Record deficit of 343 billion to Ottawa

Déficit record de 343 milliards à Ottawa

Photo: Adrian Wyld Archives The canadian Press
Bill Morneau

The government of Justin Trudeau has devoted no less than 212 billion in direct support measures to help Canadians and businesses in the country to face the pandemic. Result : the deficit of the current year will reach a record $ 343 billion $.

The economic update presented on Wednesday by the minister of Finance Bill Morneau confirmed that the government has spent even more money than what had been evaluated the experts.

Without surprise, these are the programs Providing canadian emergency (PKU) — 73,1 billion $ — and that of the wage subsidy — 82,3 billion $ — that cost the most expensive to the federal treasury. These two measures of support will cost 155,4 billion $ this year, on the 181,1 billion $ that will pay the city of Ottawa in support to individuals. The government argues that they have helped to mitigate the consequences of the economic crisis, which makes that 5.5 million Canadians have lost their jobs this spring, or have seen their working hours reduced. This represents approximately 30 % of the active population in the country. The PCU and the wage subsidy were extended last month : the PCU 16 to 24 weeks, to extend until the end of August for some, and the wage subsidy for 12 weeks to 24 weeks, also until the end of August.

In addition, in particular to the costs of the PCU and of the wage subsidy amounts granted in support of business — 21.3 billion $ — the same as those spent in health. The government has also waived the $ 85 billion $ by postponing payments of tax, income tax and customs duties. And the federal government has made available 86,5 billion $ in liquidity through a program of business credit and credit support to the agricultural sector. The ministry of Finance figure and its economic intervention to more than $400 billion.

Record deficit

The ministry of Finance had not provided an update of the economic situation in the country since last winter.

This last projection, which date of the month of December 2019, predicted at the time a deficit of $ 28.1 billion for the year 2020-2021. The government will instead be a deficit of 343,2 billion $ for the same year. The Finance ministry believes that the evolution of the economic situation since December, has it only made back $ 81.3 billion the budgetary balance for Canada, which would have encrypted the deficit to 106,4 billion $ even before that Ottawa does not invest to support Canadians and their businesses.

The federal deficit will reach and 15.9% of gross domestic product this year, while the debt will reach 49 % of GDP. But the interest rates are at their lowest make the debt affordable, insists the government, which means that the State will save, in fact, $ 4 billion of debt charges compared to the forecasts for this winter.

The government has not ventured to make projections for the years subsequent to the year 2020-2021, referring to the economic instability that persists. “The dynamic nature of the challenge we face so that we may not make assumptions regarding a future in which we do not know the nature today “, argued the minister Morneau in the press conference, shortly before it submitted its update to the Commons.

 

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It is, however, committed to introducing a budget or a new economic update this fall, when the government will have “more information” on the state of the economy.

The wage subsidy extended

By then, Mr. Morneau has promised to reveal soon the new terms and conditions for the wage subsidy program. Justin Trudeau announced in June that it would be extended for a further three months, beyond the first three months. The minister has since conducted consultations and would now like to change it so that more businesses take advantage of them to remunerate their employees. The federal program pays up to 75 % of the salary of employees of companies that are using them, up to a maximum of $ 847 per week. Half a million firms have benefited so far, representing a cost of 18 billion $. Ottawa plans to spend 82 billion dollars in total under the new rules, which will be revealed shortly.

The PCU — which offers $ 2000 per month to workers who have lost their jobs because of the pandemic has so far been much more popular than the wage subsidy. Contrary to what is expected by the federal government. “We need to reduce some of the [brake] to the economic growth,” acknowledged the minister, without saying more.

Mr. Morneau has not revealed what it plans about the fate of the PCU, which must end at the end of August. The minister would like the workers are moving away from the PCU to fall back on the wage subsidy, and that the employment insurance program to take over for those who will still not find a job despite the slow economic recovery. One in four employees in the private sector is currently paid through the wage subsidy. The minister hopes that they will be more numerous due to the adjustment of the program.

Mr. Morneau has also ensured that it did not intend to increase taxes to straighten out the finances. “We believe that raising taxes would be exactly the wrong response,” he insisted.

The Trudeau government was presenting its budget to the year 2020 on march 30. But two weeks ago, Canada came to be confined, and the Parliament closed. The exercise has therefore been postponed. Since then, the prime minister Justin Trudeau forged an economic update would be unrealistic given the continuing instability of the global economy.

Mr. Trudeau, however, has eventually bowed to pressure from conservatives and bloquistes, as well as some economists who rejected the argument of the instability held up by the government. The opposition parties have, however, criticised the government for presenting his economic update in the middle of July.

Strategic debate for the following

Even before they know the size of the record deficit of Ottawa, the opposition parties have shared their requests on the strategy that the government should adopt to promote the economic recovery over the next few months.

The conservative Party and the Bloc québécois are demanding that Ottawa tightens Delivery canadian emergency (PKU) to encourage Canadians to return to work. The providers of ECPS can currently earn 1000 $ revenue per month, because beyond this threshold they lose all their benefit. The conservatives and the bloquistes propose to allow the retention of a $ 0.50 of federal benefit, for each dollar earned. A worker could earn up to $ 5000 per month before you lose entirely the PCU, up from $ 1,000 currently.

In the camp opposite, the New democratic Party would rather that Ottawa may ease the access to the wage subsidy – which helps firms pay up to 75 % of the salary of their employees, up to a maximum of $ 847 per week. The NDP are the government help people with disabilities. A single payment of $ 600 had been promised, the last month, but the minority government has not managed to make it adopt to the Common. Rather than reducing federal assistance to citizens affected by the pandemic, the new democrats invite Ottawa to continue to support, by funding these measures in combating the use of tax havens and imposing a special tax for the wealthy.

The head outbound on the green Party, Elizabeth May, was also paid to the defence for an extension of federal spending. As well as the size of the deficit is high, the government has accumulated to respond to a pandemic, she argued. “These expenditures are essential and it is crucial that we continue to spend. If we listen to the conservatives and that we adopt a program of austerity now, it would plunge the country into great depression, ” said Ms. May, prior to the submission of the update to the minister Morneau.

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