December 16, 2024: What a day in politics…
Introduction
Never in Canadian history has a finance minister resigned on the day they were slated to deliver a Fall Economic Statement (FES). The FES can be viewed as a mini budget as it reports on the fiscal health of the nation and sets the priorities ahead of the formal budget that is usually delivered in the spring.
What happened yesterday is unprecedented. One can only wonder how much time the Government House leader Karina Gould had to get up-to-speed on the document as she was the one who tabled it in the House of Commons. Later in the evening, Public Safety Minister Dominic LeBlanc was sworn in as the new Finance Minister.
The FES and the Budget are always provided after 4:00 pm EST (specifically after the markets close) so there is time to reasonably digest the information these documents provide without causing market disruption. However, with the resignation of Chrystia Freeland occurring mid-day, it is a surprise the markets were only marginally down at the end of trading – it could have been worse.
Highlights
The deficit is now at $61.9 billion – a far cry from the $40 billion pledge the government made in its 2024 Budget. Where does the $21.9 billion in new spending come from and what will it be spent on?
- Scientific research and development ($1.9 billion over five years).
- Extension of the Accelerated Investment Incentive ($17.4 billion over five years).
- Border security ($1.3 billion over six years).
- Affordability and Housing ($3.1 billion over six years)
And, while the GST holiday did begin on December 14 and will continue for the next 2 months, do not count on those $250 cheques the government had promised for those making less than $150,000 per year, because this item did not get to a vote in the House of Commons.
Opposition Reaction
The Conservative Leader Pierre Poilievre called for the government to hold a confidence vote on the economic update immediately and stated, “The prime minister has lost control, yet he clings to power.”[1]
Relevance
While there are big spending promises in this FES, it is not a Budget. That means that a budget in 2025 will have to be delivered sometime in the spring of 2025, which will then require a confidence vote.
Given the lack of support for the current government, it is looking more and more likely that a federal election will occur in the first half of next year.
For more information, please contact Diplomat Consulting at: hello@diplomatconsulting.com.
Ivan Ross Vrána
Managing Partner
[1] CBC “Federal deficit balloons to $61.9B as government tables economic update on chaotic day in Ottawa” December 16, 2024.
