April 16, 2024
Today the Government of Canada released its 2024 Budget.

Summary
Finance Minister Chrystia Freeland tabled her fourth budget today which includes $535 billion in spending and has a deficit of $39.8 billion, compared to last year’s deficit of $40.1 billion. Total new spending is $11.5 billion. Key spending areas are:

• $8.5 billion to house for the creation of approximately 4 million new homes by 2031
• $6 billion for the Canada Disability Benefit
• $1 billion for a national school food program
• $8.1 billion to defence over five years to bring the percentage of GDP to defence spending to 1.76 by 2030.

The cost to service the national debt has increased substantially — now about $2 billion more than projected just a few months ago. The government will spend more on servicing its debt than on health care this year.

Themes
Housing
Solving the housing crisis is one of the main themes of this budget. In order to meet its target of approximately 4 million new homes by 2031, it plans to decrease regulatory and zoning barriers, provide direct low-cost financing, and make more land available. The budget announces new support for renters by eliminating steep rent increases and ‘renovictions’. There will also be a pathway to ensure renters get credit for rental payments. The federal government will make available surplus, underused, and vacant public lands, such as empty office towers or low-rise buildings for housing. The budget promises $1.1 billion over ten years to transform 50% of the federal office portfolio into housing.

Generational Fairness
While the budget and its supporting documents are over 400 pages “fairness” is used over 50 times. Key highlights are:

• the provision of $200 billion over ten years to strengthen universal public health care, including $5.4 billion for long-term care and home and community care
• enhancing the Canada Workers Benefit by providing up to $2,739 to working families and $1,590 to single workers
• The Canada Disability Benefit Act (passed last year) has now been funded with a maximum benefit of $2,400 per year for low-income individuals with disabilities between the ages of 18 and 64 — about $200 a month.

Taxes
Capital gains taxes are going to increase – up from the current 50% to two thirds for annual capital gains over $250,000. The budget estimates that this could bring in $19 billion over five years. Sin taxes are also going up – the tobacco excise duty will be $5.49 per carton. The vaping excise duty will increase rates by 12%. This equates to an increase of 12 to 24 cents per pod, depending on where you live. It is expected that these increases will provide additional tax revenue of $310 million over five years.

However, previous history would suggest that as taxes on tobacco are increased, illegal trade in these products becomes more robust. Of interest, the budget has included an opt-in tax collection system for First Nation communities for fuel, alcohol, cannabis, tobacco and vaping products. It is not clear how many First Nation communities will opt-in, nor does the budget detail how much money the tax will generate for these communities.

Defence
The defence portfolio is receiving additional increases in its budgets. However, many of the increases are spread over 20 years: $38 billion to upgrade to NORAD; $11.5 billion to increase NATO’s common budget and to establish a new regional office in Halifax; $4.4 billion over 20 years to enhance Canada’s cyber security; and $3.8 billion over 20 years to acquire new critical weapons systems, replenish stocks of ammunition, and improve the Canadian Armed Forces’ digital systems. Ukraine will receive $2.4 billion in loans for 2024 and the budget will also provide $1.6 billion over five years, starting in 2024–25, to the Department of National Defence for the provision of lethal and non-lethal military aid.

Health
While the health transfers to the provinces and territories are keeping up with inflation, there are a few new initiatives such as the launch of the National Strategy for Drugs for Rare Diseases, which allows Canadians in need to access to drugs for rare diseases A total of $1.5-billion will also be made available over five years for the first phase of a national pharmacare program. This program will provide cost-free contraception, including birth control pills and emergency contraceptives, as well as diabetes medication, including insulin.

Opposition Reaction
The Official Opposition Conservative Leader Pierre Poilievre has stated that the Conservative Party will vote against this budget given “…everything Justin Trudeau has touched in eight years has gotten worse…”

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Ivan Ross Vrána
Managing Partner