the canadian parliament and library during the fall

The federal Liberals are proposing $25 billion in new spending to help Canadian businesses and workers make it through a Covid-19 winter and vowing tens of billions more to help the country recover from the pandemic.

The government’s fall economic update proposes to send extra child-benefit payments to families next year as well as cash for skills training and to create new jobs.

For businesses, the government wants to bring the wage subsidy back to 75% of business payroll costs and extend the business rent subsidy to mid-March.

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Finance Minister Chrystia Freeland’s update makes clear the measures will be removed once the economy improves, although the timing is tied to the path of the pandemic.

The cost to date has the federal deficit reaching $381.6 billion this year, but the government’s math says it could close in on $400 billion if widespread lockdowns return in the coming weeks.

Freeland’s update tees up work already underway to craft a spring budget focused on an economic recovery. She says federal support for that will include a three-year stimulus plan worth up to $100 billion.

The recession the pandemic has caused is deeper than the one the country faced in the last downturn over a decade ago, and the Liberals make the case in their fiscal update that the stimulus response needs to be even greater this time around.

While the details have yet to be worked out, Freeland said it will include time-limited spending on things like a green economy and areas that could use attention like bio-manufacturing — the industry that creates and makes vaccines and medication.

The breadth and depth of spending would be tied to the pandemic and the hopes that rest on vaccines that could be available to the majority of Canadians by next fall.

“We are very mindful, however, of the fact that our economy can get fully back up to speed only once we have the virus fully under control,” Freeland told reporters.

“And that’s why we’re going to be spending the winter months working on the details of this growth plan.”

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Freeland’s update includes no specific “fiscal anchor,” a measurement to moor government spending to keep it from drifting off target.

Instead, the Liberals are saying they’ll keep track of a suite of economic indicators like the unemployment rate and hours worked as a way to decide when spending can ease off or when the taps need to be opened wider.

Freeland didn’t provide precise levels for any measure that might trigger changes, saying those details will be worked out.

“The most devastating economic harm done by the coronavirus is the jobs lost,” she said.

“As we build our growth plan, and as we deploy it, the measure we’re going to be looking at to see if we’ve got the job done is really around jobs.”

The country has clawed back about three-quarters of the three million jobs lost during spring lockdowns. The Finance Department estimates the unprecedented spending to date prevented a further loss of about 1.2 million jobs.

Federal aid has accounted for $8 of every $10 spent by Ottawa and the provinces to respond to Covid-19, a slight drop from the $9 out of every $10 the Liberals noted in their July fiscal snapshot.

The document Monday gives a view of how much some of those measures have cost.

The wage-subsidy program gets a revised estimate of over $83.5 billion when taking into account take-up through the summer and its extension since the fall.

A revamped commercial rent-relief program will cost $2.18 billion this fiscal year.

The two programs are, combined, estimated to cost about $16.2 billion next year.

Spending next year on extra child benefits will amount to $1,200 tax-free to families with net incomes up to $120,000, and $600 for families that earn beyond that.

The cost will be about $2.4 billion, a little more than the $2 billion for extra Canada Child Benefit payments this year, bringing the total cost for the program next year to $27.9 billion.

And while the document includes money for long-term care facilities, there is no specific bump in health transfers for the provinces. What the Liberals are proposing is to provide more money to provinces that see sudden drops in revenues through an existing fiscal-stabilization program, an increase provinces asked for last year.

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Other highlights

  • For the first time, Netflix and other foreign streaming giants such as Amazon and Apple TV+ will be subject to sales tax in Canada, according to the fiscal update. The government says GST/HST will apply to all companies that provide digital services — which means Netflix and Airbnb would charge sales tax on subscriptions and reservations north of the border. While the European Union moved to tax digital platforms two years ago, Freeland said Canada is prepared to act “unilaterally if necessary.”
  • Ottawa is aiming to dole out $2.6 billion over seven years to help homeowners make their digs more efficient, starting in 2020-21. The cash, channelled through Natural Resources Canada, would take the form of up to 700,000 grants of $5,000 or less to help with projects that could range from energy-efficient heating to solar-panel installations. The upcoming plan, with eligibility retroactive to December 2020, fulfils a Liberal election promise from last year.
  • The statement says the government will take steps in 2021 “to implement a national, tax-based measure targeting the unproductive use of domestic housing that is owned by non-resident, non-Canadians, which removes these assets from the domestic housing supply.”