NEW! Federal: Significant spending ahead revealed in Liberal throne speech

The CPA’s government relations consultant, Temple Scott Associates, has provided the following analysis to the CPA on the Liberal’s September 23 Speech from the Throne.

The speech emphasized that fighting the pandemic will continue to be the government’s primary focus. It also announced several new programs that would substantially increase the scope of federal government spending in the medium- to long-term. Pledging to “do whatever it takes, using whatever fiscal firepower is needed”, the government announced that it will extend the Canada Emergency Wage Subsidy (CEWS) until summer 2021, expand Employment Insurance (EI), and invest in a national early learning and childcare system.

Notably, the speech did not define the government’s fiscal framework for a rapidly expanding policy agenda, after the previous ‘fiscal anchor’ of declining debt-to-GDP ratio was abandoned during the initial response to COVID-19. However, it is clear that the Liberals view significant federal spending as an essential part of addressing the pandemic.

The speech reiterated the government’s commitment to most of its pre-pandemic priorities. Longer-standing priorities like enacting measures to exceed Canada’s 2030 climate goals, banning single-use plastics, working towards national Pharmacare, and implementing the United Nations Declaration on the Rights of Indigenous Peoples were highlighted in the speech.

The Official Opposition Conservatives immediately rejected the throne speech, saying that it was divisive, does not support middle class workers in the resource and small business sectors, and creates too much debt. The Bloc Quebecois is also voting against the speech.

Holding only a minority position in Parliament, the Liberal government will require the NDP’s support for the throne speech to remain in power. The NDP previously made its support conditional on the throne speech addressing income supports, housing, paid sick days, child care, and long-term care. All of those topics were spoken to in some way, making NDP support more likely than not. However, the NDP did not announce its voting intentions after the speech, setting up some nervous days ahead for the government. The House of Commons rules allow for up to six days of debate before the required confidence vote on the Speech.

Speech Details

Business Supports

Beyond extending the CEWS until summer 2021, the government pledged to expand the Canada Emergency Business Account and Business Credit Availability programs. However, in an isolated nod to reducing COVID-specific expenses, the speech specified that additional financial support for businesses will be targeted at those that have to temporarily close due to local public health decisions. The travel and tourism, hospitality, and cultural industries were named as sectors that are targeted for increased government support due to the extent of the pandemic’s impacts in those industries.

Social Security

As signaled in government communications over the summer, overhauling the social security system will be a cornerstone of the government’s ongoing response to the pandemic. The throne speech commits the government to a wide-ranging social policy agenda that includes:

• Expanding EI eligibility. The government will replace Canada Emergency Response Benefit with a Canada Recovery Benefit during that process.
• Investing in a national early learning and childcare system. The publicly-funded daycare program in Quebec was cited as a model to inform a national system.
• Working towards a Pharmacare program, including several interim measures like setting a national formula to keep drug prices low.
• Augmenting the National Housing Strategy by increasing investments to “rapid housing” – like repurposing existing buildings for housing.
• Increasing Old Age Security and boosting the Canada Pension Plan Survivor’s Benefit.

Long-Term Recovery

The government announced that it will launch a campaign to create one million jobs, which, if successful, would restore employment rates to pre-pandemic levels. New job creation measures will include:

• Creating an Action Plan for Women in the Economy and accelerating implementation of the Women’s Entrepreneurship Strategy.
• Launching new worker training programs and creating incentives for employers to hire and retain workers.
• Creating a new fund to attract investments in manufacturing zero-emissions products and halving corporate tax rate for companies in that field.

The government also reiterated that it will balance environmental and economic considerations, promising further investments in energy retrofits, green technology subsidies, and pricing pollution.

The government is committed to updating the federal COVID-19 Economic Response Plan this fall. While unlikely to be a full Budget, that update will set the government’s new fiscal framework and allocate funding to many of the programs announced. Given the government’s rhetoric about the drawbacks of austerity, stakeholders should expect a high federal deficit and spending as a percentage of the national GDP for the foreseeable future.