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Canada: What to Expect in Budget 2023

(Chrystia Freeland: Deputy Prime Minister and Minister of Finance)

This article will serve as a general pointer to what we can expect in Canada's upcoming 2023 Federal budget. Much of this information is publicly sourced from news media. I also include some conjecture about what the budget may or may not fit based on primary source analysis. 

Regarding the announcement of budget 2023, the most likely time periods are in March or April. With last year's budget being released in early April, one can expect that this year's budget will follow a similar timeline.

Investments and Accountability in Canadian Healthcare

According to Canada’s Deputy Prime Minister and Minister of Finance, Chrystia Freeland, budget 2023 will include two primary priorities: healthcare and environmental policy. The former includes $46.2 billion from the federal government to provincial governments. This money will be conditional funding based on shared priorities between the federal government and provinces. Each province will have separate bilateral agreements with the federal government outlining priorities unique to that province. These priorities will include reducing ER wait times, reducing surgical backlogs, providing mental health and addiction services, developing a national data-health system shared between governments, and supporting healthcare workers through better recruitment, retention plans, and pay. 

Other potential policies to look out for include additional healthcare funding in the tens of millions serving remote and Indigenous communities. 

Funding for a national plan on reducing medication prices, enhancing negotiating powers, or providing funding for the National Drug Agency to form a national formulary of covered drugs may also be included. However, recent information indicates that the Federal government is looking to implement such a program later in the year rather than having it in budget 2023.

What’s the Status of Pharmacare?

According to government sources, advances in Pharmacare legislation will likely come later in the year, not during the budget. And although other moves against the pharmaceutical industry regarding pricing regulations have gone through, the federal government is still committed to implementing a national pharmacare system to further lower drug costs. 

As for what Pharmacare could look like, the federal government has recently announced an expansion of drug coverage in Prince Edward Island, with Federal Health Minister Jean-Yves Duclos stating that PEI may serve as a “model” for the rest of the country for pharmacare. Advocates say that the PEI-based model is a “fill-in-the-gaps” model rather than a single-payer model, ushering the notion that such a model would not go far enough for comprehensive drug coverage compared to a single-payer model.  

In addition, lobbying from both sides indicates a fight between the pharmaceutical industry looking for a “fill-in-the-gaps” that will be favourable to their bottom-line drug coverage insurance schemes and health coalitions that seek comprehensive coverage for all Canadians for better health outcomes.

If the government perceives such heated debate about the implementation of pharmacare, they will likely hold it off until later in the year. As a result of this division, Pharmacare will probably not be included in the budget for 2023. 

Either way, the federal government has quite some time to implement such a program; they have until the end of 2023 to table legislation as per the Liberal-NDP supply-confidence agreement

“Building the Clean Economy of the 21st Century” - Minister Freeland

If Canada is to be a leader in green technology development and investment, then Canada must compete against the US’s recently passed $300 billion IRA climate bill and $1 trillion infrastructure bill. Canada must have its allocation of government funds to make the country more economically competitive in green energy generation on the global stage. Although the federal government has made historic investments in infrastructure since 2016 through the nearly $200 billion Invest in Canada Plan, Canada has yet to make equivalent investments in green energy infrastructure.

Budget 2023 is looking to do just that, according to Minister Freeland; responding to the US’ recent legislation will be a top priority. That means making historic investments in green energy through business and household retrofitting policies, tax credits for green energy technology transition, and subsidies for green-oriented infrastructure development such as EV charging infrastructure, public transit, battery production, and modernizing the Canadian electricity grid for renewables. 

Moreover, the United States is looking to spend over $1 trillion on roads, bridges, highways, passenger and freight rail, ports, road safety, and public transit. In that case, Canada must compete to match the US with relatively similar investments. That includes building on the Invest in Canada Plan by providing more subsidies for upgrading current road and transit infrastructure and providing further grants for building green tech-oriented infrastructure (wind, solar, hydro, and nuclear power generation). 

According to government sources, Freeland is looking to partner with the provinces to counter the tax credits, buy America incentives, and subsidy policies in Biden’s climate bill. Suppose Canada is to be competitive against the US in building a green economy. In that case, the provinces must work with the federal government to ensure the country’s competitiveness in building infrastructure for critical mineral extraction, advanced manufacturing, providing transitional funding for our energy workers, and other green technologies that will increasingly dominate in the 21st century. Canada cannot let its issues with political fragmentation get in the way of developing a resilient and clean economy. 

Unfortunately, according to these government sources, Canada needs to match the sheer scale of the tax incentives and investments the US is making. Instead, the sources say that Canada’s response must be targeted and efficient. In other words, they are investing in green technologies that will give us the most value for our dollar. Nevertheless, businesses are urging Minister Freeland to match or at least respond in some capacity against the US’ two pieces of climate legislation.

The Wild Card: A National School Nutrition Program

The Liberals, in their 2021 election campaign bid, had promised to allocate $1 billion over five years to develop a national school food program. Currently, Canada is the only G7 country that still needs a federal school food program that provides adequate breakfast and lunch to grade school children. Moreover, a recent report by UNICEF ranked Canada 37 out of 41 high-income countries in kids’ access to nutritious food. Furthermore, provinces like Quebec, Alberta, Manitoba, and Saskatchewan severely lack school nutritional services compared to other provincial peers like Ontario and the Maritimes, according to a University of Guelph study.

Advocate organizations like The Breakfast Club of Canada (BCC) are pushing the federal government to implement a solution to children’s access to nutrition. The BCC feeds nearly 600,000 children each day but cites that inflationary pressures on food prices have reduced their capabilities to provide children with adequate nutrition, resorting to food rationing and calling for more funding support from federal and provincial governments. 

In a recent report from Politico, 40 Senators have urged the Families Minister, Karina Gould, to develop a Canada-wide school nutritional policy. In addition, lobbying efforts from the Breakfast Club of Canada showcase an increased number of consultations six months after 2022. They supported the notion that local organizations are being hit hard by increases in food prices and need more government support. 

Furthermore, according to the Federal Lobbying Registry, in November of 2022, the Breakfast Club of Canada lobbied 41 specific times with the federal government, a multi-year high; a total of 94 lobbying events took place since June of 2022. Interestingly, December’s number of lobbying events by the BCC had reduced to 1. A sudden reduction in lobbying may mean the government has completed its consultation process and is looking to implement the policy in the upcoming budget. 

That comes after the federal government launched a national provincial-territorial consultation process in Budget 2022 in April 2022 and open consultation in November 2022. The open consultation process in November of 2022 likely explains why the BCC initiated a sudden spike of lobbying with the federal government during that specific month. It shouldn’t be a surprise to see money allocated to fund such a program in budget 2023 after such consultations. 

Addressing the Housing Crisis

There may also include policies focused on housing affordability, as mentioned in the 2021 Liberal election platform. The budget may have policies such as tax credits for first-time home buyers, advancing on a rent-to-own program where landlords and renters sign an agreement for eventual ownership of a rented home, and a savings account for first-time home buyers. Many of these policies are tackling the peripheries of housing affordability.

However, housing pundits argue that the crux of the issue lies in building a surplus housing supply to forcibly bring the prices of homes down through basic market principles. On this front, the Liberals are on track to produce 1.4 million homes by 2026, according to their electron platform. However, housing pundits argue that more housing supply is still needed to meet current and future demand as the country is looking to increase immigration rates to historic highs to nearly half a million by 2025. More people necessitates the need for more housing. 

As a result, billions for funding to build housing supply in urban areas can be expected. As well as funding incentives for municipalities to rezone their cities for higher density-oriented housing development, other policies may include transforming vacant commercial or residential properties to market housing through direct subsidies to municipalities. Additionally, the budget for 2023 might consist of specialized housing subsidies for Indigenous people, low-income groups, and marginalized groups.

Much of this is based on the government’s 2021 election platform, so seeing at least some of these policies in the upcoming budget seems inevitable. 

Maintaining “Fiscal Prudence” 

Minister Freeland has made it plain that any additional spending must be done so with financial restraint, though, at the same time. The federal government worries that any additional sizable spending could increase inflation. So, there should be little room for new significant spending expectations.

In another statement, Minister Freeland stated, "offset any new spending with savings”. Freeland is likely referring to big-ticket social programs with hefty price tags, such as healthcare expansion or pharmacare. To fund such programs, budget 2023 may include potential tax increases on banks, telecom companies, the natural resource extraction industry, high-income earners, expensive assets, and financial stocks.

Whether budget 2023 is “fiscally prudent” will depend on media scrutiny and public opinion. The federal government is looking to spend and implement significant policies in this year’s budget.

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