5 things to watch for when the Liberals unveil the federal budget

After a year that saw federal spending reach levels not seen since the Second World War, the Liberal government will release a long-awaited budget Monday that will offer a roadmap to a post-pandemic economic recovery.

Deputy Prime Minister Chrystia Freeland’s first budget as finance minister will attempt to balance measures meant to reduce the severity of COVID-19’s third wave with efforts to set the stage for an economic rebound.

The budget will account for record emergency spending driven by measures to fight the pandemic and blunt its economic impact.

Freeland is also expected to provide details of a plan to spend up to $100 billion in stimulus and jump-start progress on a number of Liberal priorities ahead of a possible election this year.

“We will have more to tell you next Monday about the plan we are implementing to keep Canadians safe, to create jobs for the middle class and to rebuild a clean, resilient economy,” Prime Minister Justin Trudeau said in French at a press conference on Friday.

“All of the measures in Budget 2021 are focused on helping you through this crisis and rebuilding a stronger Canada for everyone.”

Here are five items to look out for when Freeland opens the government’s books.

Child care

The budget is expected to take major steps toward funding a national early learning and child care system — a pledge Liberal politicians have made for decades.

At the party’s policy convention two weeks ago, Freeland said the time is ripe to fulfil an old promise.

“I really believe COVID has created a window of political opportunity and maybe an epiphany on the importance of early learning and child care,” Freeland said.

The Liberals say they believe a national child care system will boost economic growth and productivity by creating well-paid jobs and freeing up more women to work.

Freeland has pointed to Quebec’s system — where parents pay a flat rate of $10 a day per child — as a potential model.

Morna Ballantyne, executive director of the advocacy group Child Care Now, said the budget will have to include a significant financial commitment to show the government is serious about funding more spaces and bringing costs down for parents.

“We want to see a signal that the federal government is ready and willing to work together with provinces and territories to make sure that a system can actually be built, because it is going to require a collaborative effort,” said Ballantyne. 

Fiscal anchor

The fall economic statement released in November projected the deficit would reach $381.6 billion by the end of March 2021.

It’s likely that number is even higher now, given that several benefits programs — the wage subsidy, the rent subsidy and the recovery, sickness and caregiving benefits — have been extended into the late spring as the country confronts a third wave of the pandemic.

Freeland also announced the government’s intention to introduce a short-term stimulus package — valued at $70 billion to $100 billion over roughly three years — that would launch after vaccines are distributed and life begins to return to normal.

Sources have told CBC News the budget is expected to project a downward trajectory for the deficit but is not expected to propose a timeline for eliminating it.

Economists and business groups will be looking for a sign that the Liberals have a plan in place to keep spending in check so that it doesn’t overheat the economy or lead to unsustainable debt payments if interest rates rise. 

“The federal government can boost business confidence and encourage higher levels of private sector investment by committing to a responsible and prudent post-pandemic fiscal plan that avoids unnecessary new spending and seeks to gradually ease the burden of public debt,” Goldy Hyder, president and CEO of the Business Council of Canada, wrote in a March 1 letter to Freeland.

Hyder is encouraging the government to adopt a clear fiscal anchor — a benchmark to serve as a theoretical cap on spending and deficits.

The government has said the spending taps will remain open until several “fiscal guardrails” tied to the labour market are met. Those include improvements in employment, unemployment and total hours worked, though the Liberals have not revealed specific targets for each.

Green economy

The Liberals’ slogan for their post-pandemic agenda — “build back better” — refers in part to their desire to speed up the transition to a green, low-carbon economy.

Expect a significant portion of the planned stimulus spending to go toward investments in clean energy technology, jobs and infrastructure. That means money for building charging stations for electric vehicles, retrofitting old-stock commercial buildings and homes and helping natural resource industries transition to cleaner energy.

Through investments in greening homes and buildings, the government hopes to create a domestic retrofit industry and supply chain for products such as energy-efficient windows and doors.

Shortly after budget day, the government is expected to release more ambitious greenhouse gas reduction targets. The current target is 30 per cent below 2005 levels by 2030.

Monday’s budget likely will sketch out how the Liberals plan to meet that more ambitious target.

Inequality and racial justice

It’s become a common refrain — that the COVID-19 pandemic has exposed pre-existing and deep-seated inequalities in Canadian society — and it’s one the Liberals say they take to heart. 

The budget is expected to include an emphasis on supporting people who have been disadvantaged historically, and those who have been hardest hit by the pandemic. That includes seniors living in long-term care, young people, Indigenous people and non-white, racialized Canadians.

Advocates say they want the budget to address high levels of unemployment among racialized Canadians, including those with Asian and Black heritage and Indigenous Canadians.

“This could be the once-in-the-lifetime chance that the government will have this huge amount of fiscal power to correct some very long-standing inequalities,” said Avvy Go, executive director of the Southeast Asian Legal Clinic.

“It will create so many jobs that it will be a missed opportunity if we don’t use the spending power to address some of the systemic racism, as well as systemic sexism within the labour market by creating jobs for more women, both men and women of colour, [and] people with disabilities.”

Pharmacare

In the throne speech, the Liberals said they remain committed to a national, universal pharmacare system. The party’s membership recently reinforced that commitment at the Liberal policy convention.

But it’s not clear that commitment means money in the budget to move the project forward.

The government has taken only incremental steps since an advisory panel recommended creating a universal, single-payer public pharmacare system. The panel predicted that such a program would cost $3.5 billion over 10 years starting in 2022, rising to $15.3 billion annually in 2027.

National pharmacare is a key NDP demand but some budget watchers believe the pandemic might further delay the initiative because it would require long-term structural spending and negotiations with the provinces — some of which are opposed to the very idea of a national pharmacare program.