MP Carol Hughes not surprised at increased federal debt projections in fiscal update

Algoma-Manitoulin-Kapuskasing MP Carol Hughes sat in as acting Speaker last week.

OTTAWA – It was certainly no surprise to Algoma-Manitoulin-Kapuskasing (AMK) MP Carol Hughes that the federal government’s fiscal snapshot last week predicted a $343 billion deficit in 2021. Meanwhile, the Association of Municipalities of Ontario (AMO) was disappointed that immediate federal funding relief to municipalities was not included in the announcement.

“This wasn’t a fiscal statement, there was no action plan, no new policies or a plan to reduce the deficit,” MP Hughes told the Recorder. “Are we surprised the deficit is growing? Of course not.”

However, “the government will need to put a plan in place to go forward,” said MP Hughes, “and this will need to include providing assistance to municipalities and to individuals. At this point, none of us know how long it is going to take for our business sector to get back to normal, and not being able to access measures to funds during this difficult time. They won’t see relief for probably another two years to get back to where they should be.”

“The Americans will not be coming to Canada for some time and this has impacts as well as the border is closed,” said MP Hughes. 

The federal government expects to post a $343 billion deficit in 2021 as COVID-19 spending continues to mount, outpacing earlier estimates and reinforcing the depths of Ottawa’s weakened fiscal position, reported several national publications last week.  

Finance Minister Bill Morneau indicated in his fiscal update last week that total government spending would jump to $612 billion by 2021, nearly double the $346 billion spent in 2019. This comes largely as a result of higher projected spending under Ottawa’s two key COVID-19 financial aid programs: the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Response Benefit (CERB), which have been repeatedly extended and expanded in recent months.

Total federal debt as a percentage of GDP is expected to swell to 49 percent in 2021, up from around 30 percent currently.

The CERB, which provides $2,000 per month to people who have lost their jobs due to COVID-19, was initially expected to cost around $25 billion. That projection was increased by Mr. Morneau to $80.5 billion through 2020 and 2021.

The CEWS, which effectively covers 75 percent of employee wage costs for struggling businesses, is now expected to cost $82.3 billion, up from an initial estimate of $73 billion. 

In a press conference on Wednesday of last week, Mr. Morneau said an update to the CEWS program would be coming “in the very near term.” 

Canada’s total debt is expected to reach $1.06 trillion in 2021, up from $685 billion last year. 

“We expected the fiscal snapshot would include an increased deficit,” stated MP Hughes. She explained, “there is a lot government can do to offset that by ensuring people can make ends meet. Deal first with child care issues; people can’t go back to work unless they have care for their children. Our long-term care needs to be better protected and there is a need to make sure lots of jobs and investments moving forward be focused, for instance, in the clean energy sector. The funds to create jobs and start up jobs in the energy sector also better address the Paris Accord.”

“We need to make sure the government is not looking at austerity measures that won’t help businesses and people,” said MP Hughes. “For years, governments have let wealthy corporations ride for free; for instance, Facebook and Netflix—we need to tax those making a lot of money and not being taxed. This would assist in offsetting a lot of the expenses.”
MP Hughes said that when the government had indicated it would be giving some people $2,000 to get through COVID-19, “everyone should have received $2,000 because there are a lot of people that are falling through the cracks.” 

“They have put in place rent relief subsidies, but unless the owner of the accommodations wants to apply for this funding, the renter is out of luck,” said Ms. Hughes. “The government has to start thinking about how they are going to assist people in the meantime that can’t go to work, and those business owners who are thinking of closing their business permanently.”
In a release July 8, AMO said it was disappointed that immediate federal funding relief for municipal governments was not contained in today’s federal snapshot. We remain hopeful that current federal-provincial-territorial conversations will continue productively to find an agreed-upon arrangement for providing this necessary relief to municipalities. In his daily briefing, Premier Ford noted that Ontario had financial resources ready for municipal support but that he was working toward a deal with the federal government for flexible funding that reflects Ontario’s proportion of the national population.”