Deputy Prime Minister Chrystia Freeland holds a media availability in Ottawa on Nov. 23, 2020.Sean Kilpatrick/The Canadian Press
Britain’s Chancellor of the Exchequer did something last week that his Canadian counterpart has not: He tabled a budget.
Not only did Rishi Sunak lay out a five-year plan for spending and borrowing that sought to reassure taxpayers and investors that his government intends to address the mountains of debt Britain has accumulated during the COVID-19 pandemic, he stressed the urgent need to do so.
“The amount we’ve borrowed is comparable only with the amount we borrowed during the two world wars,” Mr. Sunak told British MPs. “It is going to be the work of many governments, over many decades, to pay it back. Just as it would be irresponsible to withdraw support too soon, it would also be irresponsible to allow our future borrowing and debt to rise unchecked.”
British taxpayers and businesses may not have liked everything in Mr. Sunak’s budget, which included a plan to boost the corporate tax rate to 25 per cent from 19 per cent in 2023. But at least they know their government is serious about its desire to stabilize public finances.
Canadians, meanwhile, are only left to wonder what Ottawa has in store for them. Prime Minister Justin Trudeau’s government has not tabled a budget in almost two years and appears to have no plans to do so this month, as had been expected. The dithering in Ottawa undermines business confidence and leaves firms in the dark about the future direction of public spending and taxation, leading them to postpone investments or forgo them altogether.
Tabling an annual budget is one of the basic responsibilities of any government. But the Trudeau government’s failure to do so for two years running is emblematic of its contempt for Parliament and improvisation as it rolls out spending measures without considering the longer-term consequences of its actions.
If there was still any doubt that the government is making it up as it goes along, it was dispelled on Monday when Finance Minister Chrystia Freeland announced the creation of a Task Force on Women and the Economy. The group will “advise the government on a feminist, intersectional action plan that addresses issues of gender equality in the wake of the pandemic.” It will hold its first meeting “in the lead-up to Budget 2021.”
That budget should be written by now. Instead, Ms. Freeland appears to be playing for time by announcing an additional round of prebudget consultations to address the unequal impact of the pandemic on women. The move has more than a whiff of politics to it.
Besides, the government does not lack recommendations on how to boost women’s participation in the work force and repair the damage done to female earning power amid the pandemic. The solutions involve a long-term commitment to funding child care and skills development. But both measures also require extensive negotiations with the provinces and transcend a single federal budget. They could take years to implement.
It is much more critical at this point for Ottawa to present a fiscal framework for the next five years that sets out the parameters for future spending. The minimalist fall economic statement that Ms. Freeland tabled in November raised more questions than it answered about Ottawa’s fiscal direction, as the government projected a $381-billion deficit for the 2020-21 fiscal year and set out plans to launch a $100-billion stimulus plan with zero specifics.
Ms. Freeland may have intended for her first budget to signal a bold new era of activist government. But a slew of recent indicators are interfering with her government’s narrative of an economy that needs major stimulus spending to recover from the pandemic. Inflated household savings and rising commodity prices suggest quite the opposite.
Ottawa has continued to flood the economy with government transfer payments to individuals that far exceed income lost because of the pandemic. While many households have seen their incomes decline, and should be made whole through targeted measures, most others have built up their savings and are poised to spend a big chunk of them later this year.
As such, Ms. Freeland needs to present a credible fiscal plan that lays out clear targets for debt and deficit reduction. The much-vaunted sustainability of federal finances – in contrast to the unsustainability of provincial budgets – has been thrown into doubt by the pandemic. Ottawa has no room to undertake new program spending without also raising taxes.
Ms. Freeland may be reluctant to admit that, especially as her boss prepares for a potential spring election. But she needs to be honest with Canadians soon. It’s her job.
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