Federal budget 2021 highlights: Child care, recovery benefits, OAS increases – everything you need to know

The federal government’s first budget in more than two years certainly looks the part: At 739 pages, it is a hefty document chock full of billions in new spending.

Those funds will be spread among a number of key groups – students, seniors, parents and small-business owners, to name a few – as Ottawa looks to bolster Canada’s recovery from COVID-19 but also plan for life beyond the pandemic.

To that end, the deficit is projected to hit $354.2-billion in the 2020-21 fiscal year, which just ended – better than expected about five months ago, given the economy’s resilience over the winter months. It is estimated to fall to $154.7-billion this fiscal year, before dropping further in the years to come as pandemic spending recedes from view.

Here are some of the highlights from Monday’s budget.

Child care

The budget outlines tens of billions of dollars in federal subsidies for a national child-care program, a promise the Liberal Party has made in some form since the early 1990s. Child-care supports became a point of national debate during pandemic lockdowns as parents with young children struggled to juggle work and family responsibilities.

In total, the government proposes spending as much as $30-billion over the next five years, and $8.3-billion each year after that, to bring child-care fees down to a $10-a-day average by 2026. The proposal, which requires negotiation with the provinces and territories, would split subsidies evenly with those governments and targets a 50-per-cent reduction in average child-care fees by the end of 2022.

The federal program is largely modelled on Quebec’s subsidized child-care system, implemented in the 1990s in an effort to increase women’s access to the labour market. Since then, labour participation rates for women aged 25 to 54 in the province have grown to exceed the national average by four percentage points.

Program extensions

The federal government is planning to extend many of its signature pandemic relief programs to help businesses and workers. As part of that plan, the budget details the phase-out of the Canada Emergency Wage Subsidy (CEWS), a program that has been heavily criticized for its largesse. Ottawa proposes to extend the CEWS until September – it is currently set to expire in June – at an added cost of $10.1-billion. But starting July 4, the subsidy rate will fall from its current maximum weekly benefit of $847 per employee to $226 in the final eligibility period. Only employers with revenue declines of more than 10 per cent will qualify as of July 4.

Furthermore, publicly listed corporations would be required to repay wage subsidies received this summer if their executive compensation in 2021 is higher than in 2019.

Separately, the federal government proposes to extend the Canada Emergency Rent Subsidy and Lockdown Support programs – extra rent support when companies are seriously affected by public-health measures – until late September. The budget also plans to extend coverage for the underemployed in the Canada Recovery Benefit by 12 weeks, to a total of 50 weeks. The first four of those additional weeks would be paid at the usual $500 weekly before tax, then decline to $300 a week for the remaining eight weeks.

New COVID-19 supports

Beyond continuing COVID-19 economic stimulus, the budget also outlines a series of pandemic-related health and social supports.

The government proposes spending $3-billion over the next five years on Canada’s hard-hit long-term care system. The funds would go to “ensuring standards for long-term care are applied and permanent changes are made,” the budget document says.

The budget also proposes spending $257-million over the next five years on mental-health services, another area that has come under heavy scrutiny during the pandemic. Those funds would go to developing new national mental-health standards, setting up services for racialized communities and those hardest hit by COVID-19 and for trauma and post-traumatic stress disorder programs.

The government also plans to allocate $375-million to Global Affairs Canada over the next year to fund Canada’s international COVID-19 response.

Hiring program

Ottawa is trying to jump-start the jobs recovery with a new program that offsets a portion of employers’ labour costs. The Canada Recovery Hiring Program (CRHP) would run from June 6 to Nov. 20 and cover as much as 50 per cent of pay increments to workers, either through higher wages, more hours or new hires. The program is estimated to cost $595-million.

The CRHP is designed to work in conjunction with the CEWS. Their qualifying periods overlap, while an employer’s revenue declines – which are used to determine eligibility, along with subsidy rates in the CEWS – are calculated in the same way. Eligible employers would receive whichever subsidy is greater in value. Subsidy rates in the hiring program are held at 50 per cent for the first three qualifying periods, eventually declining to 20 per cent by the sixth and final period.

The labour market has mostly recovered from the pandemic. The number of employed Canadians is down by roughly 300,000, or 1.5 per cent, from prepandemic levels.

At this point, the damage is largely confined to a handful of sectors – such as hospitality – that are curtailed by public-health measures, while employment has increased in many white-collar industries.

Housing and real estate

As in past budgets, the federal government has proposed a series of measures on housing, although they are unlikely to curb the torrid activity and speculation of the past year.

Ottawa intends to implement an annual 1-per-cent tax on the value of residential real estate that is vacant or underused and not owned by Canadians or permanent residents. This would take effect Jan. 1, 2022. The government has signalled such a vacancy tax for years, and it follows foreign-buyers’ taxes in British Columbia and Ontario. The move is estimated to bring in $700-million in revenue over four years, starting in 2022-23.

The budget also proposes to send an extra $2.5-billion to the Canada Mortgage and Housing Corp. for various initiatives, including the construction of affordable housing units, and plans to reallocate $1.3-billion for such things as the conversion of vacant offices into housing.

However, the budget was just as notable for what wasn’t there: new measures aimed directly at cooling the real estate market. Sales and prices have been rising at historic rates, leading several Canadian banks to call for action from Ottawa. It appears those calls went unheeded.

Life sciences

The budget earmarks $916-million in new spending over the next five years for the life sciences and bio-manufacturing sector. The funding will go to organizations such as postsecondary institutions, hospitals and grants councils to support new life-sciences companies, stem cell researchers and vaccine developers. “Raising the bar on our domestic life sciences and bio-manufacturing capacity will provide Canada with a more secure pipeline for vaccines in the future,” the budget document reads.

In recent months, the federal government has been criticized for its decision to source its COVID-19 vaccine supply from other countries’ production facilities. Though efforts are now in place to ramp up domestic production, the first vaccines from local producers aren’t expected until the end of the year – months after the government projects it will have enough supply to vaccinate all Canadians.

Environmental initiatives

In total, the budget allocates $8.75-billion over the next five years – spread out over 43 different programs – aimed at developing green technologies, addressing the affects of climate change and preserving the environment.

The Net Zero Accelerator, a fund announced in December dedicated to “decarbonizing” large emitters such as aluminum and cement producers and the aerospace and automobile sectors, would receive $5-billion over the next seven years.

Another initiative would grant corporations and small businesses manufacturing zero-emission technologies a 50-per-cent reduction in their income tax rates.

Climate Action Incentive payments – tax credits worth hundreds of dollars that were paid out for the 2020 tax year to residents of Alberta, Saskatchewan, Manitoba and Ontario – would move from an annual credit to quarterly payments in 2022.

The CMHC would receive $779-million over the next five years to set up a loan program aimed at helping homeowners retrofit their homes to reduce energy bills. The loans would be worth as much as $40,000.

The federal government also proposes a federal “green bond” to subsidize future green initiatives. The budget says the government will target $5-billion for its first issuance.

Other programs would invest in carbon capture and storage research, strengthening greenhouse gas emission regulations, the development of new green technology standards and ongoing nature conservation efforts.

Addressing data gaps

Over the next five years, the budget allocates $250-million for Statistics Canada, which would work to collect new data on a vast range of topics.

Statistics Canada would use these funds to implement a “Disaggregated Data Action Plan” to gather diversity data and business condition statistics and quantify government efforts to address systemic racism and improve data collection on the justice system.

Data gaps, and the policy issues they lead to, have been the focus of several recent Globe and Mail investigations, including a series in 2019 on Canada’s overall lack of data collection on subjects ranging from race to the economy. Earlier this year, The Globe also began publishing the results of a years-long investigation into the “power gap,” or inequalities in pay and position, between men and women in the public and private sectors.

Along with its investments in data collection, the federal government also proposes the creation of a new office similar to the extant federal information and privacy commissioners. A new “data commissioner” would “inform government and business approaches to data-driven issues to help protect people’s personal data and to encourage innovation in the digital marketplace,” the budget says. The office would receive $17.6-million over five years and $3.4-million each year after that.

Old Age Security increase for seniors over 75

Ottawa is improving benefits for seniors via Old Age Security. The budget proposes a one-time payment of $500 this August to OAS pensioners who will be 75 or older as of June, 2022. Furthermore, it would introduce legislation to boost regular OAS payments for those 75 or older by 10 per cent “on an ongoing basis” as of July, 2022.

The federal government estimates the second measure would raise benefits for about 3.3 million seniors, with an added $766 going to full pensioners in the first year. “This would give seniors more financial security later in life, particularly at the time when they face increased care expenses and greater risk of running out of savings,” the budget document reads.

During the last election campaign, Prime Minister Justin Trudeau pledged a 10-per-cent hike to OAS payments that would have taken effect in July, 2020. Through both measures announced Monday, the government would be extending an additional $12-billion in support to seniors over five years. (OAS has a clawback mechanism tied to seniors’ incomes.)

Indigenous communities

The federal government plans to set aside roughly $18-billion in new funds over the next five years for Indigenous communities, making that a major theme of the 2021 budget.

The funds are spread around dozens of new initiatives, spanning from education and entrepreneurship to improving health outcomes and recovering from COVID-19. About $6-billion over five years is set aside for infrastructure; of that amount, roughly three-quarters will go to the Indigenous Community Infrastructure Fund, which supports “immediate demands, as prioritized by Indigenous partners, with shovel-ready infrastructure projects,” the budget says. This funding would also aim to lower the number of boil-water advisories in First Nations.

The federal government also proposed $2.2-billion in added funding over five years aimed at ending the crisis of missing and murdered Indigenous women and girls.

Innovation and venture capital

The budget includes extensions and expansions of past programs, including funding for venture capital, superclusters, artificial intelligence, genomics and access to intellectual property expertise for fast-growing, innovative companies. The government has also finally put its stamp on a strategy to support quantum technologies, years after the country became a global leader in the area. The budget includes $1-billion of committed capital to health sciences and biomanufacturing companies through the Strategic Innovation Fund and a $50-million set-aside for biotech firms in the Venture Capital Catalyst Initiative. But after years of pushing government to use its vast procurement capabilities to buy more from Canadian firms – a big driver of economic growth in the U.S. – domestic innovators must settle for a modest five-year, $84.7-million commitment to the federal procurement system earmarked specifically to increase diversity and empower Black and Indigenous-owned and managed businesses. Small businesses are also getting billions of dollars of help to adopt technology.

Other initiatives

• Vape tax: The federal budget announces the government’s intention to tax vaping products such as e-cigarettes, though it does not list specific regulations or rates.
• Credit-card transaction fees: Due to the pandemic, small and medium-sized businesses have seen an uptick in credit-card use – and, as a result, higher transaction fees. The budget signals the government’s intention to negotiate lower credit-card transaction and interchange fees, though details will be scant until the fall economic statement.
• Digital services tax: In 2020, the federal government signalled its intention to tax digital services. The budget proposes a 3-per-cent tax, effective Jan. 1, 2022, on digital services that “rely on data and content contributions from Canadian users” and would apply to businesses with gross revenue of $750-million or more. The government estimates this tax would raise $3.4-billion in revenue over the next five years.
• Opioid crisis: The budget proposes an additional $116-million in funding over two years to support harm reduction, treatment and community prevention programs.
• Guns: To implement already announced gun violence, arms control and buyback legislation, the government proposes $312-million over five years for the Royal Canadian Mounted Police, Canada Border Services Agency and Public Safety Canada.
• Access to information funding: To buttress the federal government’s strained access to information system, the Treasury Board Secretariat would receive an additional $12.8-million over five years.
• Minimum wage: According to the budget, 26,000 workers in federally regulated private-sector jobs earn less than $15 an hour. The government proposes raising the federal minimum wage to that level.

With a report from Sean Silcoff

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