The Decibel - The 2023 federal budget, in 23 minutes

Episode Date: March 29, 2023

The Canadian federal government unveiled its 2023 budget on Tuesday, which sets the economic strategy and tone for the next fiscal year. There’s a lot packed into this document, ranging from measures to help with inflation to an expansion of the national dental plan to investment incentives to help us transition to a greener economy. But how will this budget really impact you?The Globe and Mail’s Ottawa bureau – Deputy Ottawa bureau chief Bill Curry, personal finance columnist Rob Carrick, senior political reporter Marieke Walsh and senior Parliamentary reporter Steven Chase – join the podcast, five minutes at a time, to break down the key takeaways of this year’s budget.Questions? Comments? Ideas? Email us at [e-mail]

How many hours do you think you've worked today already? When did you start? Yeah, we're closing in on 12 hours, I guess. You get into the lockup around 8.30 and you get the books at 9. So we're still going. We're still working on our final story for the paper. Bill Curry is the Globe's Deputy Bureau Chief in Ottawa. And on Tuesday, he was in the budget media lockup to get an advance copy. Today, we're going to chat with Bill and three more of our Globe colleagues who were studying the budget. We'll spend five minutes with each of them, where they'll break down the key details

you need to know about where the Liberals intend to take the country and what it all means for your life. I'm Mainika Raman-Wilms, and this is The Decibel from The Globe and Mail. Bill, I know it's been a long day. Thank you so much for being here. No problem. Thanks, Mainika. All right. So let's get into this here because there's a lot to look at with this budget.

I just want to take a step back, actually, and think about the story, really, that the liberals are trying to tell here. So, Bill, what does this document say about this government at this moment? Well, I think it's a story of Christopher Freeland, the finance minister, trying to respond to two things at once. One would be global politics. And absolutely, there's a lot going on. You've got, you know, global supply chains that used to rely on a lot on countries like China. So they're rethinking their supply chains. At the same time, you've got the United States wanting to do that, but also they wanted to green their economy. And they're doing this through a very different way than Canada has approached these things. They're going through it with a very subsidy-heavy focus through a program called the Inflation Reduction Act that has

hundreds of billions of subsidies to attract private companies. So I think this is Canada's response to those two things internationally. And then there's also the domestic politics. This is a minority liberal government that is dependent on the NDP to survive confidence votes. The budget is a confidence vote. And so that's why when you look at this budget, you're going to see things that are clear NDP priorities, like dental care and support for low income people through a GST credit rebate. A lot of this stuff is kind of looking at the priorities for this government. Is it fair to say in a way this is kind of a promotional document for what the Liberals want to do and what they want their government to stand for?

Yeah, absolutely. And that's what a budget is. I think people maybe might be under a false impression that a budget is a very line by line account of how a government spends money, and that's actually in separate documents. The budget is really a promotional, it's a really big flyer, essentially, for the government to talk about all the things that it's done and all the things it plans to do. So it's really focused on the new spending, things it's going to do above and beyond what it had previously announced. So it really is an opportunity for the government to set the agenda about what its message is and what it wants to talk about. Okay, so what are the key things that this government is spending on in this budget? Well, definitely there's a lot there on clean technology.

Overall, it's a five-year spending plan. There's about $67 billion in gross new spending in there. About $20, a little over $20 billion of that is this chapter on green technology. There's obviously a lot of money for health care. And then I think the other big element would be the dental care program. This was a clear priority of the NDP. It was not part of the Liberal platform in 2021. So it's a clear thing that the NDP has pushed the Liberals to do.

So this year, they are going to follow the deal and expand it to more people. So it's going to go to, it's income tested, but lower income seniors, low income Canadians with disabilities, and children right up to 18 and low income families. And it's going to shift to more of an insurance program for people who do not have other insurance programs through work or what have you. So there's a bit more in terms of more money for loans for Ukraine. The overall defense spending, there's not a whole lot new there, which is somewhat of a surprise because certainly Canada has been under pressure from its NATO allies to contribute more on defense spending. So that didn't happen. Okay, so there is a lot of spending in this budget bill.

How is the government saying it's going to pay for all the new money that it's allocating here in this budget? Yeah, I think any kind of budget, you want to be talking about the bottom line. So that's one of the big news stories out of here is the bottom line has deteriorated. You know, looking ahead at the fiscal year that starts April 1, just a few months ago, that was supposed to be a $30 billion deficit roughly. Now it's closer to $40 billion. And the fall update was saying the books would be balanced in five years. And now they're saying that that's not going to happen. We're going to still have

about a $14 billion deficit by then. Can you just explain that a little bit, Bill? Why does it matter if the deficit is increasing? Why is this important? If a government spending gets out of control, then suddenly it becomes harder for it to borrow money on financial markets. And we saw that in the 1990s. And it forced some pretty aggressive and painful spending cuts as a result. So generally, you want to be lowering your debt to GDP so that, you know, in moments of crisis, if you have to reverse course for a couple of years, it's manageable. Okay, great. But let's come back to how they're actually paying for everything in this budget, Bill. How would they say they're going to pay for everything that they're spending on?

Right. So of the total $67 billion or so in new spending over five years, it's partly offset by about $21 billion that they're going to get through a mix of tax hikes and spending cuts. So the tax hikes that are in there, there's some that are aimed at very high income Canadians. And there's also some technical changes to the way banks are taxed that are going to raise a few billion dollars, according to the documents. So, you know, in harder times, government spending cuts can involve, you know, public sector layoffs, you know, across the board, total cuts to operating spending, that kind of thing. Those harder decisions are not being taken here. OK, Bill, thank you so much for taking the time to speak with me on a day like today.

Thanks, Bianca. With inflation still running high and interest rates pinching people's pocketbooks, a lot of people are looking for some kind of government help. We spoke with personal finance columnist Rob Carrick about what's being offered in this budget. Rob, thank you so much for being here today. No problem. So for a lot of Canadians, when it comes to making sense of the federal budget, I think the first thing they're really wondering is, you know, what does this actually mean for my personal finances, for my world here? So we're at a point right now

where inflation, of course, remains really high. There's still the threat of a recession, possibly. So, Rob, what is the government doing to help Canadians in this budget? Well, let's talk about something that the government's not doing, first of all, so we can just tick it off our list. They're not raising taxes. And I know there was some speculation, oh, the government needs cash. They may raise taxes on the wealthy. They may raise taxes on investors. They didn't. They are rejigging the alternative minimum tax, which the idea of that being to make sure high net worth people pay their fair share tax. But beyond that, taxes are fine. So what are they doing? Well, the marquee measure is the grocery rebate,

which is just fancy branding for an extended version of a previous extra amount of GST tax credit that was paid to people. It'd be about $400 plus for an eligible family with two kids. And I calculated that it would be about a little less than $9 a week. So you could, I'll leave the listeners to judge whether that's going to make a difference in their lives. Okay, so is this money that people have to spend on groceries then? Is that what this is? Nope, it's cash that will go into their bank account

like any routine GST tax credit, and they can spend it on anything. It's just, they're just sort of branding it as the grocery rebate because they know high food costs, food inflation are top of mind, and people are saying, what is the government doing? And they can say, well, we got the grocery rebate. You mentioned that the GST rebate, can you just explain this a little bit more here? So for people with lower incomes, this is what would apply to

them. So not every Canadian is going to be getting this grocery rebate. Isn't that right? Correct. The GST rebate is the government's way of giving lower to moderate income people back some of the GST and HST they pay. If you're a middle hire earner, you won't see any of this. The idea is to help the people who need help the most. And that way, I think it's actually well targeted. And so just to be clear, if you're already getting the GST rebate, the government sales tax rebate, this is something you'll get. If you're not already getting the GST rebate, you won't see it then, right? Exactly. Okay.

Let's talk a little bit about food inflation here because as you touched on, I mean, food inflation is really high. Food purchases from stores went up 10.6% year over year in February. And regular inflation is only at 5.2%. So food inflation is more than double everything else. This rebate is only a few hundred dollars, as you said, Rob. How much of a difference will this money actually make for people? Well, you know what? I figure for that family of four, if they have older kids, probably that's two weeks

grocery shopping. So that's something. But, you know, the government has to walk a fine line because if they were to deliver a bigger block of financial relief to families, they would be accused of stoking inflation, putting more money into the system. The problem with our system now is there's too much spending. So here, I think they've managed to give people a small amount of money. We can debate whether it's meaningful or not, but I think it pretty much saves them from being accused of having ignited more inflation. I want to touch on taxes again, because you mentioned that taxes are

staying the same, but you also touched on the tax called the alternative minimum tax. This is usually for wealthy Canadians. What is that, Rob, and why is that significant? The idea of the alternative minimum tax is to catch people who use various tax deductions and tax credits to get their taxes down to very close to nothing. And these could be high earners. So what this does is basically says, when you do your taxes, we very close to nothing. And these could be high earners. So what this does is it basically says, when you do your taxes,

we're going to do two calculations, a conventional calculation, and we're going to apply this alternative minimum tax, which is going up from 15% to, I believe, 20.5%. And whatever is the higher amount of tax, you pay that amount. So the alternative minimum tax sort of puts a floor under high earners

and would theoretically prevent them from getting their taxes down to nothing or nearly nothing. It's a fairness measure. But you know, there's a whole industry here to help people avoid taxes, not in an illegal sense, but take maximum advantage of every loophole there is. And so they'll go up against this new alternative minimum tax, and I guess we'll see who wins. Rob, is there anything that you think this budget missed? Like when it comes to affordability, is there anything you thought maybe should have been in here that wasn't? No, I was just glad to see that they didn't tinker with taxes.

This is a time to sort of not layer on top of people. So I was glad to see that. I think one of the big measures in this budget is actually dental care. They're expanding the coverage of dental care. While it's not strictly a personal finance measure, it's more of a health measure. I do think that a lot of families who were up against it to afford dental work, maybe they had to give up other things to afford it, or maybe they were skipping dental care. That's going to be a difference maker for them. Last year with the budget, we saw a lot for housing. Housing affordability is a huge issue

for a lot of Canadians. Is there anything in this year's budget to help people buy homes or give a rebate to renters? Anything in that? There's nothing in this budget that you can latch onto if you want to get into the housing market, but you can't afford it. Zero. And I think that's reality. I think the government has taken a lot of measures that at the margins might help. I mean, they announced last year the tax-free first home savings account. And as of April 1st, that will start to become available at financial firms. And I think that's a really good thing for young people to get involved with. Put your money in that. There's not really any downside, even if you don't end up buying a house. But that's last year's measure coming into effect now. I'm just curious. There's so much stuff in a document like this. Was there anything random in this budget that, I don't know, you found amusing when you were looking at the affordability measures here? Well, you know what, there's this talk, there's this blurb in the budget about how they're going to work to try and eliminate junk fees. You know, those are like add-on service charges that get layered on top of

things that I've placed an Uber Eats order lately, like I have. You'll notice there's the menu costs and there's delivery costs and the tax costs and the service costs and there's like by the time they add all these extra costs and you've almost doubled the menu cost so they are i think trying to ride public anger on that and say we are on it we're going to try to do something but it was so vague i had to mark them down on that because i thought it's a good idea but i would if you're going to tackle it give me something more concrete than we want to explore and talk and consult on this. Rob, thank you so much for taking the time today. No problem.

We'll be right back. Unlike past budgets, this one didn't include a section on climate change. Instead, the transition to a clean economy was one of the main visions that the Liberals laid out. Marika Walsh is the senior political reporter covering this. Marika, it's great to see you. Thanks for being here. Thanks so much for having me, Manika. So there's a lot in this budget here when it comes to transition from fossil fuels to greener sources of energy. But let's look at this from a big picture point of view here, Marika. Like, what is the government trying

to do here? What's the overall goal? The overall goal of this budget and this spending in particular is to line up the economic incentives that the government is sending with the climate targets that it has already set. For example, 2035, they have set the target of a net zero electricity grid. 2050, we know we want essentially a net zero economy. And there's all these targets to reduce emissions. And they need the economy to be moving in the same direction in order for it to have a hope in heck of getting there. And so this budget is really about spending in ways to try and push the economy in that direction. And so how much money are we talking

about here? How much are we spending to try to do this? So the five-year timeline that the budget actually details the money, we're talking about about $21 billion, primarily in tax credits for clean electricity, for things like critical minerals to, again, get things moving in that direction. Over a 12-year time frame, the government says that would actually be about $80 billion worth of tax credits that are targeted to business investments in areas of the economy that need to change in order to reduce emissions. I think you can attribute the scale of it in large part to how much the American government is spending to subsidize the transition to the clean economy and ensuring that Canadian companies can compete. Nobody was really expecting Canada to match dollar for dollar.

They wanted enough of a signal, according to the business community, that they could still compete in Canada to match dollar for dollar. They wanted enough of a signal, according to the business community, that they could still compete in Canada. Okay, so let's talk about the U.S. because this is a big thing that the U.S. has done recently. They've invested $369 billion, with a B in American dollars, invested that very heavily into the clean tech sector. So how do the measures that are in the Canadian budget actually measure up to that? Canada has set a different sort of table when it comes to how it plans to transition the economy. The U.S. tax incentives are around production tax credits, so how much is produced, whereas the Canadian response is about investment tax credits.

So how much a company is willing to spend up front to change from a coal-fired plant or a natural gas electricity plant to solar or to nuclear. And on top of that, the government says that this level of tax credits builds on policies that were already in place. So things like the carbon tax act as a stick to encourage companies to move in one direction. And the tax credits act as a carrot on top of that. I want to ask you about fossil fuel extraction, though, and the oil sector, because, I mean, like it or not, that's still a big part of the Canadian economy these days. So how is the government trying to make it easier for the oil sector in particular to transition and be part of this cleaner economy? The government actually rolled out a tax credit for what's called carbon capture utilization and storage in last year's budget. And this year they slightly expanded the eligibility of it. So that is one of the elements that is part of the

suite of these clean energy, clean economy tax credits to incent progress on that file to reduce emissions by capturing carbon. Okay. How will these incentives change things and how will they impact the lives of Canadians? The government's pitch is that this is not just about climate targets, it is about the next generation of jobs. And what their communications around the release of the budget is, is that this is sort of the biggest economic transition since the Industrial Revolution. And they want to make sure that the jobs that this economic transition creates are also happening in Canada. There's also this discussion that's happening at the same time around what we're hearing is friend-shoring. So that Canada and other allies and democracies create new supply chains that ignore or cut out unreliable dictatorships like Putin and Russia, and that by unveiling this suite of programs,

they are ensuring that Canada will be part of those supply chains. And therefore, Canada will have customers for its sort of next generation new economy products. Key among those sort of the example we always hear about are critical minerals. Marika, always great to talk to you. Thank you so much for being here. Thanks so much, Meenaka. Lastly, we spoke to Stephen Chase, who's a senior parliamentary reporter, about what caught his eye in this year's budget. Steve, thank you so much for being here. I know it's a crazy day there in Ottawa, so I appreciate your time. Oh, glad to be here. So Steve, you've been covering Chinese interference in Canadian elections, which we've learned about through

intelligence reports. What was in this budget to address that? There was about $66 million to address foreign interference, and it's broken down into two components. First of all, one of the big complaints by diaspora groups, by new Canadians, by people who've arrived from other countries, is that they're harassed by their governments from their homeland. For instance, many Uyghurs, Tibetans, Hong Kong Canadians, Taiwanese Canadians say that they are under threat and under harassment by the Chinese government. So the government today announced about $50 million they're giving to the RCMP over a three-year period to basically work on protecting these groups from harassment, investigating them, and also educating them about how to deal with it. And that's one portion of

the money. The other portion, which is about $16 million, is going to the Department of Public Safety, which is to be used to set up an office to counter foreign interference. And when we talk about foreign interference, we mean efforts by foreign governments such as China, such as Russia to interfere in Canadian politics. There's very little given to us in terms of a mandate for this office, but the title gives us a sense that this is the first stab at trying to confront it. The RCMP is going to have a mandate to reach out to these groups and help protect them

and help educate them on how to deal with this harassment. And of course, the Office of Foreign Interference, we don't have a lot on its mandate yet, but arguably that office is supposed to be coordinating efforts by governments at different levels to fight foreign interference in the elections, to help educate members of parliament, to help educate political staff, to help educate civil servants on efforts by foreign governments to meddle in our politics and in our policymaking. So it's really a first step. Okay. So just to be clear here, there's money going to two different places then. So there's 50 million to the RCMP to combat harassment of Canadians, as you were talking about there.

And then 16 million is going to the Department of Public Safety to set up this National Counter Foreign Interference Office. Is that correct then? That's correct. Yes. Okay. And so when we're talking about the $50 million and the $16 million, is that all new money, Steve? Yes, it's all new money that was announced in the budget Tuesday and will be rolled out over the next few months. And so, Steve, what will you be rolled out over the next few months.

And so, Steve, what will you be watching for in the next few weeks, next few months? What do you expect to happen on this file? Well, the best source of information on this file is members of diaspora groups, groups that have traditionally been persecuted and harassed. We're going to be asking them what kind of contact they've made with the RCMP on this. We're going to be asking them what kind of what they're hearing from the RCMP on this. We're going to be asking them what kind of what they're hearing from the Department of Public Safety. In many ways, that's going to be our best clue as to how effectively this is rolling out. Let's turn a little bit here and look at Ukraine. Ukraine, of course, is still under assault from Russia. And Steve, you've been looking to add Canada's spending commitments to Ukraine.

What did the budget say about that? The budget unveiled a $2.5 billion loan for Ukraine. This is going to be administered through the International Monetary Fund framework and adds to an existing loan we've made to Ukraine earlier. But what's also significant is it brings the total amount of support for Ukraine from Canada in the last year to over $8 billion. And the Canadian government in the budget is actually making the argument that on a per capita basis, Canada is actually giving more to Ukraine than any other country. That's significant. Wow. Yeah, they say it's about $98 US per person is how much we're contributing to help Ukraine defend itself against Russia. There was other elements announced

as well. There was $170 million to further help Ukrainians settle in Canada. This is in terms of income support and settlement support. And over the last year, 200,000 Ukrainians have already settled in Canada. Many of them, of course, temporarily. They're hoping to go home when the war is over. But there's actually a waiting list of 800,000 people. So the government is anticipating there'll be a lot more arrivals over the next year. And this $170 million is aimed to help them resettle. Steve, thank you so much for taking the time to speak with me today. You're welcome.

That's it for today. I'm Mainika Raman-Wilms. Our producers are Madeline White, Cheryl Sutherland, and Rachel Levy-McLaughlin. David Crosby edits the show. Adrian Chung is our senior producer. And Angela Pachenza is our executive editor. Thanks so much for listening, and I'll talk to you tomorrow.