Finance experts weigh in on federal budget

By Dale Woodard on April 22, 2021.

Possible incoming elections, record debt, business benefits and existing and new programs were among the topics of a BDO webinar earlier this week after the reading of the 2021 Federal Budget.
Entitled “2021 Federal Budget: Rethinking the Path Forward” the hour-long session featured talks by National Post columnist John Ivison, chief economist for the Canadian Chamber of Commerce Trevin Stratton and Jennifer Lucier, partner of Canadian Tax BDO Canada.
Stratton touched upon some aspects of the new budget Canadian businesses will like.
“The extension of the wage subsidy and the rent subsidy is going to be very useful for small businesses and small businesses in those hardest hit sectors, restaurants, the arts and tourism. The new Canada Recovery Hiring Program is going to be useful for a lot of those same businesses to be able to bring on new workers once they are able to reopen,” he said.
Stratton said there are some more economic foundational pieces that when it comes to competitiveness the business community has been calling for in the past few years, including regulatory competitiveness reviews and looking at provincial trade barriers.
“Obviously, there are jurisdictional issues, but the federal government putting money toward gathering data and figuring out what the barriers are and then potentially doing discretionary transfers through the provinces to help them reduce barriers. There is capitalization of the National Trade Corridors Fund, which has to do with creating trade and enabling infrastructure across the country.
“Certainly, that has to do with interprovincial trade barriers.”
Stratton said there are also re-skilling initiatives, which will be helpful for businesses and has a big focus on employers and labour market demand.
That said, these weren’t necessarily the big-ticket items in the budget, said Stratton.
“The wage subsidy, the rent subsidy and the hiring program together are a bit over $12 billion out of $101 billion. But the regulatory competitiveness reviews and looking at provincial trade barriers are low-cost or no-cost things that could really produce growth. What we see is a lot of the big-ticket items which were perhaps one-time spending to help businesses now, things that might create longer lasting programs that might create more structural deficits.
Of those is child care, said Stratton.
“I think a lot of economists agree that being able to get rid of some of the challenges and being able to get women back in the work force is good for the economy and good for growth and building that economic base to propel recovery.”
The question, said Stratton, is how to do it.
“There are other ways to do it, creating a national program will take some time and it’s going to take negotiations with the provinces, which are uncertain. There are a lot of women that need support right now. So is maybe a child care tax credit a better way to go about it to provide the support and perhaps with less of a fiscal hit? I think that’s probably going to be the big question going forward.”
With the budget delivered, Lucier touched on the two existing programs – the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Rent Subsidy (CERS) – as well as the new Canada Recovery Hiring Program.
“By far, the CEWS program is Canada’s biggest spend on the government’s COVID-19 programs. The budget has proposed to extend the CEWS program until Sept. 25 and also the potential to further extend the program to Nov. 20, 2021,” said Lucier. “That extension is going to depend on how the economic situation in relation to the status of the pandemic will play out in the coming months. The government anticipates the extension of the program will cost about $10.1 billion. Another important update to the CEWS program is the required decline in revenue has to be greater than 10 per cent starting July 4, the beginning of Period 18.”
Also starting on July 4 the subsidy rate will start to gradually decline for each qualifying period as the program is intended to be phased out, said Lucier.
“That is all part of the government’s plans as the vaccinations are completed and the economy starts to re-open.”
The CERS program has provided over $2.6 billion for Canadian businesses, said Lucier, adding the budget is proposing to extend the CERS the same as the CEWS.
“This extension will cost about $1.9 billion. Similar to the CEWS, the subsidy rate will gradually decline. That will start July 4 and phase out with a maximum base subsidy rate in Period 20 of 20 per cent, which is also a decline from the original 65 per cent.”
The lockdown support rate is going to continue to be maintained at 25 per cent, said Lucier, adding the lockdown portion of the CERS is available only to those entities that had to close or significantly restrict their activities due to a public health order.
The Canada Recovery Hiring Program – or Hiring Subsidy – has been introduced with the intention of providing alternative support to the CEWS, said Lucier.
The Hiring Subsidy will start June 6, which is the beginning of Period 17 of the CEWS and will be available until Nov. 20.
The government expects the Canada Recovery Hiring Program will cost about $595 million.
Businesses must have an open payroll account as of March 15, 2020 to be eligible, said Lucier, adding furloughed employees on leave with pay, but aren’t performing any work are not eligible.
Ivison was asked if Monday’s budget was a pre-election budget and if an election is indeed on the horizon.
“I think on the horizon, probably not provoked by the budget,” he said. “We’ve already had NDP leader Jagmeet Singh saying he will support this budget. I don’t think anybody thinks an election right now in the middle of a third wave of a pandemic is a good idea. But I think it’s a pretty good hint at what’s to come.”
Ivison pointed to the $500 one-off payment to seniors over 75 and thereafter an annual increase in the amount of the Old Age Security.
“One of the other things we saw was the wage subsidy was extended to the end of September and the Canada Recovery Benefit is also going to run until the end of September. I don’t think political parties generally want to go into an election when they’re taking money away from people.
“There’s a sweet spot there between giving money and taking it away where I think we may end up going to the polls.”
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