National Post



- Brian Platt

Surging economic growth has Canada’s government on track to lower its deficits, but it’s also committing billions of dollars in new spending, including an extra $ 5.6 billion pumped into the Canada Child Benefit program over five years.

The fall fiscal update, released on Tuesday, shows the government expects an extra $ 8.9 billion in revenue this year, compared with the estimate in the spring budget. The projected deficit has dropped from $28.5 billion to $19.9 billion (including $ 1.5 billion set aside as a risk cushion).

About $33 billion in total has been shaved off the deficits projected over five years, but there is still no timetable for returning to balance. The debt-to- GDP ratio is forecast to drop under 31 per cent this year and reach 28.5 per cent by 2022-23, when the deficit is forecast to be $12.5 billion.

Instead of plowing all of the in- creased revenues into reducing the deficit, the fiscal update shows the government flexing its spending muscles — or in the words of Finance Minister Bill Morneau, “doubling down” on its strategy of stimulatin­g the economy.

An extra $ 1.8 billion is already booked this year in new spending since the spring budget, and starting next year, hundreds of millions will be spent on boosting two benefit programs: the Canada Child Benefit and the Working Income Tax Benefit.

Asked why he isn’t focusing more on getting to a balanced budget, Morneau told reporters the government’s strategy of boosting the economy through new spending has clearly been shown to work, given the buoyant growth.

“We’re very pleased with our economic situation, it’s what we would have hoped for,” he said.

“We now are able to show a very positive fiscal track … We’re able to do that by doubling down on what we’ve done for Canadian families, improving the Canada Child Benefit so people have more money in their pockets, and helping those who are struggling to get by.”

The child benefit, which provides tax- free monthly payments up to a maximum of $ 6,400 a year for a child under six, started in July 2016 and has been credited by many — including Bank of Canada Governor Stephen Poloz — with boosting consumer spending. The program paid out $ 23 billion to 3.3 million families in its first year.

The government now says it will index the child benefit to inflation two years faster than planned. In one example outlined, indexation would give $ 560 more in a year to a single parent making $ 35,000 who has two children. The move is expected to cost the government $400 million next year, and about $ 1.4 billion each year after.

Meanwhile, an extra $500 million annually will start going into the Working Income Tax Benefit, a tax credit cl ai med by l ow- i ncome workers. Details will be announced in the 2018 spring budget.

In addition, last week the government announced a lowering of the small- business tax rate from 10.5 per cent to nine per cent by 2019, which will decrease revenues by $2.9 billion over five years.

Some economists have worried that the new spending during a time of robust growth will fuel inflation, and in turn, interest- rate hikes from the Bank of Canada to combat it. The next rate announceme­nt comes out on Wednesday, and follows two hikes in a row.

Conservati­ve Leader Andrew Scheer used the occasion to remind people of broken Liberal campaign promises on the budget.

“Justin Trudeau promised to balance the budget by 2019,” he said. “Today the budget is officially projected to never return to balance under this Liberal government, and debt is being added at twice the rate promised.”

The Canadian Taxpayers Federation was also unimpresse­d with the lack of a plan to eliminate the deficit. “If they can’t balance the budget when the economy is doing well, when can they?” the federation said.

The fall update outlines for the first time a series of new spending commitment­s since the spring budget — in total, about $ 1.8 billion for this fiscal year, plus billions more in future years.

This includes $ 546 million over five years in new spending f or t he “l egal framework to strictly regulate and restrict access to cannabis” and $ 150 million over six years for enforcing drug-impaired driving.

It also outlines $ 760 million over six years in new spending for security at Canada’s embassies and consulates, and $1.2 billion over six years in new service funding for the coast guard and other fisheries operations.


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