Liberals extend Covid-19 aid with election top of mind

The first federal budget in more than two years extends Ottawa’s Covid-19 “lifeline” for workers and struggling businesses another few months as it aims to pull Canada through the pandemic once and for all.

Finance Minister Chrystia Freeland’s first crack at a budget plan is also widely viewed as a pre- election platform with more than $100 million in new spending over the next three years amid record-smashing deficits.

Canada’s debt is now over $1 trillion for the first time ever, after a $354-billion deficit for the pandemic year just over, and an expected deficit of $155 billion for fiscal 2021-22.

That is driven in part by more than $100 million in new spending over the next three years, including costs to maintain federal wage and rent subsidies and aid for laid-off workers until September instead of cutting them off in June.

Freeland is also looking ahead to the post-pandemic Canada the Liberals want to see: one that has $10-a-day childcare, the ability to produce its own vaccines, national long-term care standards and small- and medium-sized businesses equipped with the workers and technology they need to survive.

All of it comes with a pandemic-sized asterisk that things could still change drastically if vaccine supplies are delayed or they prove not to work that well against emerging variants of the virus.

Ottawa’s budget measures for small and medium-sized businesses include pandemic-related program extensions and funding boosts even as the government rolls out a $15 federal minimum wage.

The Liberal government says it will extend the wage subsidy, the rent subsidy and its lockdown top-ups to Sept. 25, and gradually decrease them starting in June as vaccinations become more widespread.

The government will also expand the timeframe of its Covid-19 income support programs for those taking sick leave because they’ve contracted the virus, are in self-isolation or must take time off work to care for children and family.

As the rent and wage programs wind down, the government plans to introduce a new hiring subsidy of up to 50% on the incremental remuneration paid to eligible employees between June 6 and Nov. 20 for a maximum of $1,129 per employee per week.

The government also proposes a new Canada Digital Adoption Program, which would train and deploy 28,000 young Canadians to help small businesses move online and support e-commerce initiatives.

On the other side of the ledger, some small business costs will increase, with the new minimum wage set to rise with inflation. There are provisions to ensure that where provincial or territorial minimum wages are higher, the higher wage prevails.

The federal Liberals are betting that billions more in debt will pay itself back in economic growth by helping thousands of workers find jobs and small businesses adapt to shifting consumer behaviour.

The government’s budget today estimates all the spending should create or maintain some 330,000 jobs next year and add about two percentage points to economic growth.

The largest contributor is $30 billion over five years on top of existing planned child-care spending to drive down fees in licensed daycares and eventually get to $10 a day by 2026.

There is also more money for broadband infrastructure and over $1.6 billion in funding for small and medium-sized businesses to make sure they aren’t left behind by the dash to online shopping.

All that extra spending with few new taxes will send the deficit to $154.7 billion this fiscal year, one year after a record-smashing $354.2 billion deficit induced by the pandemic.

But first, the Liberals plan to keep open the taps of emergency aid until at least the fall as the labour market and businesses continue to struggle under the weight of Covid-19.

Luxury tax

The federal Liberals are introducing a new tax on luxury cars and expensive boats in the budget.

Starting next year, Ottawa wants to charge a luxury tax on new cars and personal aircraft priced over $100,000, and boats for personal use priced over $250,000.

The proposed new tax is in addition to the GST/HST that is already charged on the pricey purchases.

Smokers are also going to pay more under the budget. The budget increases the tobacco excise duty rate by $4 per carton of 200 cigarettes, along with corresponding increases on other tobacco products.

The Liberals also want to put more money in the pockets of older Canadians with an increased Old Age Security payment for those 75 and older.

In addition to a proposed one-time payment of $500 in August to OAS pensioners who will be 75 or older as of June 2022, Ottawa says it wants to increase OAS payments for those over 75 by 10% on an ongoing basis.

More to come.