The Big Picture
Prime Minister Justin Trudeau government’s first budget is much like its infrastructure plan. It repairs some of the damage from Harper’s decade in power, but it doesn’t yet set a clear direction forward for the economy, particularly in terms of generating good jobs for working people.
Harper steadily shrank the federal government to the smallest it has been as a share of the economy since the mid-1940s. Trudeau’s first budget changes that direction and in fact changes the 35 year-long trend—since the early 1980s—of shrinking federal government.
The areas that receive the most support in this budget are:
- Families with children, through the new Canada Child Benefit, which will provide increased benefits for families with incomes under $150,000.
- Unemployed workers with the reversal of Harper’s cuts to EI plus an extension of benefits to workers in regions that have experienced a sharp increase in unemployment.
- Infrastructure, particularly public transit, affordable housing, green retrofits, water, wastewater systems and at post-secondary institutions, but smaller amounts than promised in the election.
- Indigenous peoples and First Nations, with substantial funding for education, community and water infrastructure.
- Climate change, clean technology and the environment, including fisheries and oceans.
- Youth, with increases to Canada Student Grants and a renewed Youth Employment Strategy, although less than was promised in the Liberal platform.
- Post-secondary education with increased student grants, more flexible student loan repayment and increased funding for research.
- Seniors, with increases to the Guaranteed Income Supplement and restoring the retirement age to 65 for Old Age Security and GIS. The minister says he’s committed to reach a deal with provinces on enhancing the CPP by the end of this year.
- Veterans, with increased financial support and reopening Veteran’s services offices.
The budget also includes measures to crack down on tax evasion and tax avoidance: the government is committing an additional $800 million to this over the next five years and expecting to generate an extra $10 billion in revenue over five years as a result.
These are all positive measures that go a substantial way to undoing the damage and neglect from the Harper years. But we will need much more to rebuild a stronger diversified and sustainable economy, generate more good quality jobs, improved public services and a better standard of living for all Canadians. A lot of the important measures needed to achieve this have been left for following years.
Major priorities for CUPE are public investment to rebuild our economy with diversified sustainable growth and good jobs; decent pensions for all through an improved Canada Pension Plan; affordable public early childhood education and care; a new health care accord that delivers improved public health care; and greater tax fairness.
The budget is a good first step in rebuilding, but it is future budgets that will demonstrate if the Trudeau government is committed to real progressive positive change over the long term.
On the Issues: what’s new and what’s missing
The deficit and debt
The federal deficit for this coming year is estimated at $29 billion for each of the next two years, $23 billion in 2018/19, $18 billion in 2019/20 and $14 billion in 2010/21. All these amounts include an effective contingency cushion of $6 billion. Much attention is being paid to the deficit because it’s well above the $10 billion they promised in the election campaign, and whether their fiscal plan is sustainable, but given the deterioration in the economy, running a higher deficit is the right thing to do.
The Liberal’s proposed deficit is a lot lower than Harper’s $50 billion deficit in 2009/10, representing just 1.5% of GDP and is less than what a lot of economists, including big bank economists, called for Ottawa to do. With borrowing rates at rock-bottom levels (and even negative at some points), now is the time for the federal government to borrow to invest in the economy. The interest cost of servicing the federal debt as a share of the economy is the lowest its been for over 50 years and just a quarter of what it was 25 years ago.
The important thing about the deficit and public finances isn’t how big they are, but what you do with them. Public spending on child care, infrastructure, health care and education result in strong economic and job growth, while corporate and high income tax cuts provide little boost to the economy. This means we can get significant economic and job growth by increasing increasing public spending in these areas while hiking taxes on corporations and high incomes by a similar amount, without any direct change in the deficit.
As the Alternative Federal Budget shows, we could have increased employment by 500,000, lifted more than one million Canadians out of poverty, reduced inequality and hiked economic growth if the federal government boosted investment in public services and introduced a fairer tax system.
Trudeau did little to meet his commitment to review tax expenditures and close regressive tax loopholes. We’ll be pushing them to do much more in future budgets. Progressive tax reform is key to increasing equality and ensuring that the improved public services they promised are fiscally sustainable.
With over 1.4 million Canadians unemployed and the jobless rate up to 7.3 percent, we need concerted action to create good jobs.
This budget included a number of measures that will create jobs, but they aren’t enough. Finance estimates that the additional measures in this budget will generate 43,000 jobs this year and 100,000 additional jobs in 2017/18, mainly as a result of increased infrastructure spending and higher transfers to people through the Canada Child Benefit and GIS. This won’t reduce the unemployment rate much. Unemployment increased by almost 100,000 over the past year.
CUPE and the Green Economy Network offered the federal government advice on how to create one million green jobs over ten years by increasing investments in public transit, renewable energy and energy efficiency retrofits. Investments in health care, education and public infrastructure are also good at generating employment as well as improving public services—and if they’re public sector jobs, they tend to be good quality jobs as well. Investments in childcare and early learning don’t just provide an important public service that reduces inequality; they also generate by far the greatest number of jobs of any sector in the economy.
Missing from this budget is any mention of the Liberal’s election commitment to bring back the fair wage policy for federal government procurement. Nor is there any move to restore and increase minimum wages applying to federally regulated workers.
None of the measures in today’s budget will counteract the unemployment that will be created if the Liberal government presses ahead with corporate investment protection deals such as the Comprehensive Economic and Trade Agreement (CETA) and the Trans Pacific Partnership (TPP). Estimates are that the TPP will lead to an estimated 58,000 jobs lost in Canada and increase income inequality.
Children and families
A centrepieces of this budget is the Canada Child Benefit (CCB), which replaces the Harper government’s Universal Child Care Benefit (UCCB) and combines the Canada Child Tax Benefit (CCTB) and National Child Benefit Supplement (NCBS) programs into one benefit.
The new CCB will be income-tested, phasing out for incomes above $65,000, but will also be tax free. Middle income families with two or more children and family incomes between $40,000 and $90,000 can expect to receive an additional $2,000 or more per year. According to their calculations, all families with household incomes below $150,000 will receive more under this new program than they would under the programs it replaced and will help lift an estimated 300,000 children out of poverty. The federal government has asked provinces and territories to ensure that social assistance isn’t reduced to offset the CCB, as some had done with previous federal child benefits.
The federal government has committed to work with provinces, territories and Indigenous peoples to develop a “National Early Learning and Childcare Framework” as a first step towards delivering affordable high quality flexible and fully inclusive childcare. The budget includes $500 million towards that, but only starting in 2017/18. This includes $100 million for Indigenous child care and early learning on reserve.
CUPE and hundreds of thousands of families without safe affordable child care call for more action to establish a national high-quality public/ non-profit affordable childcare system. CUPE and other childcare advocates called for the federal government to provide funding in this budget to help Indigenous communities and provinces develop these systems and for these childcare programs to be public.
As promised, the budget provides an immediate funding increase for infrastructure. Phase one starts right away and focuses on repairs to existing infrastructure. Phase two, starting after two years, will be more focused on new construction, flowing funding in the remaining eight years of their ten year plan. Phase one, with an additional $11.9 billion allotted over five years, includes:
- $3.4 billion over three years to upgrade and improve public transit systems across Canada. Amounts have been allotted on a provincial and territorial basis.
- $5 billion over five years for investments in water wastewater and green infrastructure projects, including a $2 billion Clean Water and Wastewater Fund.
- $3.4 billion over five years for social infrastructure, particularly affordable housing, but also including early learning and childcare, cultural and recreational infrastructure and health facilities on reserves.
These amounts are less than the Liberals promised in their election platform: a total of $6.5 billion instead over the first two years instead of the $10 billion promised.
The federal government will fund up to 50 percent of eligible costs for public transit infrastructure Fund and for the Clean Water and Wastewater Fund.
CUPE is glad to see the Liberal budget doesn’t specifically promote public private partnerships (P3s). Trudeau has committed to remove the P3 screen and officials from the Minister of Infrastructure’s office said they plan to remove the requirement that public transit projects be P3s. This budget also announces that they are transferring responsibility for PPP Canada Inc. to the Minister of Infrastructure and Communities.
However, much of the announced infrastructure funding (and any additional financing through the Canada Infrastructure Bank) will involve P3s or higher cost private finance. A number of the larger projects mentioned in the budget are P3s—although this is no longer a federal government requirement. The budget does talk about “innovative financing” and engaging pension funds and other innovative sources of funding, including “asset recycling” to increase the long-term affordability and sustainability of infrastructure for Phase two of their infrastructure plan. This is often code for privatization.
CUPE continues to urge the federal government to completely eliminate PPP Canada Inc. and redirect the $1.25 billion P3 Canada Fund to public infrastructure projects. Public infrastructure should be publicly financed and operated. Consistent with the new federal government’s commitment to openness and transparency, it should implement comprehensive P3 accountability and transparency legislation.
A significant amount of the additional infrastructure funding is for affordable housing, primarily for energy and water retrofits and renovations to existing social housing, doubling the current federal funding in the Affordable Housing Initiative, and increasing affordable housing for seniors. Also included is $90 million over two years for the construction and renovation of shelters and transition houses for victims of family violence.
This budget didn’t include some the other commitments the Liberals had made for affordable housing, including making the Home Buyers Plan more flexible and removing the GST from capital investments in affordable rental housing. These may come in future budgets.
Pensions and retirement security
As announced, the budget restored the age of retirement to receive Old Age Security and the Guaranteed Income Supplement to 65 years from 67. This is an important positive move that will benefit all those born in 1959 and after and is fiscally affordable, as the Parliamentary Budget Office has shown. This was a priority for CUPE and labour unions and we’re glad the new Liberal government delivered on this commitment
The Guaranteed Income Supplement top-up benefit increases by up to 10% for single seniors, which will provide up to $947 million for the lowest income seniors, starting in July 2016. This is better than the Liberals had promised is expected to benefit 900,000 single seniors. It also provides increased support for senior couples receiving GIS who must live apart for reasons beyond their control.
More important in reducing seniors’ poverty is increasing the level of benefits provided through the Canada Pension Plan (CPP). In this budget the Minister makes a commitment to work with provinces and territories to reach a collective decision to enhance the CPP before the end of this calendar year. We urge the federal government to demonstrate leadership in achieving a universal expansion of the CPP instead of deferring to piecemeal and provincial measures, such as the voluntary plan proposed by Ontario.
This budget delivers on most of the Liberal’s promises to improve Employment Insurance:
- Ending the higher eligibility rate for EI that was required for new workers and those re-entering the workforce
- Reversing Harper’s 2012 EI reforms that force unemployed workers to move away from their communities and take lower-paying jobs
- Reducing the waiting period for benefits to one week from two
The surprise new measure is this budget’s commitment to extend EI benefits by five weeks up to a maximum of 50 weeks for all eligible EI claimants in the 12 economic regions that have experienced the sharpest and most severe increases in unemployment. The regions include Newfoundland/Labrador, Sudbury, Northern Ontario, Northern Manitoba, Northern Saskatchewan, Saskatoon, Northern and Southern Alberta, Calgary, Northern BC, Whitehorse and Nunavut. This provision is for one year, starting in July 2016, and will be applied retroactively to all claims as of January 4, 2014. Long-tenured workers on EI in these regions will be eligible for an extra 20 weeks up to a maximum of 70 weeks.
This budget also extends the working while on claim pilot project until August 2018 and extends the maximum duration of EI worksharing agreements from 38 weeks to 76 weeks and also devotes more funding to improve access to EI.
The government is deferring their proposals to make Employment Insurance parental leave more flexible for family and work circumstances and to introduce a more flexible and accessible Employment Insurance Compassionate Care Benefit.
Training, skills and labour force development
The budget includes additional funding for skills and training but not as much as the Liberals had committed in their election platform. Included in this budget are:
- $125 million in additional funding in 2016/17 to the Labour Market Development Agreements with provinces, less than the $500 million promised in their platform.
- $50 million in additional funding for Canada Job Fund agreements, less than the $200 million pledged in their platform.
- $85 million over five years for union-based apprenticeship training, with funding to flow in 2017/18, which is also less than what had been promised.
- $15 million over two years for aboriginal skills and training, also less than what had been promised in their platform.
CUPE urged the federal government to restore and maintain core funding for literacy and essential skills programs and organizations across Canada, including the Office of Literacy and Essential Skills (OLES). Literacy and essential skills should be integrated in pre-apprenticeship and skills training and be core parts of a well-funded pan-Canadian training strategy and of the Poverty Reduction Strategy.
The only mention of funding for literacy in the budget is for literacy and numeracy training on reserves, with $100 million committed over five years.
First Nations and Indigenous peoples
The 2016 Federal Budget provides significant and extensive funding increases for First Nations and Indigenous peoples. This includes:
- $2.6 billion over five years to improve primary and secondary education for First Nations Children
- $1.1 billion for housing and social infrastructure in First Nations Communities
- $729 million for water and water infrastructure on reserves and for waste management in First Nation communities
- $635 million over five years for First Nations Child welfare
- $40 million for the national inquiry into missing and murdered indigenous women and girls.
There is little funding for Inuit and Metis communities and people in this budget.
There’s no question the budget provides significant steps forward after the many years of Conservative neglect. But significantly more needs to be done to bring conditions in Indigenous communities and opportunities for Indigenous people up to the standards other Canadians enjoy. This is an issue of human rights, but it is also something that will benefit all Canadians. In just purely monetary terms Canada’s economic output would be $36.5 billion higher and government balances $17.7 billion better in ten years if these education, labour market and social well-being gaps were eliminated, the Centre for the Study of Living Standards has estimated.
Environment and climate change
Federal Budget 2016 includes significant investments in clean technology, provides additional funding for freshwater research, protection of oceans and for national parks, and to restore credibility to the federal environmental assessment process. There are a number of retrofit and efficiency projects and programs in Phase one of the new federal infrastructure plan and in the programs for First Nations and Indigenous communities. The budget includes:
- Many of the Liberal election commitments on clean technology innovation and development, amounting to $400 million over two years
- Starting in 2017/18, $2 billion over two years for a low carbon economy fund to support provincial and territorial actions that will materially reduce GHGs
- $197 million over two years to expand research on measures to reduce air pollution
- Expansion of the national parks system and free access to Canada national parks in 2017 and free access for children thereafter
These are all positive steps, but there will need to be more significant action to meet the Paris commitments to slow climate change and limit global warming to 1.5 degrees Celsius. In particular, all infrastructure investments should be consistent with plans to reduce greenhouse gas (GHG) emissions and demonstrate how they’ll achieve this.
CUPE calls on the federal government to adopt the Green Energy Network’s proposal to make significant investments in public transit, public renewable energy and energy efficiency retrofits. This would reduce Canada’s annual GHG emissions by an estimated 25-35% while also creating one million green jobs over five years, which would certainly help many of those who have lost their jobs as a result of the decline in oil prices.
The new Liberal government made a commitment to put a price on carbon, in collaboration with provinces and territories, but there’s no mention of carbon pricing in this budget. CUPE supports putting a price on carbon, but it must be done in a progressive way that penalizes corporate polluters rather than low-income and working Canadians. Revenues raised from carbon pricing should be used to invest in complementary green investments, job retraining, create green jobs, and to mitigate negative impacts of climate change and carbon pricing measures on vulnerable Canadians. There’s more to be done on the Liberals’ election commitment to phase out fossil fuel subsidies.
There’s very little in this budget for health care, just a continued commitment to negotiate a multi-year health accord and to continue discussions with provinces on the affordability of prescription drugs and improving access to home care and mental health services.
In terms of actual spending the budget only includes small amounts for programs such as the Canada Health Infoway, the Canadian Partnership Against Cancer, expanding Nutrition North Canada and enhancing food safety. It all amounts to less than $300 million over three years.
None of the major health care initiatives announced earlier by the government received funding allocation in this budget. The $3 billion for home care outlined in the Liberal Party election platform, for example, was not announced in this year’s budget. Funding for a new health accord with the provincial and territorial governments is also absent as the Minister of Health continues to hold discussions with the provinces.
CUPE and public health advocates will continue to push for much more significant commitments to improving public health care in future budgets.
Post-secondary students received additional support in this budget as the Liberals promised in the election, including:
- An increase in the Canada Student Grant by 50 percent to $3,000 per year for low income students, $1,200 for students from middle income families and to $1,800 for part-time students
- Increase in the loan repayment threshold so no student has to repay Canada Student Loan until they earn at least $25,000 per year
- A flat rate student contribution to assess eligibility for Canada Student Loans
There is also additional funding for Canada research granting councils.
There is additional funding ($2 billion over three years) for strategic infrastructure investments at post-secondary institutions, too much of which will support commercialization and privatization. This funding is targeted at modernizing research and commercialization facilities on campuses, industry relevant training facilities at colleges, and projects that reduce greenhouse gas emissions and improve environmental sustainability
The budget includes specific commitments for youth, but some fall short of what the Liberals promised in their election. They include:
- $165 million for a Youth Employment Strategy in 2016/17, less than the $300 million promised
- $25 million per year in Youth Service program, as promised
- $73 million over four years to increase youth co-op placements, less than the $40 million promised per year
There’s only a small amount devoted specifically for women, an extra $23 million over five years to increase capacity at Status of Women Canada including to support local organizations working on women’s issues and gender equality. There are significant increases in funding for federal culture and heritage institutions, including additional funding as promised for the CBC/Radio Canada, the Canada Council for the Arts, and national museums. The budget includes $256 million over two years for international development assistance. This is positive, but is less than a 3% increase. It includes $240 million over two years to help settle Syrian refugees and a significant increase in financial support for veterans. Funding is restored for the Court Challenges Program, an important program cut by Harper that helps individuals and groups fight for equality rights.
The major initiative in this budget on fair taxes is a commitment to crack down on tax evasion and tax avoidance. The government is providing an additional $800 million to the Canada Revenue Agency over the next five years and expects to generate an extra $10 billion in revenue over five years as a result.
- Eliminating the Children’s Fitness and Arts Tax Credits. They’ll be reduced by half for 2016 and then eliminated for the 2017 tax year.
- Deferring further reductions to the Small Business Income Tax Rate, which will remain at 10.5% instead of being reduced to 9% as the Liberals had promised.
Tax measures that are included in this budget that had been promised by the Liberals include:
- Providing a new tax credit for teachers and early childhood educators of 15% for amounts they pay of up to $1000 for their purchase of educational supplies.
- An increase of the northern residents’ tax credit to $22 from $15 per day.
- Eliminating the education tax credit and the textbook tax credit
The budget includes some measures to crack down on abuse of the small business tax rate, but the Liberals have backed off on making any changes to the stock option deduction, which is one of the most egregious tax loopholes available and widely used by CEOs to reduce their taxes. There’s also little in the way of reducing subsidies for fossil fuels.
We’ll need much more progressive tax reform, including closing regressive loopholes, in order to fund the more significant commitments that the Liberals have promised and Canadians expect in future budgets. These will also need to set a clear progressive direction forward for the economy, particularly in terms of improving public services and generating good jobs for working people.