B_Reaction

 source: La Presse

authors: JULIA POSCA AND BERTRAND SCHEPPER

RESEARCHERS AT THE INSTITUTE FOR RESEARCH AND SOCIOECONOMIC INFORMATION (IRIS)

translation: EdgeTranslate/doxa-louise

A federal budget that fuels cynicism

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

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

In two key areas, housing and the environment, the government is choosing instead to support the private sector in the hope that it will solve problems that it has -itsef- helped to create.

Tenants left to fend for themselves

House prices have continued to rise in recent years at the expense of low- and middle-income households. Between the end of 2017 and the end of 2021, rents rose by 13.4% while inflation increased by just over 7% over the same period. Measures were therefore expected to support tenants, but they are largely left to their own devices. It must be said that Canada has never recovered from the cuts to social housing programs in the 1990s, and that, to date, the National Housing Strategy has mainly favoured the construction of rental housing that is not accessible to the poorest. So-called affordable housing is disappearing faster than that being built, and the announced addition of 100,000 units over five years will only meet a fraction of current needs, estimated at nearly triple.

Contradictory measures of access to property

The government is also announcing measures to support home ownership, including the introduction of a Tax-Free Savings Account for the Purchase of a First Property (TPIA) and the enhancement of the tax credit for the purchase of a home. Since they support demand, these measures are nevertheless likely to fuel rising house prices.

In return, the government is taking some steps to curb speculation, including the taxation of profits during real estate "flips", a measure more than welcome in a turbulent market. It also prevents purchases by foreign investors, who nevertheless represent a minority of buyers, for two years. It would have been wiser to target all investors who – through their practices – have been driving up real estate prices for two decades. For example, it would have been easy to increase the down payment required for property purchases when it comes to investor transactions. In short, in terms of housing, private developers appear to be the big winners of the approach taken in this budget.

The private sector to the rescue of the environment?

Easy does it is also the rule in terms of the environment. Ottawa is betting on electric vehicles, to which half a billion is devoted from 2022-2023, and is financing the exploitation of critical minerals with billions. The Government is also supporting, through the Canada Infrastructure Bank, various industries, often themselves highly polluting, to develop technologies that are supposed to enable Canada to achieve carbon neutrality, although that has yet  to be done. In addition to an act of faith in the private sector, this is a missed opportunity to show real leadership in the fight against global warming.

The government had a responsibility, in light of the warnings issued by the Intergovernmental Panel on Climate Change a few days earlier, to empower Canada to transform the way it produces, consumes, transports and houses its residents. After the announcement of the government's support for the Bay du Nord oil project, it is clear that it is avoiding the harfd questions.

Despite its alliance with the NDP, the Liberal budget fails to adopt a realistic strategy to reduce real estate overheating and structuring measures to combat global warming. this risks fuelling the cynicism of the population towards parliamentary institutions.