Finance Minister Announces 2023 Budget

Finance Minister Chrystia Freeland speaks to the House of Commons in Ottawa after announcing the 2023 federal budget | Photo Credit: Sean Kilpatrick/The Canadian Press via CTV News

Amidst looming fears of a recession and slowing economic growth, this year’s federal budget sees billions in new spending for healthcare, affordability, and the clean economy, while straying from key measures of fiscal responsibility and facing a mounting debt burden. 

The Canadian Budget 2023, announced Mar. 28, details $43 billion in net new spending over six years, along with $21.5 billion over five years in savings from tax hikes, and reductions in internal spending. All this comes at a deficit of $40.1 billion.

Topping out the new measures is a $55 billion framework of new spending on the green economy. When combined with other programs encouraging the deployment of carbon capture and storage in last year’s budget, the government plans to spend nearly $83 billion through to the 2034/35 fiscal year.

These huge sums, mostly in the form of tax credits, come just months after US President Joe Biden signed the Inflation Reduction Act into law, providing $369 billion USD in funding for a clean economy.

Budget 2023 follows in bringing Canada up to speed with its allies in creating a green economy while divesting from authoritarian states like Russia and China, Finance Minister Chrystia Freeland said in her budget presentation to the House of Commons.

The new climate measures include $21 billion in spending over five years, with $1.2 billion coming in this year’s budget. So far, four investment tax credits have been announced, totalling nearly $17 billion over five years.

Eligibility for these credits requires that businesses pay their employees wages comparable to the compensation awarded to unionized workers in the same profession. Pensions and benefits will also be factored in.

The government sees all this spending as a stepping stone to eventually spending $100 billion on the clean economy yearly. 

“In what is the most significant economic transformation since the Industrial Revolution, our friends and partners around the world, chiefly among them the United States, are investing heavily to build clean economies,” said Freeland. “Canada must either meet this historic moment, the remarkable opportunity before us, or we will be left behind as the world’s democracies build the clean economy of the 21st century.”

Some climate activists are skeptical, though, about the new spending. 

“Rather than finally delivering on the government’s promise to end fossil fuel subsidies, this budget throws more fuel on the fire by funnelling even more public dollars into false solutions that serve to prop up the fossil fuel industry. Carbon capture and hydrogen are great for greenwashing oil and gas, but they won’t deliver meaningful emissions reductions,” said Julia Levin, the Associate Director of National Climate at activist group Environmental Defence, in the organization’s media release regarding the budget.

Keith Brooks, the programs director at the group, is concerned the credits include natural gas fired electricity, arguing such projects won’t bring any significant carbon savings, since carbon capture systems, whose task would be made counter-productive if they emitted carbon themselves, don’t use natural gas fired electricity.

“Budget 2023’s investments in clean electricity are welcome and needed, though extending that support to abated natural gas fired power is a bad idea. There are no examples of natural gas power plants with carbon capture and storage — and the attempts that have been made for coal plants are abject failures.”

More new spending comes in the budget as help for Canadians’ inflation-strained finances, in the form of another one-time doubling of the GST tax credit, branded as a grocery rebate.

Reaching over 11 million lower-income households, the $2.5 billion initiative will provide seniors with $225, adults with $234, and families with two children with $467 in financial assistance.

More investments in lower-income families will come in the form of dental care. Budget 2023 earmarks $13 billion for the program to be progressively expanded to reach all nine million Canadians with a household income of less than $90,000 by 2025, more than doubling the $6 billion in last year’s budget.

The rollout began in December, covering 240,000 lower-income kids under the age of 12. Later this year, the program will be expanded to cover lower-income Canadians under the age of 18, people living with a disability and seniors.

An additional $359.2 million over five years will target the toxic drugs crisis, targeting a safer supply of drugs, more safe consumption sites and better data on the crisis.

Indigenous children’s timely access to healthcare will get a $171 million boost, bolstering the government’s commitment to Jordan’s Principle, which guarantees that Indigenous children have access to government services without delay.

Budget 2023 will also see $2.8 billion in compensation as part of the Gottfriedson Band Class settlement paid out to some 325 nations still reeling from the effects of residential schools. It also proposes an Indigenous housing strategy starting in the 2024/25 fiscal year, valued at $4 billion over seven years.

In the coming academic year, post-secondary students can expect to benefit from an additional $814 million in federal funding put towards a 40 per cent increase in student grants and an increase in the student loan limit from the current $210 a week to $300 in the same time frame. In addition, the government looks to spend $197.7 million in next year’s budget to work with industry and post-secondary institutions in helping graduating students find work.

The federal government also announced it has negotiated a 27 per cent reduction in the interchange fees Mastercard and Visa charge businesses, saving small businesses $1 billion over five years.

Canada’s presence in space is also getting a boost. $1.4 billion is being allocated to ensure the Canadian Space Agency (CSA) continues to participate in the International Space Station until 2030, along with $76 million over eight years for the CSA to participate in developing Gateway, a space station set to orbit the moon and act as a jumping-off point for astronauts travelling to Mars. Canada is expected to contribute to Canadarm3. 

Following recent allegations of Chinese government interference in federal elections, the budget aims to combat foreign meddling with $49 million over three years in funding for the RCMP to tackle the problem and another $13.5 million over five years to create a National Counter-Foreign Interference Office.

The budget also promises a new loan of $2.4 billion to Ukraine through the International Monetary Fund. It aims to address the financial burden the country has suffered from the ongoing war and help in rebuilding widespread damage to critical infrastructure.

However, all these billions in new spending at a time of high inflation comes at a huge cost to the government and everyday Canadians. 

To offset these costs, the government aims to save $21.5 billion over five years. Over half of that sum will come from increased taxes primarily targeting corporations and the wealthy, accompanied by less internal government spending. This includes a $7.1 billion plan cut to government travel and outsourcing, along with a further $7 billion in other internal spending cuts over four years, followed by a continued annual $2.4 billion reduction in internal spending in the years after.

Bea Bruske, president of the Canadian Labour Congress, voiced skepticism to The Globe and Mail that cuts to internal funding will be possible as public sector unions strike and demand higher wages.

These figures still leave billions in taxpayers’ dollars unaccounted for, however. While Freeland promises the budget will ensure Canada holds its place as the G7 nation with the least debt and lowest debt-to-GDP ratio, both key measures of fiscal responsibility are trending upwards.

The budget predicts a $40.1 billion deficit this fiscal year, an increase from the $30.6 billion predicted this past November in the Fall Economic Statement. Moreover, the Statement predicted a balanced budget in five years, while Budget 2023 predicts a $14 billion deficit for the 2027/28 fiscal year. This compares with a total federal deficit of $1.13 trillion, up from $721 billion in the 2019/20 fiscal year.

Mostafa Askari, chief economist with the University of Ottawa’s Institute of Fiscal Studies and Democracy, thinks the figure will continue to grow. “My overall assessment is that the deficit is going to be higher than what they are showing,” she said in an interview with The Globe.

The debt-to-GDP ratio will rise as well this fiscal year. Freeland has said a downward ratio is the government’s key metric for evaluating its fiscal responsibility. It will increase to 43.5 per cent in the 2023/24 fiscal year, up from 42.4 per cent in the 2022/23 fiscal year. Budget 2023 predicts it will then begin a downward trend, reaching 39.9 per cent in the 2028/29 fiscal year. 

Scotiabank economist Rebekah Young touts some of the strategic new spending, but explained to The Globe that she is concerned about some of the spending’s long-term effects.

“It’s the first budget in a long time that is really making a concerted effort on the growth front, but at the same time, it’s reverting back to its past practices of spending a lot more in other areas,” she said. “It’s hard to argue that this is a budget of fiscal restraint in any sense.”

Conservative Leader Pierre Poilievre, too, is cornered about the spending in the budget, calling it a “full-frontal attack on the pay cheques of hard-working Canadians.” He claimed the new spending is equal to $4,200 for every household in Canada.

Budget 2023 will cause “more inflation, more taxes and more cost,” he says. “There’s no common sense for everyday people.”

Conservatives will vote against the budget because it lacks three key measures. Poilievre says it won’t ease inflation by “eliminating inflationary deficits and carbon taxes.” 

As well, he says the government failed to increase Canadians’ incomes by cutting taxes and lacks measures to create affordable housing and build more homes, such as streamlining the process of acquiring building permits.

“We’re going to be supporting the relief Canadians deserve and that we forced this government to deliver,” said NDP leader Jagmeet Singh, to reporters on Mar. 28, confirming his party will vote for the budget, ensuring it has enough support in the House of Commons to pass.

He took responsibility for the expansion of dental care, calling it the “largest expansion of our health care system in a generation,” and the grocery rebate. 

In 2022, the Liberals and NDP signed a Supply-and-Confidence Agreement, in which the NDP guarantees their support to all of the government’s financial measures, ensuring the government doesn’t dissolve, in return for the Liberals advancing some of their key policy matters.

Singh called on the federal government to modify Employment Insurance and introduce more affordable housing programs, saying the NDP “wasn’t satisfied” with the budget’s stance on those measures.

The Budget Implementation Act, Bill C-47, has passed first reading and is expected to receive Royal Assent before parliament adjourns at the end of June.

Freeland, while acknowledging the pressures of mounting debts and a slowing economy, remains confident this budget will deliver for Canadians.

“At a challenging time in a challenging world, there is no better place to be than Canada.”