Supplementary estimates
The Freeland budget and our current malaise
Journalism is addicted to novelty and can be too dismissive of routine. We have to cover federal budgets most years. It can be easy to eye-roll. Well, they missed their deficit targets again. Several years ago, to ward off that instinct, on my way into each year’s budget lockup I started reminding myself, “There is no boring way to spend a quarter of a trillion dollars.” This number has kept growing, until in 2027-28 federal program spending will actually pass a half trillion. If you include debt charges, that milestone will come even earlier, in 2024-25. And it’s still not boring.
Yet budget coverage usually lasts a single day. It’s hard to write the second- and third-day stories you told yourself you’d write. The world moves on. Most of the first-day stories focus on two elements: have they missed their deficit targets again? and What does it mean for ordinary people? These are important questions! They are also reliably well-covered by colleagues, so lately I ignore them.
The question I try to address is, “Does this budget signal big changes in large areas of government activity?” That’s why I focused on Chrystia Freeland’s announcement of large tax credits for what Aaron Wudrick at the Macdonald-Laurier Institute calls “green things.” Those tax credits will either greatly increase spending by private firms and crown corporations in Canada, or they’ll be yet another fizzled firecracker of the sort I’ve often covered here.
One thing that might make the firecracker fizzle is the number of conditions on the tax credit.
A lot of businesses would cheerfully leave large amounts of government money on the table, rather than give government an excuse to start asking them questions. This is a well-understood phenomenon among people who don’t work in government. It helps us understand why by the end of February, take-up on interest-free $100,000 loans under the Canada Digital Adoption Program was running at 15% of what the Business Development Bank’s corporate plan had projected.
The very substantial tax credits in the latest budget, perhaps $80 billion over a decade according to an Unnamed Senior Official, seem less meddlesome. Then we read:
“Labour requirements, including ensuring that wages paid are at the prevailing level, and that apprenticeship training opportunities are being created, will need to be met to receive the full 15-per-cent tax credit. If labour requirements are not met, the credit rate will be reduced by ten percentage points…. The government will consult with labour unions and other stakeholders to refine these labour requirements in the months to come…. Other requirements will include a commitment by a competent authority that the federal funding will be used to lower electricity bills, and a commitment to achieve a net-zero electricity sector by 2035.”
My favourite word here is “include.” The requirements will include lower electricity bills and a quick march to net-zero, but from the moment we see that word, we’re on notice that the requirements might not end there. Will this government really slash taxes for a company whose board of directors isn’t designed according to the PMO’s preferences, or which takes political positions judged inappropriate? How frequently will compliance with these requirements be audited, at the risk of a 10-point tax hike at any point?
I can imagine even companies that absolutely intend to lower electricity bills, reach net zero on schedule, pay a decent wage and ring every other bell of progressive governance wondering whether they can afford to get into an arrangement that would require them to prove they’re on the side of the angels, again and again for years. Costs can fluctuate, after all. It happens to the nicest people.