The federal government is expected to announce more money for children and the working poor, along with shrinking federal deficits, in a crowd-pleasing economic update Tuesday that the Liberals are counting on to draw attention away from their embattled finance minister.
But despite the economy’s surprisingly strong performance in early 2017, Finance Minister Bill Morneau still isn’t expected to provide a timeline to bring the federal books back to balance.
Some experts have predicted the growth surge will provide the government with an additional $10 billion on its bottom line in each of the next couple of years, compared to the federal forecasts in the March budget. In the spring, Ottawa projected deficits of $25.5-billion for 2017-18 and $24.4 billion for 2018-19.
A senior government official said the fall economic statement will show an improving fiscal outlook in the coming years, even though Ottawa also plans to announce new spending measures Tuesday alongside the updated predictions.
The new policy measures will be aimed at ensuring the so-called middle class — “and those working hard to join it,” as the Liberal mantra goes — benefit from Canada’s economic growth and will provide tools for them to continue contributing to the economy, said the official, who declined to elaborate before Tuesday’s announcement.
Sources, who were not authorized to speak publicly, said the government will introduce anti-poverty measures in the update.
Morneau is expected to enhance the Canada Child Benefit, which the government boasts has already lifted 300,000 children out of poverty.
The child-benefit change will come through indexation, said one source.
The benefit is not indexed to inflation, which means it does not increase with the cost of living. Indexation is currently set to happen after 2019, the year the next federal election is scheduled to take place.
Research by the parliamentary budget officer has found that indexation would have a net cost to the federal treasury of $300 million in the first year of implementation, rising to nearly $5.8 billion in the seventh year.
Sources said Morneau will also bolster the Working Income Tax Benefit, a refundable tax credit aimed at providing tax relief for low-income Canadians who have jobs and encouraging those who don’t to join the workforce.
The government has invited anti-poverty group Campaign 2000, which has called for the early indexation of the child benefit, to attend a closed-door briefing with officials before the announcement. The group’s national co-ordinator Anita Khanna said she was intrigued by the invitation and hopeful the government will take action Tuesday to help families and children.
The Liberals are likely hoping the document contains enough good economic headlines to distract the public from the conflict-of-interest controversy that continues to stalk Morneau.
The issue has forced Morneau to promise he’ll sell at least $21 million worth of stock and place his other assets in a blind trust in hopes of quieting allegations about how he handled his personal fortune when he entered public office in 2015.
Opposition MPs have called on the ex-Bay Street executive to disclose whether he recused himself from making decisions on pension legislation that they allege will likely benefit his former human resources company, Morneau Shepell.
“While the opposition obsesses about my personal finances, I’m going to continue to focus on what’s going on for Canadians — that’s what we really care about,” Morneau said Monday as he faced another barrage of ethics-related questions in the House of Commons.
“What we’re going to be able to report on tomorrow is excellent news for Canadians.”
Morneau “desperately wants to change the channel,” something he hopes to do with Tuesday’s economic update, New Democrat MP Alexandre Boulerice said Monday during question period.
“But he has broken any trust that Canadians could have had in him. It’s crystal clear: he tabled legislation that could benefit his company and himself directly.”
Conservatives, including MP Mark Strahl, repeatedly asked Morneau if he received written approval from the ethics commissioner permitting him to introduce legislation that could benefit the publicly traded company the minister built with his family.
“It is very telling that not a single Liberal member thought that the finance minister introducing the very legislation he had lobbied for as chairman of Morneau Shepell could present a bit of an ethics problem,” Strahl said.
This isn’t the only controversy Morneau has been grappling with in recent weeks.
He’s also been busy promoting the government’s efforts to address complaints about his package of proposed small-business tax reforms. Morneau was forced to tweak and even back off some of the proposals after an angry backlash from doctors, farmers, tax experts and even Liberal backbench MPs.
His office said the tax proposals will not be fully costed in Tuesday’s update because more work is needed to finalize the measures, particularly one that calls for new limits on the use of passive investment income by wealthy incorporated individuals. The passive investment change, once implemented, is expected to bring in a significant amount of revenue for Ottawa.
On Sunday, the Conservatives opened a new front in the ongoing offensive on government tax policy.
The Tories, alongside health groups, have accused the Liberal government of trying to raise tax revenue on the backs of vulnerable diabetics. Diabetes Canada was among groups that have publicly denounced what they call a clawback of a long-standing disability tax credit to help them manage a disease that can cost the average sufferer $15,000 annually.
A spokesman for National Revenue Minister Diane Lebouthillier has released a statement that called the concerns raised by some of the groups “worrisome.” It said Lebouthillier had initiated a “five-point plan” that included numerous consultations to better understand how the benefit is administered.
In Tuesday’s update, Morneau is also expected to ensure the Liberal economic plan gets all the credit for Canada’s economic performance.
The government has insisted the better economy is a result of Liberal measures such as a tax cut for middle-income earners and enhanced child benefits.
Morneau has already signalled that, despite the recent economic strength, he’s unlikely to lay out a timetable for balancing the books.
The finance minister has credited Ottawa’s deficit-spending approach for the economic improvements to date. He intends to continue with the plan in a “fiscally responsible way.”
To guide the government’s budgetary decisions, he’s insisted he would keep his focus on lowering the country’s debt-to-GDP ratio, which is a measure of the public debt burden, rather than eliminating the deficit.