Deputy Prime Minister and Minister of Finance Chrystia Freeland tabled the Government of Canada’s 2023 Fall Economic Statement (FES) in the House of Commons this week in Ottawa. The interim update to the budget includes $20.8 billion in new spending over the next six years and focuses on housing and economic programs for the clean economy and to help with affordability. In contrast to last year’s economic statement, a balanced budget is nowhere in the forecast, even to 2028-2029. While there was no commitment to reduce the debt load, there was acknowledgement that fiscal tightening is necessary after years of providing pandemic stimulus. However, Canada’s federal debt is not as large as some competing countries, evidenced by Canada’s net debt-to-GDP ratio being the lowest of any G7 nation. Not all outlined initiatives had budgeted costs, but the FES provided insight into what is slated for inclusion in the upcoming spring budget.
Fall Economic Statement Highlights
The government allocated $1.3 billion in funding for additional financing aimed at supporting apartment construction, affordable housing, and cooperative housing. However, it’s noteworthy that this funding is scheduled to commence in the fiscal year 2025-2026, which would delay any impact on current housing needs. Another proposal is the removal of the Goods and Services Tax (GST) from new rental housing, though this exemption excludes renovations. This exclusion is designed to prevent landlords from increasing rents after making building improvements. Additionally, the FES introduces the Canadian Mortgage Charter, which offers relief measures for homeowners facing risks associated with higher interest rates. However, there remains uncertainty about the government’s enforcement strategy for these measures given there is no budget allocated.
The government provided confirmation of the Clean Economy Investment Tax Credits, initially announced in Budget 2023, and included that a phased rollout of these credits will be done to stretch the fiscal impact across a few years. A new introduction was the Indigenous loan guarantee program, with detailed information set to be disclosed in the upcoming budget. This program will be designed to reduce the cost of capital for Indigenous communities and facilitate increased participation in natural resource projects. There was also a substantial reallocation of $7 billion from the $15 billion Canada Growth Fund, to create assurance for companies investing in emission reductions. This is achieved through the development of contracts providing insurance against potential declines in the carbon price. Lastly, it was signalled that the federal government is exploring options to mandate disclosures of climate impacts for private companies which will have broad implications should it be legislated.
Implications for Manitoba
There are effects for Manitoba across various sectors present in the FES. The commitment to eliminate interprovincial mobility barriers, especially for tradespeople and healthcare workers, will have effects on the province’s workforce. Manitoba needs to position itself as an attractive destination for skilled professionals as the removal of barriers will allow for easier relocation. Additionally, the funding earmarked for transitioning to heat pumps from home heating oil aligns with Manitoba’s commitment to increasing the adoption of heat pumps, even though home heating oil is not widely used in the province.
The Clean Electricity Tax Credit provides a valuable opportunity for Manitoba to subsidize construction of additional electricity generation capacity, supporting Manitoba Hydro’s projections outlined in its Integrated Resource Plan. Furthermore, the promise to remove the provincial sales tax from rental construction aligns with the federal commitment, offering a harmonized approach to stimulating construction of rental units. For Manitoba’s critical minerals industry, highlighting the Canada Growth Fund as a funder of critical mineral projects provides opportunities for development in the province, but ensuring Manitoba receives its fair share of investment is imperative for Northern growth. Additionally, improvements to permitting and the impact assessment process at the national level should encourage further investment in Manitoba’s critical minerals sector. Overall, the FES presents opportunities for Manitoba to enhance its workforce, promote sustainable energy, and may lead to additional investment in the province’s critical minerals sector.
Canadian Chamber of Commerce Perspective
“Today’s Fall Economic Statement (FES) signals that the government heard the business community on issues such as addressing our housing needs and the importance of ensuring workers can work in any community where and when their skills are needed most. We all agree on the need for measures that will help build our homes, support businesses in finding the right talent, and ease the burden of doing business in Canada.
But more needs to be done, and Canada needs to move quickly. We applaud the intent of the government’s “delivery timeline” for investment tax credits for major decarbonization projects, but time has already been lost. We need to see carbon capture, utilization and storage (CCUS) projects moving ahead, and the government still needs to deliver on the plans it first announced in 2021 and in subsequent Budgets and statements. Business urgently needs to be able to work with government to invest jointly in these projects so we can fuel green economic growth, achieve our net-zero ambitions, and catalyze the private sector investment that will help pay for the services and social programs Canadians need.
There were also some concerning developments – including that the speed with which the Government is trying to push through changes to our competition laws does not leave enough time to predict or understand their full effects. If enacted, these changes to the Competition Act would apply to all Canadian businesses and could have significant unintended consequences, including reduced investment and the punishing of pro-competitive business conduct. We’re calling for the government to consult meaningfully with stakeholders on the proposed changes to the Competition Act.
Canada still urgently needs a plan for growth. Next year’s budget must address a number of key measures that weren’t included in the Fall Economic Statement or the 2023 budget, including long overdue measures to modernize the tax and regulatory system, investments in trade-enabling infrastructure that will strengthen supply chains, and initiatives to foster an innovative economy, maintain our leadership in Artificial Intelligence, ensure widespread adoption of cybersecurity, and advance digital health.”
– Matthew Holmes, Senior Vice President of Policy and Government Relations, Canadian Chamber of Commerce
Fall Economic Statement: https://www.budget.canada.ca/fes-eea/2023/report-rapport/FES-EEA-2023-en.pdf
Canadian Chamber of Commerce’s Input on the Fall Economic Statement: https://chamber.ca/news/2023-fall-economic-statement-our-policy-experts-insights/