A federal budget that fuels cynicism

Following its alliance with the NDP, the liberal government has had free rein to make this budget a tool in the fight against poverty and global warming. Finance Minister Chrystia Freeland, however, has unveiled a budget plan that offers half measures and gives a place of honor to developers and private investors.

Posted at 13:00 yesterday

Julia Posca and Bertrand Schepper
Researchers at the Institute for Socio-Economic Research and Information (IRIS)

The federal deficit continues to shrink this year. From $ 328 billion in 2020-2021, it drops to $ 114 billion in 2021-2022 and will be less than $ 10 billion in 2026-2027. As for the federal debt, it continues to decline until it reaches 48% of GDP in 2021-2022. Canada is the least indebted G7 country relative to the size of its economy. Ottawa therefore had the most enviable leeway to set the most urgent projects in motion.

In two key areas, namely housing and the environment, the government chooses instead to support the private sector in the hope that it will solve the problems it has nevertheless helped to create.

Tenants left to fend for themselves

House prices have continued to rise in recent years to the detriment of low- and middle-income families. Between the end of 2017 and the end of 2021, rents increased by 13.4% while inflation increased by just over 7% over the same period. The measures were therefore expected to support tenants, but are largely left to fend for themselves. It must be said that Canada has never recovered from the cuts it suffered from social housing construction programs in the 1990s and that, until now, the National Housing Strategy has mainly favored the construction of inaccessible rental housing. to the poorest. So-called affordable housing is disappearing faster than new housing, and the announced addition of 100,000 housing units in five years will meet only a fraction of current needs, estimated at nearly three times.

Contradictory measures of access to property

The government also announces measures to support access to home ownership, including the establishment of a tax-free savings account for the purchase of a first home (CELIAPP) and the strengthening of the tax for the purchase of a home. . Since they support demand, these measures are likely to fuel rising house prices.

In return, the government is taking a number of measures to curb speculation, including taxing profits during real estate rollovers, a more than welcome measure in a bustling market. It also prevents purchases by foreign investors, who still represent a minority of buyers, for two years. It would have been wiser to target all investors who, through their practices, have been driving property prices up for two decades. For example, the down payment required for property purchases could easily have been increased when dealing with investor transactions. In short, in terms of housing, private developers seem to be the big winners of the approach taken in this budget.

Does the private sector help the environment?

Neglect is also present in terms of the environment. Ottawa bets on electric vehicles, to which half a billion will be dedicated from 2022 to 2023, and finances the exploitation of critical minerals with billions. The government is also supporting, through the Canada Infrastructure Bank, various, often highly polluting industries to develop technologies that should help Canada achieve carbon neutrality, although evidence remains, usually to be done. In addition to a leap of faith in the private sector, this is a missed opportunity to take real leadership in the fight against global warming.

The government had a responsibility, in light of the warnings issued a few days earlier by the Intergovernmental Panel on Climate Change, to provide Canada with the means to transform the way we produce, consume, transport and live. After the announcement of government support for the Bay du Nord oil project, it is clear that it avoids the necessary questions.

Despite its alliance with the NDP, the liberal budget fails to adopt a realistic strategy to reduce housing overheating and structural measures to combat global warming. Likewise, it risks fueling public cynicism towards parliamentary institutions.

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