09/21/2021
Federal Election 2021 Canada
Trudeau wins another minority
In a battle waged against the backdrop of the COVID-19 pandemic, voters returned Prime Minister Justin Trudeau to office with another minority government. Trudeau now faces the challenge of working with other parties to enact his fiscal, health care and social platform. This includes, continuing the war on COVID-19, launching a $10-dollar-a-day childcare program and advancing the mandatory use of vaccines. As well, he wants to raise corporate and personal taxes to help offset the expected $156.9 billion 2021 deficit.
KEY TAKEAWAYS FROM THE LIBERALS’ ELECTION WIN
Deficit
The Liberals estimate that the federal deficit will decline from $156.9 billion this year to $32 billion in 2025-26. But they offer no timeline for erasing it entirely.
The projected debt as a share of gross domestic product (GDP) could fall slightly over five years, from 51.2% to 49%. The Liberals maintain that this drop in the debt-to-GDP ratio will be its “fiscal anchor,” guiding borrowing in the future.
Spending plans also include $15 billion over three years as a “risk adjustment” to cover unforeseen costs related to the COVID-19 pandemic.
Taxes
To help pay for the government’s overall spending plan, large corporations and wealthy Canadians may be asked to pay $25 billion more in taxes.
This would include a 3% surtax on banks and insurance companies earning profits over $1 billion. Part of this money will flow to what the government terms a “recovery dividend” to finance an affordable housing program.
As well, a minimum 15% tax is proposed on people in the highest income bracket. This would mean that deductions and tax credits won’t be enough to reduce their tax obligations below that threshold. However, Canada already has an alternative minimum tax, which limits the tax deduction available from certain incentives. As such, it is unclear how these measures may work in concert.
In addition, the government hopes to generate nearly $12 billion in new revenue through stepped-up tax enforcement measures.
Social programs
The Liberals plan to spend $78 billion over five years – primarily in areas such as health care, affordable housing, and care for the elderly.
In terms of maternal health, the government proposes to add new regulations surrounding abortion in the Canada Health Act, which can be approved by Cabinet without introducing legislation in Parliament. These measures would penalize any province that fails to ensure access to abortion services by reducing federal health transfers.
Nearly $6 billion would also be spent to eliminate hospital waiting lists. As well, $3.2 billion would be used over four years to hire 7,500 family doctors, nurses and nurse practitioners.
The government proposes to push ahead with its $27 billion national $10-dollar-a-day childcare program. It has agreements with eight provinces to do so.
To improve the quality of care in nursing homes, $9 billion would be spent over five years, in part to train 50,000 new personal support workers earning at least $25 per hour.
Housing
The government proposes to address the rising cost of home ownership, by spending $10 billion on affordable housing over the next ten years. In total the government wants to build 1.4 million houses over three years.
The residential rental property rebate on the Goods and Services Tax (GST) may be increased to 100%, effectively eliminating the GST on new investments in affordable rental housing. The government will also provide $125 million per year in tax incentives to increase and renovate the supply of rental housing across Canada.
As well, a rent-to-own program, with $1 billion in loans and grants would be used to develop rent-to-own projects with partners from the private, not-for-profit and co-op sectors.
To reduce speculation, an anti-flipping tax would be implemented on residential properties, requiring the home to be held for at least 12 months. In addition, new foreign ownership would be banned for 24 months after the regulation is enacted.
COVID-19 Recovery
To ensure businesses and groups that require their customers to show proof of vaccination against COVID-19 are protected, the government proposes to shelter them from legal challenges.
To help in the hiring of more workers, the Canada Recovery Hiring Program will be extended to March 31, 2022.
The Canada Workers Benefit could also be expanded to support one million additional low-wage workers. As well, the Union Training and Innovation Program could be doubled to $50 million a year to boost apprenticeship and training opportunities. In addition, federally regulated workers could receive 10 paid sick days annually.
New parents with student loans will be able to pause their payments interest-free until their youngest child turns five.
Climate change
Prior to the election, the government reset Canada’s greenhouse gas reduction target to be 40 to 45% below 2005 levels by 2030. It also increased the carbon tax to $170 a tonne.
In their platform, the Liberals proposed funding to assist in the development of small nuclear reactors and hydrogen fuels.
Additionally, at least half of all passenger vehicles sold in Canada must be zero emission vehicles by 2030.
The Disaster Mitigation and Adaptation Fund was increased by $1.4 billion to support wildfire mitigation activities, rehabilitation of storm water systems, and the restoration of wetlands.
The government proposes to work with the insurance industry to find more cost-effective ways to protect communities from climate impacts, including floods and wildfires.
Canada Mortgage and Housing Corporation will be asked to include more climate resilience measures in its home retrofit program.
Source: Chhad Aul, Chief Investment Officer and Head of Multi-Asset Solutions, SLGI Asset Management Inc
