Budget 2024: Fairness for every generation

I.          Introduction

It is evident that the Liberal government sees Budget 2024 as an opportunity to restore “fairness for every generation.” Overall, the budget includes $52.9 billion in new spending plans in the next five years, of which $39.2 billion represents net-new spending, as well as an estimated $20 billion in targeting new tax revenue, including tobacco and vaping taxes.

The government’s projections for the deficit are largely in line with previous predictions. The federal deficit is projected to be $39.8 billion in 2024-25, $38.9 billion in 2025-26, and declining over the three years following, to $20 billion by 2028-29. 

After years of high spending, with a possible recession on the horizon and the cost of living straining Canadians' finances, Deputy Prime Minister and Finance Minister Chrystia Freeland has set three very specific fiscal guideposts: maintain the 2023-24 deficit at or below $40.1B, lower the debt-to-GDP ratio in 2024-25, and keep deficits below 1 per cent of GDP in 2026-27. 

II.         Notable proposals

1. Building affordable homes

Budget 2024 includes the comprehensive package of housing policy initiatives Prime Minister Justin Trudeau and his cabinet have been announcing in recent weeks.

Promising to build 3.9 million homes by 2031, the housing plan includes a range of measures and $8.5 billion additional spending for building more homes. This includes a minimum of 2 million new homes in addition to the 1.87 million new homes expected to be built by 2031. Much of this spending is spread out over the years ahead.

Among the biggest commitments are a $15-billion top-up to the Apartment Construction Loan Program, including at least $500 million to homebuilders that use innovative construction techniques, such as modular housing for new rental projects. Budget 2024 also includes $6 billion for a new Canada Housing Infrastructure Fund, $1 billion for the Affordable Housing Fund and $400 million to top up the $4 billion Housing Accelerator Fund.

Budget 2024 is also making significant investments to encourage more people to pursue a career in the skilled trades and breaking down barriers to foreign credential recognition, particularly for construction workers. The budget has allocated $90 million for the Apprenticeship Service, creating apprenticeship opportunities to train and recruit the next generation of skilled trades workers; $10 million for the Skilled Trades Awareness and Readiness program to encourage high school students to enter the skilled trades; and $50 million in the Foreign Credential Recognition Program, with a focus on residential construction to help skilled trades workers build more homes.

The budget offers more details on plans to enact a "public lands for homes" strategy. According to the government, this initiative intends to "unlock 250,000 new homes" by converting unused office towers, parking lots, Canada Post and National Defence properties, into residential land. 

Specifically, $1.1 billion is being earmarked over 10 years to convert 50 per cent of the federal government's office space into housing, saving $3.9 billion over that same period of time. It remains to be seen what the pricing strategy will be for this federal effort to sell off, or re-zone, this land. The government proposes to introduce legislation, as required, to facilitate the acquisition and use of public land for homes, in partnership with other levels of government.  

In the meantime, the initial opportunities to be addressed will be five federal properties leased to housing providers in Calgary, Edmonton, Ottawa, Toronto, and Montreal, amounting to 800 new homes.

2. A stronger social safety net

Key measures in Budget 2024 include:

• Delivering $200 billion over ten years to strengthen universal public health care.
• Launching the new National Pharmacare plan with $1.5 billion over five years to cover contraception and lifesaving diabetes medication and devices. 
• Delivering the Canadian Dental Care Plan as announced in Budget 2023.
• Launching the new Canada Disability Benefit with $6.1B over six years and $1.4B ongoing, seeing the first payments issued in July 2025. The maximum benefit will amount to $2,400 per year for low-income individuals with disabilities between the ages of 18 and 64.
• Launching, as pre-announced, $1 billion over five years to fund a new national school food program intended to provide meals to 400,000 more kids.
• Launching a $1 billion Child Care Expansion Loan Program.
• Extending increased student grants and interest-free loans at an estimated total cost of $1.1 billion this year. 
• Enhancing the Canada Pension Plan, including a working group led by Stephen Poloz (former Governor of the Bank of Canada) to explore how to catalyze greater domestic investment opportunities for Canadian pension funds.

3. Lowering everyday costs

While no details are provided, Budget 2024 states that it will be “continuing to help bring down the cost of groceries by implementing measures to strengthen competition in the grocery sector, monitor grocers’ work to stabilize prices, and tackle shrinkflation to uphold food sizes and qualities Canadians expect.” 

Other measures include:

• Intended amendments to the Telecommunications Act, to enable Canadians to renew or switch between home internet, home phone, and cell phone plans while avoiding unnecessary fees. 
• Consultations, beginning this June, to develop a right to repair framework so Canadians can repair their broken appliances or devices at a fair price.
• Capping non-sufficient funds fees charged by banks to $10 per instance, with regulation-making occurring in the coming months.
• Increasing access to $0 per month fee bank accounts.
• Limitations on / transparency regarding some so-called junk fees, such as baggage and seating fees when booking airline tickets.

4. Growth and productivity 

Budget 2024 proposes the largest-ever financial commitment to artificial intelligence. To secure Canada's AI advantage Budget 2024 announces a monumental increase in targeted AI support of $2.4 billion, including:

• $2 billion over five years, starting in 2024-25, to launch a new AI Compute Access Fund and Canadian AI Sovereign Compute Strategy, to help Canadian researchers, startups, and scale-up businesses access the computational power they need to compete and help catalyze the development of Canadian-owned and located AI infrastructure.
• $200 million over five years, starting in 2024-25, to boost AI startups to bring new technologies to market, and accelerate AI adoption in critical sectors, such as agriculture, clean technology, health care, and manufacturing. This support will be delivered through Canada's Regional Development Agencies.
• $100 million over five years, starting in 2024-25, for the National Research Council's AI Assist Program to help Canadian small- and medium-sized businesses and innovators build and deploy new AI solutions, potentially in coordination with major firms, to increase productivity across the country.
• $50 million over four years, starting in 2025-26, to support workers who may be impacted by AI, such as creative industries. This support will be delivered through the Sectoral Workforce Solutions Program, which will provide new skills training for workers in potentially disrupted sectors and communities.
• The government is committed to guiding AI innovation in a positive direction, and to encouraging the responsible adoption of AI technologies by Canadians and Canadian businesses.

To bolster efforts to ensure the responsible use of AI:

• Budget 2024 proposes to provide $50 million over five years, starting in 2024-25, to create an AI Safety Institute of Canada to ensure the safe development and deployment of AI.
• Budget 2024 also proposes to provide $5.1 million in 2025-26 to equip the AI and Data Commissioner Office with the necessary resources to begin enforcing the proposed Artificial Intelligence and Data Act.
• Budget 2024 proposes $3.5 million over two years, starting in 2024-25, to advance Canada's leadership role with the Global Partnership on Artificial Intelligence, securing Canada's leadership on the global stage when it comes to advancing the responsible development, governance, and use of AI technologies internationally.

In addition to making a significant investment in AI, Budget 2024:

• Unveiled a new 10 per cent tax credit on the capital cost of buildings used for EV manufacturing -- if companies make a significant bet on locating other portions of their supply chains in Canada. That tax credit, projected to cost $1B by 2035, can be stacked on top of a 30 per cent tax credit for the equipment costs of EV manufacturers.

• Temporarily allowing businesses to immediately write off the full cost of investments in patents, data network infrastructure equipment, computers, and other data processing equipment to help them boost productivity and compete in the economy of tomorrow.
• Boosting support for student and postgraduate researchers, including Indigenous researchers and their communities, through increases to core research grant funding and scholarships and fellowships.
• Increasing access for the next generation of First Nations university, college, and post-secondary students with an investment of $242.7 million over three years.
• Launching a $5 billion Indigenous Loan Guarantee Program to unlock access to capital for Indigenous communities, enabling them to share in the benefits of natural resource and energy projects in their territories and on their own terms.
• Delivering a $93 billion suite of major economic investment tax credits, on a priority basis, to drive clean growth, secure the future of Canadian businesses in Canada.
• Supporting clean fuels projects by retooling the Clean Fuels Fund to deliver funding, faster, and extending the Fund for an additional four years, until 2029-30.

To complement the housing plan, Budget 2024 is committed to building projects faster through a suite of measures to improve the regulatory and permitting processes, focused on clarifying and reducing timelines, working towards "one project one review," and improving engagement and partnerships, including those with Indigenous partners.

In an effort to cut red tape and boost innovation and business growth in Canada, the Liberal government is also revitalizing its commitment to break down the barriers to internal trade that are preventing Canada from reaching its full economic potential, and holding back businesses from trading across provincial and territorial borders. National regulatory alignment could increase Canada's GDP per capita by as much as 4 per cent, according to the International Monetary Fund (IMF)—and the federal government is taking action to get this done.

Federal public service organizations will be required to cover a portion of increased operating costs through their existing resources, which may save $4.2B over four years, starting in 2025-26. Most of these savings will be achieved through natural attrition as the ranks of the public service are expected to decline by 5,000 permanent positions over the next four years.

Worthy to note that observers warn not enough is being done in this massive financial document to address the productivity issues. Fred O'Riordan, the national leader for tax policy at EY, told CTV News that in his view, it was the "missing element" of the budget. "There are very few measures that are designed to increase capital investment and enhance labour productivity." For Canadian Chamber of Commerce CEO Perrin Beatty, “what's still missing is a clear plan to promote productivity and restore economic growth in Canada.”

5. Protecting Canadians and defending democracy

As announced previously, Canada will invest $8.1 billion over the next five years and $73 billion over the next 20 years on national defence projects with a commitment to meet Canada's defence spending to 1.76 per cent of the gross domestic product by the end of this decade. Whether the Liberal government meets this commitment will be determined in the context of other anticipated political issues in the coming months.

As the controversial threat of foreign election interference continues to concern Canadians, the Liberal government is also committing more money to bolster Canada’s spy agency. The Canadian Security Intelligence Service is expected to receive $655.7 million over eight years, starting this fiscal year, to enhance its intelligence capabilities and its presence in Toronto.

To support research operations in Canada’s North, the budget also proposes $46.9 million over five years starting in 2024-25, with $8.5 million in remaining amortization and $11.1 million ongoing to Natural Resources Canada.

To support Ukraine, the Liberal government also announced that Canada intends to provide Ukraine with $2.4 billion in loans for 2024, and $1.6 billion over five years to the Department of National Defence, starting in 2024–25, for the provision of lethal and non-lethal military aid. 

III.        Tax fairness

Budget 2024 is framed as pursuing tax fairness to level the playing field for young people – the Millennials and Generation Z. The Government has introduced a new revenue stream in the budget, an increase in taxes on capital gains for Canada's highest earners, which is projected to generate revenues of $19.3 billion over the next five years.

Budget 2024 proposes to increase the inclusion rate for capital gains from 50 per cent to two-thirds for corporations and trusts, and to two-thirds for capital gains above a $250,000 threshold for individuals. The inclusion rate for capital gains below the $250,000 threshold for individuals will continue to be 50 per cent. According to Minister Freeland, only 0.13 per cent of Canadians with an average annual income of $1.4 million will pay more on their capital gains.

The new inclusion rates will apply to capital gains realized on or after June 25, 2024.

IV.        Opposition responses

Unsurprisingly, the Conservatives will not support Budget 2024. Pierre Poilievre, when rising in the House of Commons to address Budget 2024, as the Leader of the Official Opposition and Conservative Party of Canada Leader, aimed his criticisms at the broad concept of deficit spending. This was, he said, the Liberal government's ninth deficit budget and he blames government spending for a multitude of problems, including high mortgage rates, high rents and homelessness.

In a press conference following the tabling of Budget 2024, NDP Leader Jagmeet Singh claimed the NDP forced the Liberals to include protection for renters with the introduction of the renters’ protection fund, the national school food program, and free birth control, diabetes medication and devices under the national pharmacare program.  He notes, however, that the Liberal government ignored the need to take on corporate greed. His concerns addressed a disability benefit that only offers $200 a month, the absence of a plan to address gaps in infrastructure and housing funding for Indigenous communities, and the loss of 5,000 public service employees.

As expected, Bloc Québécois leader Yves-François Blanchet stated his party would not support the budget because of “intrusions” in Québec’s provincial jurisdiction, the government’s continued support of the oil industry, and insufficient support for seniors.

V.      Next steps

At the beginning of Minister Freeland’s budget speech, she put forward the customary motion for approval of the Budget. The debate on the Budget will occur over the next four sitting days of Parliament (April 17, 18, 19, and 29) with the Official Opposition Conservatives and Bloc Québécois proposing amendments to the Minister Freeland’s motion. The vote on the Minister’s motion to approve the Budget will occur Tuesday, April 30. Each vote on those Motions is a confidence measure, so the minority Liberal government will require opposition support to retain power. Given the current strength of the Liberal – NDP Confidence and Supply Agreement, the odds of the Liberal government being defeated on a budget vote appear unlikely.

Once the Budget has been passed, the government can move forward with the first of the two Budget Implementation Acts (BIA). At the same time, the Senate will commence its pre-study of the proposed legislation. Since the NDP are once again supporting the Liberals to impose time allocation on debates in the House of Commons, the first BIA may be passed before Parliament adjourns in June.

There is, however, an important procedural matter to consider.  The government has still has not passed the necessary legislation, Bill C-59, to make portions of the fall economic update a reality. Bill C-59 is still in Committee. The government will soon to be looking to table Bill C-59 in the House on the heels of presenting the 2024 federal budget, and introducing the 2024 budget implementation bills.  The government has created a situation where the number of priority pieces of legislation competing for House time as grown exponentially.  

There are 27 fixed sitting days in the House of Commons with a potential 10 days to be added to deal with priority legislation before it adjourns for the summer. The House of Commons is not sitting the week of April 22 and the week of May 20.  The House of Commons traditionally adjourns before June 24, in advance of St-Jean-Baptiste Day celebrations in Québec. The last day of sitting for the Senate is Friday, June 28, 2024.  We can expect interesting days ahead in both chambers of Parliament before the summer recess.

For more information on the taxation measures of Budget 2024, please consult the commentary of our Gowling WLG colleagues on the tax-related aspects of Budget 2024.

For further details on Budget 2024 regarding open banking, please read the commentary of our Gowling WLG colleagues.

We would be pleased to address these opportunities and issues with you further.