Federal budget tables billions, not balance

The election-year budget offers billions in new spending, and ditches a path toward budget balance

Federal Finance Minister Bill Morneau | Photo: Art Babych, Shutterstock

What happened: The federal government today tabled its 2019 budget.

Why it matters: This is the final budget of the Trudeau government’s first term in office. It comes in an election year and as the party deals with controversy surrounding its handling of the SNC-Lavalin affair.

The federal government today delivered on what was widely expected to be an election-year budget.

It includes billions in new spending on several key areas, including housing affordability, skills training, healthcare and support for seniors.

In all, $22.8 billion in new spending over five years was announced, including $8.1 billion on a variety of indigenous services, and an additional $10 billion over nine years for the country’s Rental Construction Financing Initiative, which will support the construction of an additional 42,500 rental housing units across Canada.

Missing from the budget is a path to balance. The government estimates a deficit of -$19.8 billion this fiscal year. By 2023-24, it is projected to shrink to -$9.8 billion. The document argues that Canada cannot cut its way to prosperity, and that the federal government has instead chosen to prioritize investments aimed at Canada’s middle class and workforce.

Also missing were any major initiatives to address Canada’s competitiveness on the world stage.

The budget proposes eliminating an income threshold on the country’s Scientific Research and Experimental Development (SR&ED) tax incentive program, however the program will continue to target small- and medium-sized businesses. The budget also hinted at a soon-to-come external advisory committee on regulatory competitiveness.

Housing

Budget 2019 included two noteworthy measures for new homebuyers.

These include an incentive for first-time home buyers, which will see the Canada Mortgage and Housing Corporation (CMHC) provide up to $1.25 billion over three years to take small equity stakes in eligible properties. Home buyers can apply to have the CMHC take on a 5% or 10% equity stake in their home, repayable at the point of re-sale.

The Liberals also increased the maximum withdrawal amount allowed under the existing Home Buyers’ Plan. The change will allow first-time home buyers to withdraw up to $35,000 from a registered retirement savings plan (RRSP), up from the previous $25,000 limit.

More information will be released this summer about a new $300-million Housing Supply Challenge, which will invite stakeholders to submit ideas on reducing barriers to building new housing.

The budget also earmarks $50 million over five years to the Canada Revenue Agency (CRA) to create four residential and commercial real estate audit teams in “high-risk regions,” including B.C.

Training

Government introduced the Canada Training Benefit, intended to support skills training to Canadian workers.

It includes a non-taxable training credit, new work leave provisions and a new employment insurance training support benefit.

In total, the measures are expected to cost more than $1.7 billion over five years, beginning this year.

Healthcare

Budget 2019 proposes a new national drug agency intended to manage and negotiate prescription drug prices.

Over the long term, government estimates the Canadian Drug Agency could help lower the cost of prescription drugs by up to $3 billion a year.

Beginning in 2022, another $1 billion investment over two years will be made to address the healthcare and drug costs associated with rare diseases.

Other major spending areas

  • $2.2-billion top-up to the Gas Tax Fund
  • $1.7 billion over five years to make student loans more affordable
  • More than $1.7 billion in economic support for low-income seniors over four years

To read about changes to the budget regarding cannabis, click here.

hwoodin@biv.com

@hayleywoodin