Federal Budget 2021

It would seem the Trudeau government has taken Sir Winston Churchill’s advice to heart. More than a response to the COVID-19 pandemic, the 2021 budget has the potential to fundamentally change the role of the federal government and transform its relationship with Canadians.

Assuming all the initiatives announced today are implemented, this budget will multiply Ottawa’s touch points with citizens: unprecedented federal engagement in social policy via early childhood education and long-term care; direct support for small- and medium-sized enterprises (SMEs); and a comprehensive policy response to the unequal impact of the pandemic on women, Indigenous peoples, Black and racialized Canadians.

Reconciling this budget with the federal fact of Canada will be a tremendous challenge. More than the reactions of opposition parties, it is the negotiations with the provinces that will determine the ambition of the measures announced today and, ultimately, the success of the government’s long-term intention to build back better.

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Québec’s Budget 2021-2022

Opening the floodgates… with some caution

Québec Finance Minister Éric Girard tabled his 2021-2022 budget on Thursday afternoon. This budget postpones the return to a balanced budget by two years – it is now scheduled for 2027-2028. Instead of tackling deficit reduction in the short term, the Coalition Avenir Québec government has chosen to invest an additional $15 billion in the five (5) priorities it has identified:

  • strengthening our health care system
  • supporting educational success and youth
  • accelerate growth and the transition to the new economy
  • supporting Quebecers;
  • ensuring fairness.

In Mr. Girard’s view, the priority must be to consolidate the post-pandemic recovery ” before implementing a plan to restore fiscal balance.” Measures to reduce spending and/or increase revenues will therefore await the return of “full employment”. It should be noted that the return to a zero deficit in 2027-2028 depends in part on a substantial increase in federal transfers to the provinces for health care. In addition, the government reiterates its commitment “not to increase the tax burden.”

The budget includes $2.2 billion in new measures to increase productivity and stimulate business investment. Among other things, Mr. Girard announced a reduction in the tax rate for Quebec SMEs (from 4% to 3.2%) on the first $500,000 of taxable income.

In the area of health, in addition to the $11.9 billion planned to fight the pandemic, the government is announcing $2 billion over six years to improve services for seniors (addition of 500 long-term housing spaces) and $1.3 billion to improve health care and services ($527 million to improve front-line care).

In education, substantial amounts ($1.2 billion) are announced to support academic success and encourage perseverance at the college and university levels. This includes countering the negative, demonstrated effects of the pandemic on young people’s learning.

A few measures are planned to facilitate work-family balance, including $97 million to create 3,600 new spaces in family daycare services.

An amount ($214 million) has been announced to extend support to the cultural sector, which has been hard hit by the measures taken to fight COVID-19. The tourism sector will receive $205 million.

The Quebec government had already earmarked more than $130 billion for its ten-year infrastructure plan (2021-2031). Minister Girard is adding $4.5 billion to this already colossal sum. Thus, on average, Quebec will invest $13.5 billion annually in the construction and restoration of roads, buildings and public transportation.

In total, including pandemic measures, Quebec government spending will have increased by an average of 4.3% per year between 2020-2021 and 2022-2023. In the current context, this is not unreasonable.