Sussex Highlights & Analysis: 2024 Federal Fall Economic Statement

What you need to know:

• Just hours before the release of the Fall Economic Statement, Deputy Prime Minister and Finance Minister Chrystia Freeland resigned from Cabinet.
• New Finance Minister Dominic Leblanc was sworn in at Rideau Hall.
• The deficit reached $61.9 billion, well exceeding the government’s internal $40 billion "fiscal guard rail."
• $23 billion in new spending measures over 5 years.
• The FES contains a series of measures to encourage investment in Canada, and to address concerns raised by President Trump regarding Canada’s border management.
• The previously promised $250 Working Canadians Rebate has been scrapped.
• Amidst political uncertainty, there is a significant risk that the promises outlined in the FES may not become law or be implemented, given the possibility of an impending election.

As almost an afterthought to the most chaotic and consequential day in Federal politics in decades, the Government of Canada released the Fall Economic Statement 2024 (“FES”) on Monday afternoon, just one day before Parliament rises for the mid-winter break.

Overshadowing and dominating the day’s headlines was that after apparent weeks of pressure building between the Deputy Prime Minister and Finance Minister’s office and the Office of the Prime Minister over the imposition of the GST Holiday, the $250 Working Canadians Benefit and the government’s overall fiscal policy, Minister Chrystia Freeland resigned just hours before she was scheduled to deliver the FES in the House of Commons.

While announcing her departure from Cabinet in a letter published to ‘X’, Freeland criticized the government’s fiscal plan in scathing terms. She warned of the coming challenges from the potential tariffs threatened by the incoming administration of Donald Trump in the United States: “That means keeping our fiscal powder dry today, so we have the reserves we may need for a coming tariff war. That means eschewing costly political gimmicks, which we can ill-afford and which make Canadians doubt that we recognize the gravity of the moment.”

Freeland further indicated that although she is leaving Cabinet, she will remain in Caucus and intends to run again in the next election. The announcement of Freeland’s resignation came less than 12 hours after CBC News reported that Housing, Infrastructure, and Communities Minister Sean Fraser is also leaving Cabinet and will not be running in the next election.

The FES comes at an extremely difficult time politically for the Liberal Government. Prime Minister Trudeau and his government have been under enormous pressure from a cost-of-living crisis that has soured their polling numbers and left them trailing the Conservatives by double digits for well over a calendar year. The Leader of the Opposition frequently references economists and the Bank of Canada, arguing that excessive government spending is driving inflation upward and, in turn, pushing interest rates higher. The Parliamentary Budget Officer warned in advance of the FES’s tabling that the Government was likely to blow past its fiscal guardrails (keeping the deficit under $40 billion), with a deficit reaching $46 billion. The true number, revealed today, is $61.9 billion.

While the government faces pressure to curb spending, Donald Trump is just over a month away from inauguration, promising to immediately implement broad tariffs, drastically cut regulations, and reduce business taxes. In this context, Canada could see its exports hit by 25% tariffs, further eroding its competitiveness.

Given the urgency, why did the FES arrive so late? First, the Government's legislative agenda—and that of Parliament as a whole—has stalled due to ongoing debate over a privilege motion initiated by the Conservatives, following the government's refusal to transfer documents related to governance issues at Sustainable Development and Technology Canada (SDTC).

Question period and committee work continued but there was almost no government business that could proceed until the privilege motion was resolved.

NDP Leader Jagmeet Singh has been quoted as saying “all options are on the table,” including pulling its support of the Liberal Minority Government. He has directly called for Prime Minister Trudeau’s resignation.

In this FES, the Government scrapped the $250 cheques altogether and brought in some significant new measures to support business investment including $1 billion of support for venture capital, incentives to get pensions investing in growing businesses, and the extension of accelerated depreciation. Measures to improve Canada’s investment climate is what many economists and business leaders have been calling for. The only question now is if the plan can secure the support of the House and breathe life into a government very much on the ropes.

‍Next Steps

Traditionally, the Fall Economic Statement is debated for four days in the House of Commons before a general vote is held on the main motion. Given the timing of this particular FES, there won't be enough time to hold that vote until the House reconvenes in late January.

In an afternoon press conference, Poilievre said that Trudeau amidst the chaos of the day had completely lost control in advance of the looming threat of 25% tariffs under the forthcoming Donald Trump administration and called for an immediate snap election, personally singling out NDP Leader Jagmeet Singh. While Singh would not indicate whether he will support the FES or not, he did today call for the Prime Minister to step down.

Read the full report here