Deeper dive into yesterday’s federal fiscal ‘snapshot’
By Temple Scott Associates
The Government’s COVID-19 Economic Response Plan includes more than $230 billion in measures to support Canadians and businesses. The snapshot is formatted to give the Government flexibility to scale those programs up or down in the coming months, stating that the Government will announce measures to support economic recovery as needed – though no details were offered about what those measures could be.
Most notably for businesses, the snapshot indicates that changes to the Canada Emergency Wage Subsidy are forthcoming, to “stimulate rehiring, provide support to businesses during reopening and help them adapt to the new normal”. In anticipation of that, the Government set aside additional funding for the program, perhaps indicating that it will be extended beyond August 29th, when it is currently set to end. Notably, no additional funding was set aside for the Canada Emergency Response Benefit, which is also due to end that day.
The impact of COVID-19 on employment has been significant, with approximately 30% of the workforce either losing their jobs or having their hours reduced at the start of the pandemic. However, the Government believes that its response to COVID-19 prevented greater economic damage, arguing that federal programs replaced more than $40 billion in lost income, prevented the real GDP contraction from reaching over 10% in 2020, and stopped the unemployment rate from rising a further 2% over the course of the year.
The snapshot accounts for the $14 billion Safe Restart Agreement that is currently being negotiated with the Provinces, but it does not provide greater detail on how that money will be spent, beyond making broad commitments to prioritize healthcare capacity, testing and tracing, personal protective equipment, childcare, and support for municipalities. Minister Morneau promised to announce details of the Agreement as they are decided.
Although no Parliamentary vote is required to pass the “snapshot”, NDP Leader Jagmeet Singh stated that his support for the Government could be contingent on its contents, and the other Opposition leaders were also vocal in setting criteria for the fiscal update.
The NDP gave the snapshot a “C+”, primarily criticizing the lack of support for persons living with disabilities and absence of action to increase taxes on the wealthy and eliminate tax havens.
The Conservatives argued that the Government lacks a plan to stimulate growth, attract business investment, and get Canadians back to work and they also sounded alarm over the size of the Federal debt. The Bloc Quebecois also called for more measures to get Canadians back to work.
Marked by both the fiscal snapshot and the virtual Cabinet retreat this week, it is clear that the Government is attempting to transition from crisis management of the pandemic to charting a pathway to a new normal. However, judging by the tone of the snapshot, that transition will be cautious and the Government remains open to further spending in response to COVID-19.
Minister Morneau did not fix a date for Budget 2020 today, or even commit to tabling one before Budget 2021. He did commit to providing further details on Federal finances in the Fall, and indicated that the tabling of a full budget at that time will depend on how successfully the pandemic and its economic fallout are limited.
Meanwhile, the House of Commons Finance Committee is authorized to continue a virtual meeting schedule over the summer, and it could, in theory, choose to study today’s snapshot, which could result in an appearance by the Finance Minister before the Committee.