Hill Update: Budget 2019 – Capital Hill Group

Overview of Budget 2019

It is clear that the Liberals’ final budget of this term is aimed at people, not businesses – particularly millennials and seniors, whose votes they need most come October. Federal budgets presented in an election year must be taken with a grain of salt – or the whole shaker. This budget is the most flexible for the government, where they can make some ambitious promises and slate funds for future years where they may not be the governing Party.

This budget rests on four pillars (which you can expect to see mirrored in the Liberal platform): good jobs, housing, seniors, and pharmacare.

The Liberals have doubled down on seniors in their support of low-income seniors who choose to stay in the workforce by enhancing the GIS earnings exemption, and focus on a strong, secure, and dignified retirement for Canadians. In light of company bankruptcies affecting workplace pensions, the government is introducing new measures to enhance the security of workplace pensions.

This budget also addresses several key concerns of Canadian millennials. The Liberal government want to make homeownership more affordable for first-time buyers through the First Time Home Buyer Incentive, a shared equity mortgage program that would reduce the mortgage payments required to own a home. Millennials will also see a reprieve from student loans – in addition to lowering interest rates, students will not accumulate interest in the six-month grace period following graduation.

This budget also offers millennials work-integrated learning experiences. Over the next five years, over 80,000 work placements will be created by the government, as well as a boost for the Service Corps and the Youth Employment Strategy. In addition, the new Canada Training Benefit will help fund training and professional development up to a lifetime limit of $5,000, and includes leave provisions to protect workers’ entitlement to take leave to pursue training and skills development.

The Liberals have been promising some form of pharmacare since before the 2015 election, and we finally see the first glimpse in this budget. The pharmacare promises aim to help Canadians with the cost of prescription drugs by taking steps towards a national pharmacare plan. The government is creating a new Canadian Drug Agency that could lower Canadians’ drug costs by as much as $3 billion per year, developing a national formulary for prescription drugs, and introducing a national strategy for high-cost drugs for rare diseases.

The budget’s single biggest investment is in Indigenous services: $8.1 billion over five years for improving health care, ending boil water advisories on reserves and settling land claims. Several investments aim to advance reconciliation with Indigenous Peoples through new measures including secondary and post-secondary education enhancements and the promotion of Indigenous entrepreneurship and businesses.

Deficit and Debt
The budget projects a $20 billion deficit next year, which is scheduled to fall to $15 billion two years later, then again to $10 billion in 2023-2024.

The Liberals had pledged to run deficits to finance a massive infrastructure program, but broke their promise to return to balance by 2019.

Some good news for debt reduction and cannabis: excise taxes and duties revenues are projected to increase by $0.4 billion, or 3.2 per cent, to $12.0 billion in 2018–19, largely due to the higher excise duty on tobacco products from Budget 2018. Over the remainder of the projection, revenues are expected to grow at an average annual rate of 1.1 per cent based on historical consumption trends as well as the forecast of cannabis revenue.

Let’s take a closer look at some key sectors and their budget wins:

Innovation and ICT

The majority of innovation and digital news in Budget 2019 is focused on education and skill development, particularly for Canadian youth – including $60M over the next two years to support CanCode.

Following the National Space Strategy and the announcement that Canada will participate in the Lunar Gateway project, the budget re-announced the $2B over 24 years for space research and robotics development, including $150M over five years towards a Lunar Exploration Accelerator Program that will help small and medium-sized enterprises develop new technologies to be used and tested in lunar orbit and on the Moon’s surface in fields that include artificial intelligence, robotics, and health.

Cybersecurity was one of the biggest winners from this budget. To strengthen the cyber security of Canada’s critical infrastructure, Budget 2019 builds on 2018 investments and proposes $144.9 million over five years, starting in 2019–20, including $22.9 million from within existing Communications Security Establishment resources.

This investment will help to protect Canada’s critical cyber systems including in the finance, telecommunications, energy, and transport sectors. Funding will also support the Canadian Centre for Cyber Security in providing advice and guidance to critical infrastructure owners and operators on how to better prevent and address cyber attacks.

Budget 2019 proposes to invest $30.2 million over five years to implement a number of new measures to protect Canada’s democratic institutions from cyber attacks, the Government is proposing to provide the Communications Security Establishment with additional funding of up to $4.2 million over three years, starting in 2019–20, to provide cyber security advice and guidance to Canadian political parties and election administrators.

Canada’s highly skilled workforce and world-class universities means that Canada is primed to lead in cyber security research, innovation and talent development. To promote collaboration between Canadian cyber security centres of expertise, Budget 2019 proposes to provide $80 million over four years, starting in 2020–21, to support three or more Canadian cyber security networks across Canada that are affiliated with post-secondary institutions.

The networks—to be selected through a competitive process—will expand research, development and commercialization partnerships between academia and the private sector, and expand the pipeline of cyber security talent in Canada. Additional details on this program will be announced in the coming months.

Indigenous

Since 2015, the Government has invested nearly $2 billion to build new public water systems in First Nations communities, and for repairs and upgrades to existing systems. Since then, more than 80 long-term drinking water advisories have been lifted, and the Government is on track to eliminate all of the advisories by March 2021.

Budget 2019 builds on this effort by announcing an additional $739 million over five years, with $184.9 million per year ongoing for urgent repairs to vulnerable water systems, water operator training and other support programs, so that First Nations communities can effectively operate and maintain their public drinking water.

The majority of investments are aimed at improving health and education outcomes for Indigenous peoples in Canada. Budget 2019 proposes to invest $39.2 million in 2020-21 First Nations young people living on reserve face unique challenges to enter the labour force. This funding provides services for young people to acquire pre-employment skills, access training, and overcome barriers to employment.
This budget also invests $969.4 million over five years for school infrastructure to support primary and secondary education on reserve in order to improve education outcomes of First Nations young people.

Budget 2019 proposes to invest $327.5 million over five years to renew and expand funding for the Post-Secondary Student Support Program while the Government engages with communities on the development of long-term First Nations-led post-secondary education models.

You can read the complete Budget 2019 document at the link below
Budget 2019: Investing in the Middle Class

The Budgetary Process
While most conversations about the federal government’s budget begin and end the week it’s introduced in the House of Commons, the process to get the money out the door is considerably longer. Broadly speaking there are three stages to the budget process: consultation, presentation, and concurrence.

In the consultation stage both the Department of Finance and the Standing Committee on Finance consult widely with Canadians on what they want the government to prioritize in that year’s budget. This process is often running constantly, although the Finance Committee generally holds their consultations from September to December of each year. The committee will then table a report describing what they heard from stakeholders in December before a budget is released. This report can help the Finance Minister adjust their budget submissions and ensures that the views of Canadian citizens are taken into account.

At some point the government will decide on a day for the budget speech; this is the presentation stage. This will be one of the most anticipated days in Ottawa all year as it gives an unusually specific look into how our government functions, and what they are choosing to prioritize. Will they choose to invest more in renewable technology, or small business? Is there an increase in how much funding a department has received since the previous budget? What regulation changes are included in the budget legislation for stakeholders?

Finally, we reach the longest and possibly most complicated portion of the budget cycle: the concurrence stage. Once the budget has been introduced it is carved up into different sections and sent off to relevant committees for review. These are known as the main estimates. This process takes a few months as budget deliberations are not particularly expedient.

In the meantime, the government introduces interim estimates bills. These will be smaller portions of the money necessary to make sure the government has enough money to run until the main budget has been voted on and are based off estimates provided in the previous fiscal year with minor adjustments. Think of this as funding to keep the lights on and the track moving.

Committees are required to have their main estimate reports back to the House of Commons by May 31st and all votes on the Budget must be held by June 23^rd, after which, the process resets to prepare for the budget next year.

If you have any questions about Budget 2019, please contact our consultants at Capital Hill Group
info@capitalhillgroup.ca