Budget update won’t have fiscal anchor until after crisis: PM
It will provide some guidelines for ongoing spending to help the economy
OTTAWA — The government’s promised update on the health of its finances won’t have a specific anchor to guide decisions and keep spending from spiralling out of control, Prime Minister Justin Trudeau says.
Officials have started working on what Trudeau called a “robust” budget update promised in the throne speech, with budget submission letters having gone out to departments.
Trudeau didn’t say when the fiscal update or mini-budget would delivered, only that it will provide some guidelines for ongoing spending to help the economy.
The Liberals projected in July that the government would run a historic deficit of $343.2 billion this fiscal year, but extended spending programs and throne speech promises will shift that number.
The parliamentary budget office in a recent report estimated the debt as a share of the economy, which had been the Liberals’ preferred fiscal anchor, could be about 48 per cent of the domestic economy this year and next.
The debt this year is expected to push past $1.2 trillion.
Trudeau said the cost could have been far worse in the form of massive business closures, and households diving deep into debt to survive financially.
“COVID is going to be expensive,” he said during the virtual appearance with the Canadian Chamber of Commerce.
“The question is who is best positioned to bear these additional costs, and we don’t feel it’s businesses, we don’t feel it’s ordinary Canadians.”
He vowed to keep doing whatever is necessary to help workers and businesses make it through the pandemic, but wouldn’t commit to a fiscal anchor because of ongoing uncertainty about the pandemic.
“It would be premature to be locking things down. But we will certainly talk about the frame and the responsibility that’s necessary,” he said.
For now, interest rates are low, which keeps costs low for governments taking on debt, but rates will rise eventually.
The concern is that when they do, they will increase federal costs and tighten the fiscal space governments have to deliver programs like old age security, training or even defence, said Perrin Beatty, president of the Chamber of Commerce.
He said businesses and investors will be looking for signs of a federal strategy to manage the pandemic to help the economy reopen safely and allow people to get on with their ordinary lives.
“And that they will be focused on private-sector growth, as opposed to believing that we can borrow and spend our way back to prosperity,” Beatty said in an interview.
Conservative Leader Erin O’Toole, speaking after Trudeau, said it’s necessary to focus spending to increase economic growth and help businesses through things like rapid testing for COVID-19.
“If we do that, if we see GDP growth and get spending down, I think we can avoid a looming crisis,” he said.
“The Trudeau government has no plan with respect to spending, and their policies have actually been leading to job loss. So we are on a precipice.”
Trudeau also used his morning address to announce that businesses that use personal banking accounts could finally apply for a popular federal loan program.
He added that legislation would be soon tabled in the House of Commons to send more direct rent relief to companies, as well as an extension to the wage-subsidy program.
The changes address what business groups and opposition parties noted as key shortcomings in the plethora of pandemic aid programs.
The updates to the loan program, for instance, were first mentioned in the spring, and the government vowed to make the necessary changes in May. The rent-subsidy program originally flowed through landlords, who weren’t keen to take it up.
O’Toole said moving into the second wave of the pandemic, parliamentarians should be asking if aid programs need to be changed to avoid a repeat of mistakes that “doomed a million Canadians to a much harder recovery than was necessary.”