Budget 2024: Burrard Strategy’s Political Pulse

Burrard Strategy

April 17, 2024

By Mark Marissen

Principal, Burrard Strategy

 

The Minister of Finance and Deputy Prime Minister, Chrystia Freeland released Budget 2024 yesterday. 

Budgets are a key signal to Canadians to understand what the government’s priorities are for the upcoming fiscal year. Canadians have been pressed over the last number of years, with high inflation caused by a multitude of factors in the wake of COVID and regional conflicts across the globe. 

The government will surely keep the confidence of the House due to the agreement they set in place with the NDP. 

This budget is a significant one however, as we get closer and closer to an election year with the Conservatives continuing to hold a consistent double digit lead in federal polling. 

With this budget, Liberals have taken big steps to address the real concerns of Canadians and are hoping these aggressive measures will get them back on track to maintain power past 2025. 

Despite all of the political drama around our country’s fiscal situation, Canada maintains the lowest deficit- and net debt-to-GDP ratios in the G7.

The Conservatives immediately voiced their opposition to the budget, due to increased contributions to the debt, new taxation measures and that “Trudeau will spend more on interest costs than on health care.” Citing from the Budget that “The aggregate principal amount of money to be borrowed by the government in 2024-25 is projected to be $508 billion, 83 percent of which will be used to refinance maturing debt.”

Budget 2024 has three main objectives:

  1. Increasing housing supply to tackle affordability issues, introducing initiatives like the Public Lands for Homes Plan and Canada Rental Protection Fund to unlock 3.87 million new homes by 2031.
  2. Reducing everyday expenses for Canadians with initiatives like stabilizing grocery prices, combating unfair fees, and introducing programs like the National School Food Program and Canada Disability Benefit.
  3. Fostering inclusive economic growth by attracting investment, promoting innovation, and supporting entrepreneurship, with a particular emphasis on job creation and Indigenous inclusion, all while making the tax system fairer by ensuring the wealthiest contribute their share.

Among those key priorities in Budget 2024, here is what Burrard Strategy is looking at specifically:

CAPITAL GAINS TAX INCREASE

The capital gains tax will increase from ½ to ⅔ on gains over $250,000/year for individuals and on all capital gains realized by corporations and trusts. 

This change is expected to net the government $19.3-billion over the next five years, with $8.8-billion from individuals and $10.5-billion from companies.  This is meant to offset roughly $53-billion in new spending.  

It’s the largest revenue measure in the budget and the first increase in capital gains taxes in 25 years.

Chrystia Freeland: “I know there will be many voices raised in protest. No one likes paying more tax, even — or perhaps particularly — those who can afford it the most […] Tax policy is not only, or chiefly, the province of accountants or economists. It belongs to all of us because it is how we decide what kind of country we want to live in and what kind of country we want to build.”

Jimmy Jean, Chief Economist at Desjardins: “Perceptions matter.  A lot of people will be running away with the message that the government doesn’t want to see more business investment, doesn’t want wealthy and highly educated individuals to thrive.”

Dan Kelly of the Canadian Federation of Independent Business: “Our early assessment is that most small business owners will come out ahead or be unaffected by today’s changes as a result of a boost in the Lifetime Capital Gains Exemption from $1 to $1.25 million and a new Canadian Entrepreneurs’ Incentive for some sectors which will lower the capital gains inclusion rate to 33.3% on the next $2 million when fully phased in.”

INCREASING HOUSING SUPPLY

The budget allocates $8.5 Billion for new housing construction across Canada. This will be through the housing accelerator fund, building homes on under-used government land and offering tens of billions in loans for new rental construction.

Federal offices into homes

The federal government plans to spend $1.1 billion over ten years to convert 50% of federal offices into homes. They also intend to build homes on Canada Post land. There are 1,700 Canada Post offices nationwide that can be used to build new homes while keeping the postal service intact. 

Apartment Construction Loans

This year’s federal budget includes an injection of $15 billion into the Apartment Construction Loan program. The 2017 program was initially designed to build at least 30,000 new rental apartments throughout major urban centres, rural areas, and small communities. The additional funds could mean about 130,000 new apartments added over the next eight years.

30-Year Amortization Period

The federal budge will adjust mortgage insurance regulations to allow for 30-year mortgage amortization for first-time homebuyers purchasing newly built homes. It will go into effect on August 1, 2024.

Financing Options for Secondary Suites

The budget announced the Canada Secondary Suite Program, to be managed by the Canada Mortgage and Housing Corporation (CMHC). The housing measure offers homeowners up to $40,000 in low-interest loans to create a secondary suite in their home.

Underused Public Lands

The federal government will lease underused public lands to developers at reduced costs to build affordable housing.  This could include schools with low enrollment, abandoned industrial parks, and places where government entities became defunct.

Home Buyers’ Plan RRSP Withdrawal Limit

In recent years, first-time homebuyers can access their Register Retirement Savings Plan (RRSP) to purchase or build a home. The tax-free withdrawal limit was $35,000 for individuals and $70,000 for couples has now been increased to $60,000 for individuals and $120,000 for couples.

Addressing the Labour Shortage

Canada’s housing market is facing a significant labour shortage, resulting in higher costs and delayed completions. 

Budget 2024 allocates $50 million to accelerate The Foreign Credential Recognition program, which supports skilled trades workers to participate in the Canadian workforce.  The budget also offers $100 million for training in skilled trades, apprenticeship opportunities, and programs to recruit skilled trades workers.

Chrystia Freeland:  “Budget 2024 renews our focus on unlocking the door to the middle class for millions of younger Canadians. We’ll build more housing and help make life cost less. We will drive our economy toward growth that lifts everyone up. That is fairness for every generation.” 

“We are moving with purpose to help build more homes, faster. We are making life cost less […] Millennial and Gen Z Canadians, we want them to look forward to the future with a sense of anticipation, not angst.”

Karen Yolevski, Chief Operating Officer of Royal LePage Real Estate Services: “Initiatives aimed at making it easier for young Canadians to enter the market are welcome…. However, without a material increase in supply, further upward pressure will be placed on home prices.”

Francis Fong, Senior Economist at TD Bank, says that the “ambitious” efforts to rapidly increase housing supply in Canada could give the government a “fighting shot” at eventually restoring affordability, but they would not provide a short-term fix for those boxed out of the housing market today.

INDIGENOUS LOAN GUARANTEES 

The Federal government is allocating $5 Billion in loan guarantees for Indigenous communities to invest in natural resource and energy projects.

The loans would be guaranteed by the federal government, ensuring Indigenous borrowers can get more favourable interest rates.  The federal Indian Act doesn’t allow First Nations to put up their reserve land or other assets as collateral, making financing much harder to secure.

The First Nations Major Projects Coalition forecasts Indigenous participation in the natural resource and energy sector could reach $525 billion in capital investments over the next 10 years.

But while some Indigenous communities might gain a few investment opportunities, the budget does not go very far in closing the infrastructure gap. 

 A recent Assembly of First Nations report found that $349 billion is needed to close that infrastructure gap by 2030 — a target Ottawa had promised to meet.

Chrystia Freeland: “If Canada is to make sure that Indigenous communities are able to fully benefit from the opportunities ahead, they need fair access to affordable capital that meets their unique needs.

Chief Sharleen Gale, Chair, First Nations Major Projects Coalition:  “By committing this backstop of financial support to Indigenous equity participation, the government of Canada is taking a significant step towards meaningfully advancing economic reconciliation in this country.”

AFN National Chief Cindy Woodhouse Nepinak on the budget overall: “We are pleased with new investments in health and education, on income assistance in First Nations communities and of course the Indigenous loan guarantee, but there’s critical areas such as housing and policing that are unmet yet again,” she said.

DISABILITY BENEFIT

$6 Billion has been allocated for the new Canada Disability Benefit. This will help disabled Canadians, designed to supplement existing provincial benefits for costs of medical equipment not already covered, devices and quality of life aides. 

The maximum benefit for low-income Canadians with disabilities would be $200 per month.

Chrystia Freeland:: “Budget 2024 highlights new measures that will strengthen Canada’s social safety net to lift up every generation. No matter your age, income, or your ability, every Canadian deserves to feel secure and supported.”

Rabia Khedr, National Director, Disability Without Poverty, said she was “disappointed” for all those who have been waiting since Bill C-22 passed in June.  Khedr estimates that 1.6 million Canadians with disabilities are living below the poverty line. Only 600,000 would be eligible for the new national benefit.

NATIONAL SCHOOL FOOD PROGRAMME

With an investment of $1 billion over five years, the National School Food Program, included in Budget 2024, will launch with a target of providing meals to 400,000 more kids every year, beyond those served by existing school food programs.  This was pre-announced April 1st. Canada was the only G7 country without a national school food program.

Prime Minister Justin Trudeau:  “We all want kids to have the best start in life, including the most vulnerable. When a kid walks up before class and says ‘I’m hungry,’ it means we all have more work to do as a school community and as a country.”

Chrystia Freeland: “The National School Food Program is a game changer. The Program will take pressure off of families, invest directly in the future of our kids, and make sure they’re able to reach their full potential – feeling healthy and happy. This is about fairness and doing what’s right for our kids to get the best start in life.”

The Breakfast Club of Canada says that this “marks a turning point in the country’s commitment to the well-being of all children as 1 in 3 are at risk of going to school on an empty stomach.”

Doug Roth, Chief Executive Officer, Heart & Stroke Foundation:  “We congratulate the federal government for taking children’s health to heart.  This will make a positive difference in the lives of so many kids in Canada, improving their learning and mental health and reducing their risk of developing chronic disease, including heart disease and stroke.”

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