Finance Minister Chrystia Freeland‘s fourth budget delivers a big-ticket housing program for millennials and Generation Z voters — a multi-billion dollar commitment to be paid for in part with a tax hike on the rich and corporate Canada.
Freeland’s document calls for about $52.9 billion in new spending over the next five years — a significant jump over what Ottawa had said it would spend in the fall economic statement released just a few months ago.
To offset some of that new spending, Freeland is pitching policy changes the government says will generate roughly $21.9 billion in new revenue. That money is to come in part from higher capital gains taxes and a hike to excise taxes on cigarettes and vaping products.
“We are making Canada’s tax system more fair by ensuring that the very wealthiest pay their fair share,” Freeland said Tuesday after tabling her budget in Parliament.
“We are doing this because a fair chance to build a good, middle class life — to do as well as your parents, and grandparents, or better — has always been the promise of Canada.”
The result is a projected budget deficit of about $40 billion in the 2024-25 fiscal year — roughly what Freeland had predicted.
While the government is spending more overall, it says that better-than-expected economic growth and higher taxes will keep the deficit under control.
The Liberal government’s preferred “fiscal anchor” — the budget benchmark that guides its decisions — has long been to keep the net debt-to-GDP ratio on a declining trend, with debt levels closely tracking the overall size of the economy.
The budget document says the government must meet that benchmark in the years ahead to retain Canada’s triple-A credit rating.
Debt charges soar
Deficits eventually roll over into long-term debt. The cost to finance Canada’s growing debt pile — which has more than doubled over the last nine years to $1.4 trillion — is eating up more and more taxpayer dollars as the government is forced to refinance its borrowing at higher rates.
Public debt charges will cost $2 billion more this year than the forecast in November as the Bank of Canada keeps rates relatively high to tame inflation — which has shown signs of slowing down.
With interest rates at a 20-year high, Ottawa’s cost to borrow has spiked from $20.3 billion in 2020-21 to $54.1 billion in 2024-25.
That means Ottawa will spend more to service its debt than it will on health care this year — and the debt charges will march even higher in the years ahead.
Carrying the debt is expected to cost the federal treasury $64.3 billion in 2028-29 — more than double what Ottawa sends to the provinces through equalization payments.
“The interest rates are hurting the government just as much as they’re hurting us consumers,” said Sahir Khan, a former deputy parliamentary budget officer and the executive vice-president of the uOttawa Institute of Fiscal Studies and Democracy.
“It’s now a meaningful amount relative to other spending pressures and it’s going to start squeezing other programs. The government built up a stock of debt subject to prevailing interest rates and that creates a risk.”
Billions more for housing
The budget allocates $8.5 billion more to housing to help alleviate a crisis that has locked a generation of young people out of the dream of home ownership. The government maintains its housing measures will drive the creation of roughly four million more homes by 2031.
New investment to lead ‘housing revolution in Canada,’ Freeland says
Finance Minister and Deputy Prime Minister Chrystia Freeland said this year’s federal budget will pave the way for Canada to build more homes at a pace not seen since the Second World War. The new investment and changes to funding models will also cut through red tape and break down zoning barriers for people who want to build homes faster, she said
“We are moving with purpose to help build more homes, faster. We are making life cost less,” Freeland said. “Millennial and Gen Z Canadians, we want them to look forward to the future with a sense of anticipation, not angst.”
A man wears a cardboard house on his head during a demonstration calling for more affordable housing and social housing in Montreal. (Graham Hughes/The Canadian Press)
The government also has committed to maintaining the already well-subscribed tax-free savings account, extending mortgage amortization terms and increasing the RRSP withdrawal limit for some first-home buyers, among other measures.
The housing program is a “home run,” said Armine Yalnizyan, a progressive economist and the Atkinson Fellow on the Future of Workers.
Yalnizyan said Conservative Leader Pierre Poilievre’s early focus on housing hurt the Liberals’ standing among some millennial voters.
Now, the Liberals are trying to reclaim some of those votes with an ambitious program which, if it’s carried out as planned, will meaningfully increase the country’s housing supply, she said.
“It’s really an attempt to stop the Conservatives from eating their lunch,” she said.
A tax hike on the rich
As Ottawa moves to remake the housing landscape, roll out a national dental care program and launch pharmacare, Freeland’s budget includes a number of targeted tax hikes that it says will yield some $21.9 billion in new revenue over the next five years.
The biggest windfall will come from an increase to the capital gains inclusion rate.
Under the current regime, only 50 per cent of capital gains are taxable. If a taxpayer sells an asset like a cottage, an investment property, a stock or mutual fund for $100,000 more than they paid, they are taxed only on $50,000 of that profit.
With this new budget, the “inclusion rate” will increase from one-half to two-thirds on capital gains above $250,000 per year for individuals, and on all capital gains realized by corporations and trusts.
The move is likely to be seen by business-friendly groups as an attack on the people and businesses that create jobs.
Freeland said she anticipates some blowback.
“I know there will be many voices raised in protest. No one likes paying more tax, even — or perhaps particularly — those who can afford it the most,” she said.
“Tax policy is not only, or chiefly, the province of accountants or economists. It belongs to all of us because it is how we decide what kind of country we want to live in and what kind of country we want to build.”
New Democratic Party Leader Jagmeet Singh has been pushing for higher taxes on the wealthy. (Adrian Wyld/The Canadian Press)
The NDP — the government’s partner in the supply-and-confidence agreement — likely will welcome the change; party leader Jagmeet Singh has said the wealthy and big corporations should shoulder more of the country’s tax burden.
“We are asking the wealthiest Canadians to contribute a bit more, so that we can make investments to ensure a fair chance for every generation,” the budget document says. “Canada’s tax system can be more fair.”
The change will not apply to any capital gains from the sale of a primary residence. Investment income earned in an RRSP or TFSA, including capital gains, also will not be taxed.
According to government data, only 0.13 per cent of Canadians — people with an average income of about $1.4 million a year — are expected to pay more in personal income tax on their capital gains as a result of this change.
Jimmy Jean, an economist at Desjardins who tracks Ottawa’s spending, said the federal government’s goal of collecting about $19 billion from the capital gains measure may be difficult to achieve.
“The jury’s out on whether they can get that much,” Jean said.
“Targeting the income and wealth of the wealthy — it’s difficult because it’s more mobile, they can move it around. I’m skeptical.”
Other new revenue-generating measures in the budget include a promise to crack down on bankruptcy fraud and tackle “aggressive tax planning schemes.”
Beyond housing, there’s also a promise to top up the incentives for zero-emission vehicles, deliver a new carbon tax rebate for small businesses, stand up an $800-million energy efficiency retrofit program, increase student grants, create a $500-million fund for youth mental health, launch a $6 billion Canada Disability Benefit, fund a $1 billion national school food program and deliver a $900-million top-up to the Indigenous infrastructure program.
CBC/Radio-Canada will get a one-off $42 million budget boost for news and entertainment programming — a cash injection that will help the company avoid some of the previously announced layoffs.
VIA Rail Canada stands to gain about $400 million over the next few years to turn the dream of high-frequency rail in central Canada into a reality.
What’s in the new federal budget?
CBC News breaks down the biggest items in the new federal budget — and how the government is planning to pay for billions in new spending.
Poilievre blasts budget, Singh stays noncommittal
Poilievre pilloried the budget and said his party would vote against it.
Speaking in the House of Commons, the Conservative leader said the Liberal government has never presented a balanced budget in all the years it’s been in office and the promised $40 billion in new spending will drive inflation higher.
“This is the ninth deficit. The ninth deficit after the prime minister promised the budget would balance itself and what did he do with the money? Everything he spent it on has become more expensive,” Poilievre said.
“This is like a pyromaniac spraying gas on the inflationary fire that he lit. It is getting too hot and too expensive for Canadians and that’s why we need a carbon tax election to replace him with a common sense Conservative government.”
Conservative leader rises in House of Commons to reject Liberal budget
Responding to Tuesday’s budget by the federal Liberals, opposition Leader Pierre Poilievre says Conservatives will vote against the financial plan, and renewed his call for ‘a carbon tax election’ to replace Prime Minister Justin Trudeau.
Singh, meanwhile, said it’s too early to say if his party will support the budget.
While he praised some measures he said his party forced the government to include, such as dental care, pharmacare and a national school food program, Singh said he wants to meet with Trudeau to raise some other “concerns” before making a final decision.
Singh said he’s not onside with a plan to cut about 5,000 public servants through attrition — the federal bureaucracy has grown to about 357,247 workers under Trudeau — and he said there’s inadequate funding for Indigenous peoples.
Liberals ‘ignored opportunity’ in budget to tackle corporate greed, NDP says
NDP Leader Jagmeet Singh says while he is glad to see some measures in the 2024 budget like protections for renters and the national school food program, he believes the Liberals could have done more to bring grocery, internet and housing prices down.
If Singh and his NDP MPs withhold their votes, the minority government could lose the confidence of the House of Commons, tipping the country into an early election.
While the capital gains tax increase will cost the country’s big businesses billions more than what they pay now, Singh said “the Liberals ignored the opportunity to take on corporate greed.”
Singh said the companies he blames for inflation — grocery store chains, telecommunications companies and “housing and corporate landlords” — should have faced tax hikes.
Green Party Leader Elizabeth May said her caucus will vote against Freeland’s budget.
She said the government’s planned disability benefit, which amounts to about $200 a month for eligible Canadians, is too low.
May also said there’s not enough money earmarked for social housing — just more loans for developers to build more affordable homes.
“The budget falls far short of our hopes,” May said. “It’s not meeting the moment. We need dramatic, transformative changes to our society to be able to afford the things we need.”
VICTORIA – British Columbia Premier David Eby has announced his government has committed to earlier and enhanced pensions for wildland firefighters, saying the province owes them a “deep debt of gratitude” for their efforts in battling recent fire seasons.
Eby says in a statement the province and the BC General Employees’ Union have reached an agreement-in-principle to “enhance” pensions for firefighting personnel employed directly by the BC Wildfire Service.
It says the change will give wildland firefighters provisions like those in other public-safety careers such as ambulance paramedics and corrections workers.
The statement says wildfire personnel could receive their earliest pensions up to five years before regular members of the public service pension plan.
The province and the union are aiming to finalize the agreement early next year with changes taking effect in 2026, and while eligibility requirements are yet to be confirmed, the statement says the “majority” of workers at the BC Wildfire Service would qualify.
Union president Paul Finch says wildfire fighters “take immense risks and deserve fair compensation,” and the pension announcement marks a “major victory.”
“This change will help retain a stable, experienced workforce, ready to protect our communities when we need them most,” Finch says in the statement.
About 1,300 firefighters were employed directly by the wildfire service this year. B.C. has increased the service’s permanent full-time staff by 55 per cent since 2022.
About 350 firefighting personnel continue to battle more than 200 active blazes across the province, with 60 per cent of them now classified as under control.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – AtkinsRéalis Group Inc. says it has signed a deal with U.K. rail infrastructure owner Network Rail to help upgrade and digitize its signalling over the next 10 years.
Network Rail has launched a four-billlion pound program to upgrade signalling across its network over the coming decade.
The company says the modernization will bring greater reliability across the country through a mixture of traditional signalling and digital control.
AtkinsRéalis says it has secured two of the eight contracts awarded.
The Canadian company formerly known as SNC-Lavalin will work independently on conventional signalling contract.
AtkinsRéalis will also partner with Construcciones y Auxiliar de Ferrocarriles, S.A.(CAF) in a new joint venture on a digital signalling contract.
This report by The Canadian Press was first published Sept. 16, 2024.
In an era of increased strike activity and union power, labour experts say it’s not surprising to see more calls for government intervention in certain sectors like transportation.
What’s new, experts say, is the fact that the government isn’t jumping to enact back-to-work legislation.
Instead, the federal labour minister has recently directed the Canada Industrial Labour Board to intervene in major disputes — though the government was spared the choice of stepping in over a potential strike at Air Canada after a tentative deal was reached on Sunday.
Brock University labour professor Larry Savage says that for decades, companies in federally regulated sectors such as airlines, railways and ports essentially relied on government intervention through back-to-work legislation to end or avoid work stoppages.
“While this helped to avert protracted strikes, it also undermined free and fair collective bargaining. It eroded trust between management and the union over the long term, and it created deep-seated resentment in the workplace,” he argued.
Barry Eidlin calls such intervention a “Canadian tradition.”
“Canadian governments, both federal and provincial, have been amongst the most trigger-happy governments … when it comes to back-to-work legislation,” said Eidlin, an associate professor of sociology at McGill University.
Savage said the use of back-to-work legislation peaked in the 1980s, but its decline since then had less to do with government policy than the fact strikes became less common as unions’ bargaining power softened.
But since the Supreme Court upheld the right to strike in 2015, Savage says the government appears more reluctant to use back-to-work legislation.
Eidlin agrees.
“The bar for infringing on the right to strike by adopting back-to-work legislation got a lot higher,” he said.
However, the experts say the federal government appears to have found a workaround.
In August, Canadian National Railway Co. and Canadian Pacific Kansas City Ltd. locked out more than 9,000 workers — but federal labour minister Steve MacKinnon soon stepped in, asking the Canada Industrial Relations Board to order them to return and order binding arbitration, which it did.
The move by the government — using Section 107 of the Canada Labour Code — is “highly controversial,” said Savage.
Section 107 of the code says the minister “may do such things as to the minister seem likely to maintain or secure industrial peace and to promote conditions favourable to the settlement of industrial disputes or differences and to those ends the minister may refer any question to the board or direct the board to do such things as the minister deems necessary.”
“The reason why it’s a concerning workaround is because there’s no Parliamentary debate. There’s no vote in the House of Commons,” Savage said.
Not long after the rail work stoppage, the government was called upon to intervene in the looming strike by Air Canada pilots. The airline said that a government directive for binding arbitration would be needed if it couldn’t reach a deal ahead of the strike.
However, Prime Minister Justin Trudeau said the government would only intervene if it became clear a negotiated agreement wasn’t possible.
“I know every time there’s a strike, people say, ‘Oh, you’ll get the government to come in and fix it.’ We’re not going to do that,” said Trudeau on Friday.
The airline and the union representing its pilots reached a tentative deal on Sunday.
Though Air Canada was asking for the same treatment as the rail companies, Eidlin said the Liberals appeared to recognize that would have been an unpopular move politically.
Since the rail dispute, the NDP ripped up its agreement to support the minority Liberals, and Eidlin thinks the government’s intervention was one of the reasons for the decision.
“That really left them with this minority government that’s much more fragile. And so I think they have a much more delicate balancing act politically,” he said.
Section 107 was never intended as a way for governments to bypass Parliament and end strikes “simply by sending an email” to the labour board, said David J. Doorey, an associate professor of labour and employment law at York University, in an email.
For the Liberals today, Doorey said using Section 107 to end the rail work stoppage was much simpler than back-to-work legislation — in part because Parliament was not in session, but also because the Liberals hold a minority government and support for back-to-work legislation from the Conservatives and the NDP would be far from guaranteed.
Eidlin is concerned that the government’s use of binding arbitration to end the rail work stoppage could set a precedent similar to what decades of back-to-work legislation did: removing the employer’s incentive to reach a deal in bargaining.
“This has a corrosive effect on collective bargaining,” he said.
The Teamsters union representing railworkers is challenging the government’s move.
The breadth of the government’s power under Section 107 is “something that the courts are going to have to decide,” Eidlin said.
If the courts rule in the government’s favour, the status quo could essentially return to the way it was before 2015, he said.
But Doorey believes the labour minister’s directive to the board to end the rail stoppage will be found to have violated the Charter of Rights and Freedoms.
The rail stoppage wasn’t the first time the federal government used these powers during a recent labour dispute.
When workers at B.C. ports went on strike last summer, then-federal labour minister Seamus O’Regan used the section to direct the board to determine whether a negotiated resolution was possible, and if not, to either impose a new agreement or impose final binding arbitration.
The last few years have really been a litmus test for that 2015 change, Eidlin said, as workers are increasingly unwilling to settle for sub-par collective agreements and employers “still have that back-to-work reflex.”
With an uptick in strike activity, “of course, there will be more interest in government intervention in labour disputes as a result,” said Savage.
This report by The Canadian Press was first published Sept. 16, 2024.
Companies in this story: (TSX:AC, TSX:CNR, TSX:CP)
