November 30, 2020
The Government of Canada today released its Fall Economic Statement or “mini-budget”, which has been widely anticipated because it provides important information on the impact of the COVID-19 pandemic on Canada’s economy and the measures planned to help recovery in the coming months and years.
The Statement outlines a national deficit that will reach $382 billion in the fiscal year 2020-21 and the expectation that it will fall to $121 billion in 2021-22 and to $51 billion the following year.
For a perspective on the Economic Statement as a whole, I thought you might be interested in this summary and analysis from one of my clients, Sussex Strategy Group. Their President, Paul Pellegrini, has kindly allowed me to share it with you.
Sussex Strategy is an experienced and highly respected government relations firm that offers strategic and consulting services in municipal, provincial and federal affairs. I find their reports informative and insightful, and I hope you will also.
The full government statement can be read and downloaded from this page on the government of Canada website: Fall Economic Statement 2020 – Supporting Canadians and Fighting COVID-19
Federal Fall Economic Statement Unveiled
Today, Deputy Prime Minister and Finance Minister Chrystia Freeland released the federal government’s Fall Economic Statement (FES) in the House of Commons. Titled Supporting Canadians and Fighting COVID-19, the plan is the first major economic update since COVID-19 permanently postponed Budget 2020. It also marks Deputy Prime Minister Freeland’s first major fiscal update to Canadians. As expected, the FES reveals a deficit expected to hit a record $381 billion, largely due to close to $400 billion spent fighting the pandemic.
Today’s statement is a clear indication that the government remains squarely focused on addressing the urgent needs caused by the COVID-19 pandemic. It also comes amid a highly charged political environment centered on when Canadians can expect to receive a vaccine.
The statement does, however, begin to look ahead to economic recovery and commits the federal government to a time-limited, $70-100 billion (3-4% of GDP) economic recovery plan. Between now and Budget 2021, the government will be actively developing the details of this stimulus program.
COVID-19 Response Programs
Health Care
As the second wave of COVID-19 is being fought across the country, the federal government has announced further funding to fight COVID-19, including funding for testing capacity, PPE and medical equipment, improving ventilation in public buildings, and preventing outbreaks in shelters.
New funding was announced for long-term care facilities, which have seen the majority of COVID-19 deaths across the country. The most significant was a commitment of up to $1 billion for a Safe Long-term Care Fund to help provide care and protect people in long-term care. Funding will be contingent on a detailed spending plan and investment in accordance with these plans. Funds will be allocated on an equal per capita basis and will be for infection prevention and control readiness assessments, improvements to ventilation, hiring additional staff or topping up wages. The government reiterated its commitment to establish national standards for long-term care.
The FES also committed to boosting funding for mental health and virtual care by committing an additional $50 million to distress centres and $43 million to provide further support for the Wellness Together Canada portal and the resources it offers.
Absent from the FES was any new funding for pharmacare. It did, however, indicate strategy options for high-cost drugs for rare diseases would be forthcoming. Also absent was a further increase to the annual health transfer, as requested by the provinces.
Child Care
In the FES, the government has made initial commitments to establish a Canada-wide Early Learning and Child Care System. The government has committed $20 million over 5 years, starting in 2021-22 to create a Federal Secretariat on Early Learning and Child Care. A parallel investment of $70 million over 5 years, starting in 2021-22 has been committed to sustain the existing federal Indigenous Early Learning and Child Care Secretariat.
To sustain previous investments in Early Learning and Child Care that provide fee subsidies and create new affordable spaces, the government is proposing to make funding permanent at 2027-28 levels by providing $870 million per year, starting in 2028-29. Additional funding is also committed to supporting early childhood educator workforce.
The government has proposed a temporary increase of up to $1,200 in 2021 for each child under the age of 6, for families who are entitled to the Canada Child Benefit.
Wage and Rent Support
The government announced an increase in the maximum wage subsidy rate to 75 per cent for the period beginning December 20, 2020, and to extend this rate until March 13, 2021, to provide greater certainty to employers.
In addition, the government has proposed extending the current subsidy rates of the Canada Emergency Rent Subsidy for an additional three periods. This means a base subsidy rate of up to 65 per cent will be available on eligible expenses until March 13, 2021. The government is proposing to extend the rate of 25 per cent for the Lockdown Support for an additional three periods, until March 13, 2021. The government has still not committed to making this program retroactive for businesses that did not qualify for the first round of rent support.
Business Financing
The government will work with financial institutions in the near term to create the Highly Affected Sectors Credit Availability Program (HASCAP) – a new program for the hardest hit businesses, including those in sectors, like tourism and hospitality, hotels, arts and entertainment. This program will offer 100% government-guaranteed financing for heavily impacted businesses and provide low-interest loans of up to $1 million over extended terms, up to ten years.
In addition, the government is proposing a top-up of up to $500 million, on a cash basis, to Regional Development Agencies and the Community Futures Network of Canada, bringing total funding to over $2.0 billion for this fund.
The government also announced a proposed top-up to the Strategic Innovation Fund (SIF) of $250 million over 5 years, beginning in 2021-22.
Working From Home
The government announced today that the CRA will allow employees, working from home in 2020 due to COVID-19 and with modest expenses, to claim up to $400 on their 2020 taxes, without the need to track detailed expenses. The government will generally not request that people provide a signed form from their employers.
Sector Specific Support
Clean Energy
In the 2020 Throne Speech, the government indicated COVID-19 economic recovery would focus on clean growth. In the FES, Minister Freeland unveiled the first details of its Building Back Better plan for economic recovery concerning clean investments and climate action. The FES specifically included measures that can safely be implemented now, which Minister Freeland noted are a “down payment on the investments to come.”
Details on funding for hydrogen and other clean fuels were notably absent in the FES. The document did however flag that the government’s upcoming climate plan will highlight further work and investments in areas like renewables, clean fuels, and hydrogen. Additional items expected in the near-term include the release of the Small Modular Reactor (SMR) Action Plan and the Hydrogen Strategy, both anticipated before the end of 2020.
Notable clean and green economy highlights from the FES include:
- Home Energy Retrofits: $2.6 billion over 7 years, starting in 2020-21, to Natural Resources Canada to provide up to 700,000 grants of up to $5,000 to help homeowners make energy-efficient improvements to their homes, and up to one million free EnerGuide energy assessments.
- Zero Emission Vehicle Infrastructure Deployment: $150 million over 3 years to Natural Resources Canada, starting in 2021-22 for recharging and refueling ZEV stations.
- Natural Climate Solutions for Agriculture Fund: $98.4 million over ten years to Agriculture and AgriFood Canada to helps farms increase carbon sequestration and adoption management practices.
Arts, Culture and Entertainment
The government announced an additional $181.5 million in 2021-22 to the Department of Canadian Heritage and the Canada Council for the Arts to expand their funding programs. This includes a one-year renewal of funding provided in Budget 2019 for the Building Communities through Arts and Heritage program, the Canada Arts Presentation Fund and the Canada Music Fund.
The government also committed to working with industry to prevent the closures of flagship events and festivals across Canada.
Air Sector
The FES notes that COVID-19 and related health restrictions have caused Canada’s air sector to suffer a near total collapse in passenger travel. This is threatening the viability of Canada’s airlines and airports, the people who work there and the communities that rely on them. The FES announced several new measures aimed at supporting this heavily-hit sector, including:
- $206 million over two years to support regional air transportation, including regional air carriers;
- $186 million over two years to support small and regional airports;
- $500 million over six years to establish a new transfer payment program to support large airports; and,
- $229 million in rent relief, via a mix of waiving and deferring rent payments, extended to the 21 airport authorities that pay rent to the federal government.
Conclusion
Today’s economic update demonstrates two important factors: that the suite of federal COVID-19 business support programs continues to grow and evolve and that a wide-ranging, $70-100 billion stimulus program will be shaped ahead of Budget 2021.
There is much from this FES to be sorted out in the details. Now is the time to engage with government as they fine tune existing support measures and work out a vision and direction for post-pandemic stimulus spending.