National Post (Latest Edition)

MASSIVE SPENDING ON CHILD CARE, RECOVERY STIMULUS.

COVID support programs extended

- Brian Platt

• In their first full budget since the COVID-19 pandemic devastated Canada’s economy, the Liberals are promising $101 billion in massive new spending on a national child-care program, support programs for affected businesses and stimulus to fuel the post-pandemic recovery.

The budget also offers a preview of what the Liberals plan to campaign on in an election that could come any time, including a promise to have $10-per-day child-care spaces by 2026.

Finance Minister Chrystia Freeland said the budget has three goals: to “conquer COVID” by buying vaccines and supporting provincial health-care systems; to “punch our way out of the COVID recession” by providing support to businesses and workers; and to build a “fairer” and “more innovative future,” in part by funding green jobs.

Freeland said the $101 billion in new spending over three years is necessary to ensure Canada’s recovery doesn’t drag on, as it did for some countries after the 2008-09 financial crisis.

“The world has learned the lesson of 2009, the cost of allowing economic hardship to fester,” she said. “For some countries, democracy itself has been threatened by that mistake. We will not let that happen in Canada.”

She also said the money is needed for supporting businesses and workers through the next few months until the vaccines take full effect.

“We have to finish the fight against COVID, and that costs a lot of money,” Freeland said. “Extending these income and business support programs is absolutely essential, and it is expensive, but we know the country needs it.”

The new spending plunges Canada further into debt, with a $154.7-billion deficit forecast for this year and a deficit over $50 billion forecast for the two following years. That’s on top of the unpreceden­ted $354.2-billion deficit in 2020-21, which is down from last fall’s projection of a $381.6-billion deficit due to faster economic growth and shifting some pandemic support spending into this year.

The deficits will cause the federal debt-to-gdp ratio to skyrocket to 51.2 per cent in 2021-22, then gradually decline to 49.2 per cent in 2025-26. Prior to the pandemic, the debt-to-gdp ratio was hovering at just over 30 per cent.

But Freeland and other finance officials said the public debt charges are sustainabl­e because of extremely low interest rates. In fact, the budget says that despite the huge deficits, Canada will pay less in debt charges in the next two years than it was forecast to pay before the pandemic hit.

Election speculatio­n has been running high in Ottawa, with the budget as one possible trigger because the Liberals have a minority and need the support of one of the opposition parties in order for it to pass.

But NDP Leader Jagmeet Singh made it clear his party will not trigger an election, regardless of their complaints with the budget such as the lack of pharmacare funding.

“There’s lots we can do, and lots we will continue to do, to fight for the help that Canadians need,” Singh said. “But it is clearly irresponsi­ble to have an election or to in any way trigger an election while we’re in the midst of this third wave. The impact on people would be devastatin­g, and we are not going to do that.”

Conservati­ve Leader Erin O’toole said he believes his party may vote against the budget, depending what his caucus decides.

“We will be proposing amendments,” he said. “There’s really no plan to get the finances of the nation under control ... Canadians deserve better than an election-style budget when we’re in a pandemic.”

O’toole said he doesn’t see a real fiscal anchor in the budget, and doubted the Liberals would get “even close” to reducing the debt-to-gdp ratio as the budget projects.

Yves-françois Blanchet, leader of the Bloc Québécois, said there are some “good things” in the budget but his party may also vote against it if it’s not improved. He wanted to see more funding to help the elderly, and an increase in health-care transfers to the provinces.

The splashiest item of the new spending is a national child-care program that aims to have $10-per-day regulated child-care spaces in every province outside Quebec (which already has its own child-care program) by 2026, at a cost of $30 billion over five years.

In the short term, the budget proposes to create a 50 per cent reduction in average fees for child-care spaces by the end of 2022.

“The tragedy of COVID-19 has created a window of opportunit­y, which we can open to finally build a system of early learning and child care across our country,” Freeland said in the budget’s foreword.

However, the program will require negotiatio­ns with provincial government­s, which have direct responsibi­lity for child care. The proposed funding would bring the federal government into a 50/50 cost sharing scenario with the provinces, the budget says.

“This is not an effort that will deliver instant gratificat­ion,” Freeland said in the foreword. “I am well aware of the political challenges ahead, particular­ly given our federal political structure. We are building something that, of necessity, must be constructe­d gradually, collaborat­ively, and for the long-term.”

O’toole said this is “déjà vu” for the Liberals, who have promised national child care for decades, and said the plan doesn’t do anything for parents who want other options than a regulated child-care space. “This is one area where we will be proposing amendments and even better policies that don’t leave out hundreds of thousands of Canadian families,” he said.

About a third of the $101 billion of new spending is the expansion of the pandemic support programs — both for businesses and the unemployed — into September, although government officials said they may be able to start winding these programs down in the summer if the vaccinatio­n campaign goes well.

The government is also creating a $595-million Canada Recovery Hiring Program that businesses can use instead of the wage subsidy to help offset the cost of hiring back workers. Other supports include an extra $9 billion over six years into the Canada Workers Benefit, which supports low-wage workers, and new funds to help small and medium-sized businesses adopt new technology. A further $1 billion is promised to help tourism businesses, festivals and cultural events.

One senior government official said the intention with extending and creating new support programs is to super-charge the pandemic recovery, instead of relying on growth to happen on its own as the virus subsides.

“In making these investment­s, clearly we know that they will have a near-term stimulus effect,” the official said. “Accelerati­ng the recovery is a good thing, and one of the ways of avoiding the mistakes made by so many countries coming out of the financial crisis in 2008/2009, when too many did too little.” (The official briefed reporters on the condition they not be named.)

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