Federal Budget 2021: A focus on childcare, jobs, post-pandemic recovery

OTTAWA – Affordable childcare, supporting the workforce, and equality in the economy are some of the key highlights out of the Liberal government’s Budget 2021.

The Liberals are outlining their way out of the COVID-19 pandemic, with growing the economy the main driver for recovery.

“We must punch our way out of the COVID recession,” said Finance Minister Chrystia Freeland Monday.

“…this is an economic shock of a very particular kind. We are not suffering because of endogenous flaws or imbalances within our economy. Rather, the COVID recession is driven by an entirely external event – like the economic devastation of a flood, blizzard, wildfire, or other natural disaster.”

Related article: An ambitious plan to bring record deficit down

The overarching theme for this budget is, as has been the case in the past, equality in the workforce. In this budget, which includes $101.4 billion in spending, the Liberals are putting an emphasis on new measures that will help women, families, and minority Canadians, as well as get businesses back up and running, and looking ahead to a greener future.

This year’s budget is a first on many fronts. It’s the first one by the Liberals as a minority government, the first in the midst of a global pandemic, and the first as the federal government reports a record deficit.

Since the last budget was tabled in March 2019, much has changed. The COVID-19 pandemic has destroyed thousands of jobs, put many in uncertain ways, and left the federal government in a massive financial hole. As a result of spending to try to get Canadians through the health crisis, the federal deficit has skyrocketed, with the total for 2020-2021 now sitting at $354 billion. While that is less than what was projected in the fall economic update ($382 billion), getting the country back into the black will not be a simple task.

There is no date by which the federal government expects to eliminate its debt.

While the federal deficit is lower than was initially projected, Ian Lee, associate professor of management at Carleton University’s Sprott School of Business, says when we’re talking about billions of dollars, the difference between $354 billion and $382 billion is marginal.

“I’m sure they were very careful, they wanted to come in a little bit lower than what was forecast in the fall statement, and they did, give them credit, but it’s still a gargantuan number. In roughly three years, they will have doubled the debt-to-GDP ratio of the federal government to the Canadian economy,” he said.

Some see budget 2021 as a pre-election platform for the Trudeau Liberals. This fiscal plan needs the support of at least one other party, or the Liberals risk a snap election.

Here are the top takeaways:

GETTING THROUGH COVID-19

The budget, of course, accounts for the fact that we continue to live amidst a global pandemic. Budget 2021 continues to underscore the federal government’s promise that every Canadian who wants to be vaccinated will have received all necessary doses by September. However, in addition to making vaccine promises, the federal budget also makes proposals to fill gaps that were exposed early on in this pandemic.

Protecting our seniors

Budget 2021 proposes $3 billion over five years to Health Canada to support provinces and territories in making sure standards are upheld in long-term care. The pandemic unveiled major inadequacies in long-term care facilities across the country, with people living in these centres being the hardest-hit demographic months into the health crisis.

In addition to funding for long-term care, the federal government plans to work with jurisdictions to ensure seniors and others living in care are living “in safe and dignified conditions.” Money is also being proposed to help Statistics Canada improve its data infrastructure and collection when it comes to supportive and primary care, as well as pharmaceuticals.

However, many people want to spend their later years at home as opposed to in a care facility. Budget 2021 also proposes $90 million over three years to launch the Age Well at Home Initiative which would help community organizations support low-income and other vulnerable seniors stay home for longer.

The budget also proposes increasing Old Age Security for seniors 75 years and older, starting in 2022.

CHILDCARE

$10 a day childcare

Could Canadians see $10 a day daycare become a reality? That’s the plan, according to Budget 2021, which outlines steps to get to that goal by 2025-26.

Working with provincial, territorial, and Indigenous partners, the Liberals are proposing the introduction of the National Early Learning and Child Care Plan. This plan aims to get families get back to work, while knowing their children are safe and well taken care of, without digging themselves into a financial hole.

The government’s ambitious goal is to bring fees for regulated childcare down to $10 a day on average within the next five years. This has been a major ask, both on provincial and federal levels, for years.

The Liberals plan to invest up to $30 billion over the next five years, as well as $8.5 billion in ongoing spending to support this vision. The party aims to see a 50 per cent reduction in average fees for regulated early learning and childcare by the end of 2022. This would apply across Canada, except for Quebec, which already has programs in place to keep rates down through what the Liberals call a “well-established system.” The budget includes a potential agreement with that province to help it continue to improve its system.

Budget 2021 suggests the plan could help get as many as 240,000 workers into the labour force, which could result in a 1.2 per cent rise in the real GDP over the next two decades.

Of course, with additional spaces comes the need for additional childhood educators. Budget 2021 proposes training and development for this sector.

The plan to get rates down to $10 a day is contingent on partnerships with the provinces and territories.

Canada’s Indigenous Early Learning and Child Care Framework

Budget 2021 aims to build on the Indigenous Early Learning and Child Care Framework, which was co-developed with Indigenous partners in 2018. This includes a proposed investment of $2.5 billion over the next five years to ensure Indigenous families have access to high-quality care that fits their needs. Hundreds of millions of dollars are also being proposed for before and after-school care, as well as physical improvements and renovations to early learning and childcare centres.

Helping children with disabilities

Budget 2021 proposes $29.2 million over two years to help children with disabilities. This money would be provided to Employment and Social Development Canada through the Enabling Accessibility Fund to help support centres and make physical upgrades to improve accessibility.

HELPING BUSINESSES AND THE WORKFORCE

Extending and expanding supports

Budget 2021 proposes an extension to many of the COVID-19 support programs introduced last year to help Canadians weather the pandemic. The extensions would apply to the Canada Wage Subsidy, the Canada Rent Subsidy, and Lockdown Supports until Sept. 25, 2021.

Meanwhile, the federal Liberals are proposing up to 12 additional weeks for the Canada Recovery Benefit, to a maximum of 50 weeks, in addition to an additional four weeks to a maximum of 42 for the Canada Recovery Caregiving Benefit.

The budget is also looking to make Employment Insurance more accessible to Canadians across the country. In addition, it is looking at making longer-term reforms to the EI program (page 89), including changes to sickness benefits to help Canadians who may need longer support to deal with illness or treatment.

However, what is noticeably missing from Budget 2021 is a paid sick leave program. This is despite repeated calls from opposition leaders and industry stakeholders, with calls growing over the course of the past year due to the pandemic.

The federal government also plans to introduce legislation to establish a $15 per hour minimum wage, rising with inflation, for those in the federally regulated private sector. It says provisions will ensure that provincial and territorial wages that are higher will prevail. The government estimates this increase in the minimum wage will help more than 26,000 workers across the country.

Canada Recovery Hiring Program

With many businesses having been forced to lay off staff and remain closed for months on end, Budget 2021 is proposing a new program to help these companies hire back staff and get back on their feet.

The Canada Recovery Hiring Program, which would run from June to November, proposes $595 million to support eligible businesses in this endeavor. The program would offset a portion of the extra costs employers have to deal with when reopening, for example by increasing wages or hours, or hiring additional bodies. Eligible businesses would claim either the Canada Emergency Wage Subsidy or this new program — whichever is higher.

With rates for this program and the subsidy expected to ramp down in the coming months, the federal government hopes this slowdown will incentivize businesses to get hiring as soon as possible to maximize their return through these supports.

This new program would help Canadian-controlled private corporations, individuals, charities, and non-profits, and is expected to cost about $595 million in 2021-22.

Getting businesses into the new age

In addition to hiring workers, the federal Liberals want to help bring businesses into the digital age with ease. That’s where the Canada Digital Adoption Program comes in. The proposed program would support businesses in the adoption of new technology to help them grow. It’s expected to provide businesses with the support and information they need, as well as training workers to actually use these technologies.

The Canada Digital Adoption Program could create thousands of jobs and help as many as 160,000 small- and medium-sized businesses, according to the budget document.

It provides support through two avenues: by expanding customer bases online and taking advantage of e-commerce opportunities, and/or by providing more comprehensive support to adopt new technology for “off-main street” businesses.

Budget 2021 includes $1.4 billion over four years starting this fiscal year that would, in part, help organizations provide skills training for as many as 28,000 young Canadians to help small- and medium-sized businesses adopt new technology.

Equity in business

This fiscal plan puts a big emphasis on getting women back to work. Part of that entails supports for female entrepreneurs to get them greater access to financing, mentorships, and training. The Women Entrepreneurship Strategy includes funding to help women access these services.

The government is also aiming to support Black entrepreneurs through the Black Entrepreneurship Program with an additional $51.7 million in funding proposed over four years. This is on top of the $221 million investment previously announced.

TAXES TO WATCH FOR

Luxury and real estate

Budget 2021 also proposes a luxury tax for expensive cars, aircraft, and boats. The tax would apply to the sales, for personal use, of luxury vehicles and personal aircraft worth more than $100,000 and boats (for personal use) over $250,000.

In addition to this luxury tax, the federal budget also proposes a national, annual tax on foreign-owned vacant or under-used residential properties. The one per cent tax would begin on Jan. 1, 2022, and would require owners, other than Canadian citizens or permanent residents, to submit a declaration outlining what the property is being used for, with penalties proposed for those who fail to file. This is similar to the speculation and vacancy taxes in British Columbia.

The Liberals say this tax could increase federal revenues by $700 million over four years, beginning the next fiscal year.

Digital services

“To ensure our system is fair, this budget will invest in the fight against tax evasion, shine a light on beneficial ownership arrangements, and ensure that multinational corporations pay their fair share of tax in Canada,” Freeland said, adding fairness in the tax system is essential now more than ever.

The budget proposes a Digital Services Tax on revenue from digital services that rely on data and content contributions from Canadian users. At a rate of three per cent, the Digital Services Tax would apply to large businesses with gross revenues of €750 million or more. The tax would be applicable at the start of 2022, until there is a multilateral approach.

“Our government is committed to working with our partners at the OECD to find multilateral solutions to the dangerous race to the bottom in corporate taxation,” she added.

The Liberals estimate this tax could generate about $3.4 billion in revenue over five years.

A GREENER ECONOMY

While the government has tied Canada’s COVID-19 recovery to a growing economy, the federal Liberals are also shining a light on the importance of going green.

Budget 2021 makes note of the real and significant threat climate change poses and proposes a number of action plans to address the matter.

The plan proposes to provide $5 billion over seven years to the Net Zero Accelerator, which would allow the government to support projects to help reduce domestic greenhouse gas emissions.

Budget 2021 also looks to make investments in clean tech, with up to $1 billion proposed on a cash basis over five years to help draw in private sector investments for these projects.

The Liberals want to reduce general corporate and small business income tax rates for businesses that manufacture zero-emissions technologies to help incentivize that sector. However, reductions would being on Jan. 1, 2022 and be gradually scaled back starting at the beginning of 2029.

Examples of zero-emissions technologies include the manufacturing of wind turbines, solar panels, and more.

OTHER THINGS YOU NEED TO KNOW ABOUT BUDGET 2021

Student supports

As we look ahead to a post-pandemic world and economy, the federal Liberals are looking to support students and graduates.

Budget 2021 looks to double the Canada Student Grant for two more years, and waive interest fees on federal student loans for an addition two years, through March 2023. In addition to waiving interest fees, the budget proposes giving more than 450,000 low-income borrowers access to “more generous repayment assistance,” though it’s unclear what exactly that entails.

The budget looks to help create 215,000 additional skills development and work opportunities to help Canadian youth and students get into or rejoin the workforce over the course of the next two years.

Fighting systemic racism

Building off promises in the fall economic statement, Budget 2021 makes proposals to continue work in fighting for a more equitable and inclusive Canada. It calls for $11 million over two years to go toward the Canadian Race Relations Foundation to scale up efforts to empower racialized Canadians and fight against racism.

The money can be used by the foundation to fund initiatives

In addition to this, Budget 2021 proposes $2 million to enhance Public Safety Canada’s program to help protect communities that are at risk of hate-motivated crimes. This funding can be used by organizations to enhance security infrastructure.

Affordable housing

As part of Budget 2021, the Canada Mortgage and Housing Corporation would receive $2.5 billion over seven years to address urgent housing needs of vulnerable Canadians. Money is broken down, with some being allocated to building additional units, while other portions would go to supports for low-income earners and women.

A cost for vaping and more taxes on tobacco

Budget 2021 is taking aim at vaping products, noting the government plans to introduce new taxes on vaping products starting in 2022. It’s unclear how much taxes on these products would amount to, however, the federal government says it’s open to working with provinces and territories to develop a coordinated approach to dealing with these items.

Tobacco users will also likely see their products cost more if Budget 2021 passes. In an effort to achieving its goal of less than five per cent of the population using tobacco products by 2035, the federal Liberals are looking to increase duty on these items. To give you an idea, this would result in an increase of about $4 per carton of 200 cigarettes, along with increases to other tobacco products.

The Liberals estimate this increased tax could result in increased revenues by $2.1 billion over five years.

Reducing credit card fees

COVID-19 has forced many businesses to shift to more digital payments, with merchants and customers alike looking to decrease contact out of transmission concerns. However, credit card fees can be high, and in some cases, unaffordable for businesses to manage.

While no figure has been proposed, the federal government says it will engage with stakeholders to look at how the average overall cost of providing credit card payment options can be brought down. The consultations will also look to ensure small businesses are profiting from pricing similar to larger businesses, and that consumers don’t lose access to their existing rewards.

-With files from Xiaoli Li