‐ ning laws to allow for more homes to be built.

The government also lifted the federal sales tax on new rental construction, a costly measure that some home builders say is already making a difference in the cost of construction.

Freeland could earmark more cash for programs that bolster the country's housing stock. The Canadian Mort‐ gage and Housing Corpora‐ tion (CMHC) says the country needs 3.5 million more units by 2030 to restore housing affordability.

The government is facing political heat from Conserva‐ tive Leader Pierre Poilievre, who has made the country's housing woes a key plank of his policy platform.

In a media statement an‐ nouncing the budget date, Freeland suggested there's more coming for housing.

"Our economic plan is about building more homes faster, making life more af‐ fordable and creating more good jobs. This plan will un‐ lock pathways to a good mid‐ dle class life for the next gen‐ eration - because Canada is stronger when everyone has an equal chance to succeed," she said.

Freeland also conceded last week at a news confer‐ ence that more action is re‐ quired to restore housing af‐ fordability.

"The single biggest thing in a family's budget is paying your mortgage or the rent. We just have to build more, faster. We are committed to that. We are doing it," Free‐ land said.

The Business Council of Canada, which represents some of the country's largest private-sector employers, is urging the government to avoid introducing any net new spending.

In a media statement, the council said keeping a lid on the finances would "help ease prices and rates for Canadians."

The council pointed to re‐ cent remarks from Bank of Canada Governor Tiff Mack‐ lem, who warned MPs at a recent Commons committee meeting that large govern‐ ment spending increases could "get in the way of get‐ ting inflation back down to target in the timeline we've laid out." The bank's inflation target is between two and three per cent.

If federal and provincial government spending growth significantly exceeds the economic growth rate (which is also about two per cent), Macklem said it could juice inflation and prompt the bank to respond with rate in‐ creases.

"If governments were to add more spending, it could start to get in the way of get‐ ting inflation back down, and that would not be helpful," Macklem said at the Feb. 1 committee meeting.

The Federation of Canadi‐ an Municipalities (FCM), the group that represents cities and towns, has also asked the government to renew some infrastructure pro‐ grams that are due to expire - a cash injection they say they need to keep up with a booming population.

Prime Minister Justin Trudeau promised municipal leaders last May that the "next long-term infrastruc‐ ture plan will be revealed this fall" - but it never material‐ ized.

"We were promised infra‐ structure funding, and to this day, we have not heard of a plan. So as the budget comes closer and closer, we're get‐ ting more and more con‐ cerned that there's no plan," FCM president Scott Pearce told reporters at a news con‐ ference.

Freeland has defended the government's record on infrastructure spending.

"There is no federal gov‐ ernment in Canadian history that has invested as ambi‐ tiously and as aggressively in infrastructure as our govern‐ ment. It was the centrepiece of our 2015 campaign com‐ mitment and we have deliv‐ ered on that," Freeland said, touting Ottawa's plan that will allocate about $7 billion a year in 2025-26.

Pharmacare, one of the government's big-ticket items, will not be included in this budget because there's still legislation coming before Parliament to enact the regime.

Health Minister Mark Hol‐ land also has to cut deals with the provinces and terri‐ tories before any money can be spent on drug coverage.

The government also has‐ n't decided whether it will pursue a fully universal, single-payer pharmacare program, which would be much more costly than its current plan of just covering contraception and diabetes treatments.

The government is also under pressure to increase military spending.

Some of the country's NATO allies have noted Cana‐ da has consistently failed to meet its promise to spend two per cent of GDP on the armed forces - a commit‐ ment that other members routinely meet or exceed.

It's unlikely Freeland's budget will allocate what's re‐ quired to hit the two per cent mark, as that would require an extra $20 billion a year in spending.

Asked about some re‐ cently announced spending cuts at a press conference in Edmonton Monday, Defence Minister Bill Blair said those reductions are aimed at curb‐ ing the use of outside consul‐ tants, reducing executive travel and reining in "profes‐ sional services" while redi‐ recting the money saved for use elsewhere.

He stressed that the de‐ fence budget has grown con‐ siderably since the Liberal government was first elected (total spending will double between 2017 and 2026) and there will be more dollars for other crucial areas in the years to come.

"As in any bureaucracy, I think it's important to look for the most efficient way to actually deliver the results that Canadians need and de‐ liver for the Canadian Armed Forces," Blair said, adding the government wants "value" for taxpayers' dollars spent on the CAF and the national defence department.

"Our defence spending is increasing and will continue

to increase. We've clearly in‐ dicated that we must do more," Blair said.

One area where there may be more spending is in recruiting new personnel.

The armed forces is se‐ verely understaffed after years of lacklustre recruit‐ ment drives meant to bolster the ranks and replace retiring members.

"We've got some work to do," Blair said of the mili‐ tary's readiness amid a staffing crunch.

The fall economic state‐ ment, tabled in November, explained how the govern‐ ment now spends more to service its debt than it does on the military.

Ottawa will spend $28.9 billion on the Canadian Armed Forces this fiscal year - about $18 billion less than what the government will send in payments to the banks and bondholders car‐ rying Canada's debt.