There weren’t any large new spending initiatives in this year’s federal budget as Finance Minister Bill Morneau is constrained by a commitment to keep the public debt from rising as a percentage of gross domestic product (GDP). Thus, Morneau has confined himself to small, targeted measures aimed mainly at improving skills and innovation.
The budget includes plans to spend $9.2 billion over the next five years for what it calls “a strong Canada at home and in the world,” according to the budget document. This includes $5.8 billion for health care, $1.7 billion for indigenous peoples, $624 million for veterans, $631 million for the safety and security of Canadians and $378 million for international measures.
About a third of the cost of these measures will be covered by $2 billion of funds “existing in the fiscal framework” and a $933 million deferment of Department of National Defence large-scale capital projects. There was also a $3.7 billion deferment of defence capital projects in the 2016 federal budget. A department of finance spokesperson says these deferments were initiated by the Department of Defence.
Budget 2017 also includes $8.2 billion of spending over the next five years for “skills, innovation and middle class jobs,” the budget document states. Most of the money, $5.2 billion, is for skills development. A further $1.7 billion is for encouraging “innovation” and $1.3 billion for clean technology, digital industries and agri-food. Some of the cost, $2.8 billion, comes from existing funds and there’s also expectation of $1.4 billion in revenue expected to be generated from these programs.
Read: Budget 2017
Craig Alexander, chief economist with the Conference Board of Canada in Ottawa, feels that these skills and innovation measures pinpoint some important and potentially fruitful areas.
The budget also provides more detail on the previously announced $81.2-billion 10-year infrastructure program. The program is currently expected to spend $25.3 billion on public transit, $2 billion on rural and northern infrastructure, $21.9 billion on green projects, $10.1 billion on trade and transportation and $21.9 billion on social infrastructure.
There is little in the budget, though, on how much impact the program has had so far. Craig Wright, chief economist with Royal Bank of Canada in Toronto, points out that Budget 2016 said that all its measures would increase economic growth by 0.5 percentage points in both the first and second year. This budget only says that measures add 0.4 percentage points, presumably in 2016, and makes no mention of the impact in the second year.