On Dec. 16, 2024, the Government of Canada tabled the 2024 Fall Economic Statement (FES) in the House of Commons, which was scheduled one day before Parliament is scheduled to rise for its winter recess until the end of January. The FES revealed an inflated deficit, new fiscal measures, and incentives for new investments. Notable measures proposed in the FES address the cost of living, investment in key industries and border security.

The Government delivered the FES amid political turmoil in Ottawa. The morning of Dec. 16, Deputy Prime Minister and Minister of Finance Chrystia Freeland announced her resignation from the federal Cabinet in a public letter. Ms. Freeland stated in her letter that she and Prime Minister Justin Trudeau have been “at odds about the best path forward for Canada” in recent weeks. She added,

“Our country today faces a grave challenge. The incoming administration in the United States is pursuing a policy of aggressive economic nationalism, including a threat of 25 per cent tariffs. We need to take that threat extremely seriously. That means keeping our fiscal powder dry today, so we have the reserves we may need for a coming tariff war. That means eschewing costly political gimmicks, which we can ill afford, and which make Canadians doubt that we recognize the gravity of the moment.”

Ms. Freeland remains committed to running in the next federal election. Ms. Freeland did not deliver the FES in light of her resignation. Instead, the FES was tabled in the House of Commons by Leader of the Government in the House of Commons Karina Gould. A new Minister of Finance was appointed at Rideau Hall, with Minister Dominic Leblanc taking that position in addition to his current portfolio as Minister of Public Safety, Democratic Institutions and Intergovernmental Affairs.

Minister of Housing, Infrastructure and Communities Sean Fraser also resigned from Cabinet prior to Minister Freeland’s announcement, and also announced he will not run in the next election.

The deficit

The FES disclosed a $61.9 billion deficit for the last fiscal year (2023-24), and an anticipated deficit of $42.8 billion for this coming year (2024-25). The deficit for fiscal year 2023-24 exceeds the $40.1B deficit projected in the Government’s last budget. This elevated deficit is attributable to some one-off costs, including payments made by the Government of Canada pursuant to high-profile class action lawsuits.

Measures addressed and proposed

Cost reduction
  • GST/HST relief from Dec. 14, 2024, to Feb. 15, 2025, on certain products, including:
  • Prepared foods, including vegetable trays, pre-made meals and salads, and sandwiches;
  • Restaurant meals, whether dine-in, takeout, or delivery;
  • Snacks, including chips, candy, and granola bars;
  • Beer, wine, and cider;
  • Pre-mixed alcoholic beverages of not more than seven per cent ABV;
  • Children’s clothing and footwear, car seats, and diapers;
  • Children’s toys, such as board games, dolls, and video game consoles;
  • Books, print newspapers, and puzzles for all ages; and,
  • Christmas trees and similar decorative trees.
  • Committing $9.2 billion in ongoing spending in support of $10-per-day child care programs
  • Increasing rural top-ups under the Canada Carbon Rebate program
  • Continuing investments in consumer-driven banking (also called open banking). The Government announced its intention to introduce legislation for the remaining elements of Canada’s Consumer Driven Banking Framework, with the Framework to be launched in 2026 with the support of $44.3 million in funding over three years

Housing
  • Accelerating $2 billion in low-cost financing, supporting construction of 4,000 homes
  • Continuing to allocate funds under the Canada Housing Infrastructure Fund’s $5 billion provincial and territorial stream
  • Exploring options for using mortgage loan insurance to support the construction of more two-to-four-unit homes
  • Committing $50 million over two years, starting in 2025-26, to the existing Affordable Housing Fund
  • Accelerating $50 million in spending from the Affordable Housing Fund’s Rapid Housing Stream, starting in 2025-26, to build more women’s shelter spaces
  • Providing an additional $600M in interest-free loans for energy retrofits under Canada Greener Homes Loan Program

Promoting production, investments and innovation
  • Anticipated cost of $17.4 billion from 2024-25 to 2029-30 to reinstate and extend the Accelerated Investments Incentive
  • Making that Experimental Development tax incentive program more generous
  • Taking steps to permit Federal pension funds to invest in higher risk projects, including airport infrastructure and artificial intelligence (AI) data centres
  • Launching the Canada Indigenous Loan Guarantee Corporation
  • Committing nearly $5 billion for measures to secure AI advantages and boost the Canadian AI strategy. Of that $5 billion, $2 billion is dedicated to developing and ensuring access to computational power for researchers and businesses to develop AI infrastructure in Canada
  • Committing $15 billion in aggregate loan and equity investments for AI data centre projects
  • Finalizing the design and implementation details of the EV Supply Chain investment tax credit
  • Intention to backstop up to $500 million in enriched nuclear fuel purchase contracts from the United States or other allied countries
  • Intention to impose tariffs on certain imports from China beginning in 2025, including certain solar products and critical minerals

Border security and public safety
  • Committing $1.3 billion to a comprehensive border security package for Public Safety Canada, the Canada Border Services Agency, the Communications Security Establishment, and the Royal Canadian Mounted Police (RCMP)
  • Proposing $600 million in additional spending for the RCMP to administer the gun buyback program
  • Intending to introduce legislative amendments to the Customs Act to grant the Canada Border Services Agency new authorities to inspect goods destined for export

The FES makes no reference to the Government’s proposed one-time $250 payment to Canadians who worked in 2023.

Opposition reaction

Opposition parties made statements throughout the day, chiefly regarding the resignation of Chrystia Freeland, but also about the FES. The leader of the Conservative Party of Canada and the Leader of the Official Opposition, Pierre Poilievre, voiced the need for the Government to call an election, as did the leader of the Bloc Québécois, Yves-Francois Blanchet. The leader of the NDP, Jagmeet Singh, also called on Prime Minister Trudeau to resign but did not commit to voting no-confidence in the Government to precipitate an election. Late yesterday, the NDP signalled that it may be willing to support the Government until late February or early March 2025.

Conclusion

While the 2024 FES was somewhat eclipsed by these surprising political developments, which saw a key Minister in the Liberal government resign on the day she was slated to present the FES in the House of Commons, it is expected that Canadians will soon take the time to analyse the extent of the FES in light of the current pressures on Canada’s economy and the incoming Trump administration south of the border. Political conditions in the coming days and months will determine the extent to which the Liberal government is able to implement the measures announced yesterday.

For more information, please reach out to a member of our team.

Jacques J.M. Shore, C.M., Partner, Jacques.Shore@gowlingwlg.com

Suzanne Sabourin, Counsel, Suzanne.Sabourin@gowlingwlg.com

Michael Walsh, Associate, Michael.Walsh@gowlingwlg.com