Federal Budget 2016
Finance Minister Bill Morneau delivered the first Trudeau Government budget entitled Growing the Middle Class. As expected, it contained a deficit of $29.4 billion. It also became clear there will be no balanced budget for the next five years. The government came to power on a promise of economic help for the middle class, set against sluggish economic growth, and turmoil sparked by the sharp drop in the price of commodities. The National Debt is expected to grow by $113 billion by 2020-21, but debt-to-GDP ratio will stay mostly flat at around 32 per cent. The government is projecting growth at 0.4% annually, which is much lower than economists predict, giving the Liberals some wiggle room that the economy will grow in order to accommodate the spending growth already committed.
Among the many highlights, the budget delivered on a new child benefit to assist parents, big ticket infrastructure spending, and deficit financing. The biggest single family spending item on the Liberal budget is the new Canada Child Benefit, a promised $22-billion program that replaces four former benefits, including the universal child care benefit and income splitting into a single new payment targeting middle and lower income Canadian families. The program rolls out July 1 with a maximum $6,400 a year per child under five and $5,400 annually for kids six to seventeen. The working details of the new benefit will be critically important to Liberal messaging on income equality.
BUDGET HIGHLIGHTS (in the words of the Federal Government)
Innovation, Energy and Clean Technology
The Budget will provide $2 billion over two years, starting in 2017–18, to establish the Low Carbon Economy Fund. The Fund will support provincial and territorial actions that reduce greenhouse gas emissions.
Up to $800 million over four years to support innovation networks and clusters, including support for initiatives delivered under the Industrial Research Assistance Program.
$197.1 million over five years, on a cash basis, to Fisheries and Oceans Canada to increase ocean and freshwater science monitoring and research activities and to provide support for the Experimental Lakes Area in Northwestern Ontario.
More than $1 billion over four years to support future clean technology investments, including in the forestry, fisheries, mining, energy and agriculture sectors.
In addition, over $130 million over five years to support clean technology research, development and demonstration activities.
$345.3 million over five years to Environment and Climate Change Canada, Health Canada and the National Research Council to take action to address air pollution in Canada.
$128.8 million over five years, starting in 2016–17, to Natural Resources Canada to deliver energy efficiency policies and programs, and maintain clean energy policy capacity. These resources will support improved energy efficiency standards and codes for products, buildings, industry and vehicles, and further the development of a legislative framework for offshore renewable energy projects.
More than $120 billion in infrastructure over 10 years. Phase 1 of the Government’s long-term infrastructure plan provides $11.9 billion over five years to immediately invest in the infrastructure Canadians need, including public transit, water and wastewater systems, provide affordable housing, and protect infrastructure systems from the effects of climate change.
$2 billion over three years, starting in 2016–17, for a new Post-Secondary Institutions Strategic Investment Fund. This initiative will support up to 50 per cent of the eligible costs of infrastructure projects at post-secondary institutions and affiliated research and commercialization organizations, in collaboration with provinces and territories.
Reducing the EI waiting period from two weeks to one week, effective January 1, 2017. Regions of the country that have been particularly hard hit by the falling commodity prices will see temporary extension of EI benefits.
$555 million over two years in housing for Aboriginal Canadians and to repair and build nursing stations and residences for health care workers in Indigenous communities.
$2 billion in water and wastewater infrastructure and drinking water monitoring over five years.
$2.6 billion over five years to improve primary and secondary education for First Nations children living on reserve.
$1 billion over five years to build and renovate schools on reserve.
$635 million over five years to strengthen the on reserve child welfare system.
$1.2 billion over five years as part of the first phase of the Government’s 10-year plan to create inclusive growth in Indigenous and northern communities, including early learning, child care and housing, as well as investments in other community infrastructure on reserve.
$40 million over two years was assigned to the National Inquiry into Missing and Murdered Indigenous Women and Girls.
$10.7 million over two years, starting in 2016–17, to Indigenous and Northern Affairs Canada to implement renewable energy projects in off-grid Indigenous and northern communities that rely on diesel and other fossil fuels to generate heat and power. First Nations will also benefit from proposed new funding for the First Nations Infrastructure Fund (see Chapter 3—A Better Future for Indigenous Peoples), which will support a range of community infrastructure investments, including energy systems.
Investing in the North
$3.9 million in 2016–17 to extend the Northern Adult Basic Education Program for one year. During this time, the Government will review the program with a view to determining how to best support the participation of Northerners in the labour market.
Budget 2016 proposes to increase the maximum daily residency deduction to $22 from $16.50. This measure will be effective as of January 1, 2016 and is estimated to reduce Work with the Minister of Indigenous and Northern Affairs to establish a new fiscal relationship that lifts the 2% cap on annual funding increases and moves towards sufficient, predictable and sustained funding for First Nations communities.
Enhance the Northern Benefit Deduction to help northern Canadians with the high cost of living and support the growth of northern economies federal revenues by about $255 million over the 2015–16 to 2020–21 period.
Remove the GST on new capital investments in rental housing and modernize the existing Home Buyers’ Plan to support Canadians impacted by sudden and significant life changes.
Strengthening Canada's Health Care System
The Government is committed to working in partnership with provinces and territories to negotiate a new multi-year health accord that will improve health care in Canada and boost health outcomes for all Canadians. The Minister of Health has begun discussions with her provincial and territorial counterparts to enhance the affordability and accessibility of prescription drugs, improve access to home care and mental health services, and support pan Canadian innovation in the delivery of health services.
As these discussions are ongoing, this budget provides immediate investments to support pan-Canadian progress on accord priorities in the form of support for innovations within the health care system. In addition, Budget 2016 announces initiatives that will help Canadians maintain and improve their health, including through expanding access to nutritious food in the North, enhancing food safety, providing funding for specific men's and women's health initiatives, improving vaccine uptake and coverage, and investing in concussion protocols.
Canadian Foundation for Healthcare Improvement
The Canadian Foundation for Healthcare Improvement is a not-for-profit organization funded by the Government of Canada that is dedicated to accelerating health care improvements and efficiencies. Budget 2016 proposes to provide $39 million over three years, starting in 2016–17, to the Canadian Foundation for Healthcare Improvement to support its ongoing efforts to identify and introduce innovations in the health care system.
Canada Health Infoway
Canada Health Infoway is a not-for-profit corporation created in 2001 that provides leadership and facilitates collaboration with the provinces and territories on accelerating the development and adoption of electronic health systems. Budget 2016 proposes to provide $50 million over two years, starting in 2016–17, to Canada Health Infoway to support short-term digital health activities in e-prescribing and telehomecare.
Enhancing Food Safety in Canada
Canada's food supply is among the safest in the world. At the federal level, the collaborative efforts of the Canadian Food Inspection Agency, Health Canada and the Public Health Agency of Canada safeguard food and enhance the health and well-being of consumers in Canada.
Budget 2016 proposes to provide $38.5 million over two years, on a cash basis, starting in 2016–17 to further strengthen and modernize Canada's food safety system. With this funding, the Canadian Food Inspection Agency will invest in systems that will help target inspection activities to the highest-risk domestic and imported foods. The Agency will also enhance inspection activities abroad to assist in responding to food safety risks before they reach domestic consumers.
To help families make better food choices, the Government will also be taking steps over the next year to improve food labels to give more information on added sugars and artificial dyes in processed foods.
Canadian Partnership Against Cancer
Budget 2016 confirms ongoing funding for the Canadian Partnership Against Cancer at $47.5 million per year. This will allow the organization to continue its work with cancer agencies and stakeholders, including Indigenous communities, while engaging patients, care providers and the general public in promoting innovative approaches to reducing the toll of cancer across Canada. Federal support for the Canadian Partnership Against Cancer will complement the initiatives in a new Health Accord currently under discussion with provinces and territories.
Improving Heart Health for Women
Heart disease and stroke are a leading cause of death among Canadian women. In fact, most Canadian women have at least one risk factor for heart disease and stroke—yet many women are not aware of this threat and do not know how to recognize the symptoms until it is too late. Budget 2016 proposes to provide $5 million over five years, starting in 2016–17, to the Heart and Stroke Foundation to support targeted research on women's heart health and to promote collaboration between research institutions across the country. This funding will help lay the ground work for ensuring women have access to high quality care that is attentive to the inherent differences in the diagnosis and treatment of heart disease and stroke in women and men.
Improving Immunization Coverage Rates
Vaccine preventable diseases are still present in some areas of Canada and can lead to serious disability and even death. To help ensure the ongoing health and safety of Canadians, particularly children and those who are immunocompromised, such as the elderly, high levels of immunization coverage among Canadians is required. Budget 2016 proposes to provide $25 million over five years, starting in 2016–17. With this funding, the Public Health Agency of Canada will update the national immunization coverage goals and disease reduction targets, improve Canada's ability to identify under- and un-immunized Canadians, and develop a focused program to improve vaccine access and uptake.
The Canada Child Benefit
The Canada Child Benefit will provide a maximum annual benefit of up to $6,400 per child under the age of 6 and up to $5,400 per child for those aged 6 through 17. Families with less than $30,000 in net income will receive the maximum benefit.
Under the current system, families with $30,000 in net income and one child would have received $4,852 in child benefits, after tax, if their child is under the age of 6 and $3,916 if their child is aged 6 through 17.
To recognize the additional costs of caring for a child with a severe disability, Budget 2016 proposes to continue to provide the Child Disability Benefit, an additional amount of up to $2,730 per child eligible for the Disability Tax Credit.
To better deliver help to those families who need it most, Budget 2016 proposes to eliminate income splitting for couples with children under the age of 18 for the 2016 and subsequent taxation years.
Enhancing Canada Student Grants
Budget 2016 proposes to increase Canada Student Grant amounts by 50 per cent:
from $2,000 to $3,000 per year for students from low-income families;
from $800 to $1,200 per year for students from middle-income families; and
from $1,200 to $1,800 per year for part-time students.
Increased grant amounts will be available for the 2016–17 academic year.
In total, these measures will provide assistance of $1.53 billion over five years, starting in 2016–17, and $329 million per year thereafter.
Introducing a Flat-Rate Student Contribution
Budget 2016 proposes to introduce a flat-rate student contribution to determine eligibility for Canada Student Loans and Grants to replace the current system of assessing student income and financial assets.
This change would allow students to work and gain valuable labour market experience without having to worry about a reduction in their level of financial assistance. It would also benefit adult learners, many of whom may work while studying or have significant financial assets. This measure will provide assistance of $267.7 million over four years, starting in 2017–18, and $73 million per year thereafter.
The Government will work collaboratively with provinces and territories to finalize the flat-rate contribution model in time for implementation in the 2017–18 academic year.
A Renewed Youth Employment Strategy
Each year the Government invests more than $330 million in the Youth Employment Strategy to help young people gain the skills, abilities and work experience they need to find and maintain good employment.
To expand employment opportunities for young Canadians, Budget 2016 proposes to invest an additional $165.4 million in the Youth Employment Strategy in 2016–17.
This funding would be in addition to the $339 million already announced for the Canada Summer Jobs program, to be delivered over three years, starting in 2016–17.
Going forward, the Government will make additional investments in the Youth Employment Strategy in 2017–18 and 2018–19. These investments will be targeted toward supporting employment opportunities for vulnerable youth.
$1.9 billion over five years to Canada’s cultural sector, which will help to create jobs, strengthen the economy, and ensure the unique Canadian perspective is shared with the world.
Prime Minister Trudeau confirmed last week in New York that the eligibility age for old age security will be lowered back to 65 from 67, but there remains room for more re-engineering of retirement benefits.
Guaranteed Income Supplement increased by up to $947 annually.
Not surprisingly, most of the items from the Liberal election platform were found in the budget. The big ticket items appear to be aimed at the middle class, a major Liberal election theme, and public infrastructure. Other areas include innovation, clean and green energy and climate change initiatives as well as help for Aboriginal and Northern communities. Given the current deficit and the government’s plan to run deficits for the next five years before returning to balance, the repeal of the Balanced Budget Act is a necessity and ensures that the official opposition votes against the budget bill.
For more information or if you have questions about specific items, please contact your Sussex consultants for assistance.