Budget won’t deliver on all campaign promises

Bill Morneau
Finance Minister Bill Morneau speaks at the Munk School of Global Affairs in Toronto on Wednesday, January 13, 2016. The federal budget watchdog says the Liberals' tax-bracket changes will drain about $100 million more per year from the public treasury than the government expects.THE CANADIAN PRESS/Peter Power

OTTAWA – The Trudeau government’s maiden budget will make it easier for jobless Canadians to collect employment insurance benefits and will target some additional EI measures at workers in energy-producing provinces hit hard by the plunge in oil prices.

But it won’t immediately deliver on some other Liberal election promises to reform the EI system, including promised improvements to parental and compassionate care benefits.

And it is expected to defer until the fall a promised 12-month EI premium holiday for employers who give permanent jobs to young Canadians, aged 18-24.

Those are just three election promises that are expected to be put off in Tuesday’s budget as Prime Minister Justin Trudeau’s fledgling government struggles to come to grips with an oil-price plunge that has sapped federal revenues and slowed already sluggish economic growth to a crawl.

Government insiders, speaking on condition of anonymity because they were discussing matters not yet made public, said there would be few surprises in the budget, which will instead stick to the promised “approach” of investing in infrastructure, long-term economic growth and middle-class Canadians.

That means it will include two big-ticket items from the Liberal platform: an enhanced, tax-free, income-tested child benefit and at least $5 billion in new infrastructure investments.

The government has already acted on another big ticket promise: reducing the tax rate on income between $45,282 and $90,563 while imposing a new higher tax rate on income over $200,000.

As Trudeau put it Monday in the Commons: “We put forward a plan that focused on investing in our communities, helping the middle class and creating growth in a way that would help all Canadians.

“That is exactly what we campaigned on. That is exactly what we are going to be delivering in (Tuesday’s) budget.”

But sticking to the platform’s general approach and honouring all the more than 200 election promises Trudeau made are two different things.

Indeed, even before adding new spending in the budget, the government has already broken one pivotal campaign promise: the vow to keep budget deficits to less than $10 billion for the each first three years of the Liberal mandate. Finance Minister Bill Morneau revealed last month the 2016-17 deficit was en route to $18.4 billion.

Once the budget’s new investments are tallied up, the deficit is expected to balloon to about $30 billion — three times more than promised. But that includes a hefty contingency cushion of $6 billion, which could ultimately soften the blow.

Morneau has also telegraphed well in advance that he’s likely going to renege on two other promises that anchored the Liberals’ fiscal agenda: ensuring the debt to GDP ratio declines each and every year and balancing the budget in the fourth year. The worsening economic picture has made both those goals much harder to achieve.

Ivey School of Business economist Mike Moffatt, who was a member of Trudeau’s economic advisory council before the election and helped cost the Liberal platform, will be taking the platform with him into the budget lockup to check on what else has changed or gone missing.

“I think it might be more interesting to see what they don’t do, in the sense of what was in their platform that they had to back off of, for one reason or another,” he said in an interview.

Insiders suggest the many campaign promises on improving the lot of veterans will be spread out over the four-year mandate.

Some of the pricey promises aimed at improving the quality of life for indigenous peoples — included a sweeping, uncosted promise to deliver on all 94 recommendations of the Truth and Reconciliation Commission — may not materialize immediately either, although Trudeau said Monday that the budget “will feature historic investments in First Nations and indigenous Canadians right across the country.”

On EI, the Liberal platform promised to make compassionate care and parental benefits more flexible and more inclusive. But it has since been determined that the changes are too complex to be made quickly in the first year of the Liberal mandate.

The budget is expected to deliver on the Liberals’ promises to reduce the wait time to collect EI benefits to one week from two, starting in 2017, and to reverse a measure imposed by the previous Conservative government that requires the unemployed to take lower-paying jobs outside their communities.

It’s also expected to deliver on platform promises to pump $500 million per year more into labour market development agreements with the provinces and up to $775 million for jobs and skills training.

The Liberal platform also promised to reduce employers’ EI premiums, starting in 2017, from $1.88 per $100 earned to $1.65. However, Employment Minister MaryAnn Mihychuk has since hedged on the precise size of the premium cut.

She has also signalled that not all the EI promises can be fulfilled immediately, that overhauling the system is a complex business that will take some time.

Trudeau told the Commons on Monday that the budget will deliver on “concrete (platform) commitments to improve access to Employment Insurance for the people of Canada, including in areas where the oil-price decline has led to difficulties.”

Insiders say the budget will make it easier for all unemployed Canadians to access EI but it will also have measures targeted at supporting workers in regions hard hit by the oil price shock, particularly Alberta. The duration of benefits, for instance, could be increased in economically depressed regions.

It could also allow the jobless in those regions to accept low-wage jobs without having their EI benefits clawed back.

University of British Columbia economist Kevin Milligan, who also sat on Trudeau’s economic advisory council, said he won’t be surprised if there are some adjustments to the promised infrastructure investments to take into account economic need in Alberta, Newfoundland and Labrador and Saskatchewan.

For instance, he said Morneau might create a “fast lane” for energy producing provinces, speeding up their share of the promised 10-year roll-out of $60 billion in additional infrastructure investments.

Both Milligan and Moffatt also think the government might give a nod towards creation of a guaranteed minimum income, agreeing to take part in a pilot project already announced by Ontario. Such an initiative wouldn’t cost much and wouldn’t commit the government to actually ever implementing the poverty-alleviating scheme across the country.


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