Dispatches from Ottawa: Budget 2023 key takeaways

Budget 2023 could create conditions for strong economic growth and competitiveness — but proof will be in the pudding

Finance Minister Chrystia Freeland released a 2023 fiscal plan Tuesday with large new spending commitments for green technology, health care and measures to ease cost-of-living concerns.

The additional measures – totalling $67 billion over five years – will be financed with some new targeted taxes, planned spending reductions and a larger deficit profile.

Deficits and debt

• The federal government will run larger deficits throughout the projection horizon than estimated in the November fiscal update. The deficit for the fiscal year that ends this month is projected at $43 billion, compared to the $36 billion forecast late last year. It will drop to $40.1 billion in the coming fiscal year and is projected to drop to $14 billion by 2027-28.

• The government’s finances have been hurt by downwardly revised revenue projections thanks to slower-than-expected growth. But there is a lot of new spending with the bulk of that for public health and dental care funding, as well as climate transition.

• Proceeds from spending reviews and new tax increases are projected to pull in $22 billion in additional revenue and savings over the five-year projection horizon.

• The federal debt-to-GDP ratio is projected to rise to 43.5 per cent in the fiscal year that begins next month, up from 42.4 per cent, and then slide to below 40 per cent by 2027.

• The budget assumes that federal spending will grow more slowly than the economy from 2024 – which could pose a significant risk to the fiscal track.

Green economy

• The budget allocates $18.5 billion over five years for clean electricity and decarbonization initiatives.

• The biggest items include: A 15 per cent refundable investment tax credit for clean electricity ($6.3 billion over five years;) an investment tax credit for clean hydrogen ($5.6 billion); a 30 per cent investment tax credit for clean technology manufacturing that includes processes to extract critical minerals ($4.5 billion.)

• The clean hydrogen credit will vary between 15 per cent and 40 per cent of eligible project costs, based on carbon intensity. A 15 per cent credit will also extend to equipment needed to convert hydrogen into ammonia. There will be requirements around worker wages and other labour conditions attached to the credit in order to be eligible for the highest credit.

• The government announced it will consult “on the development of a broad-based approach” for so-called carbon contracts, which would backstop the future price of carbon even if a future government decides to withdraw from the country's carbon pricing regime.

• The investment tax credit for carbon capture will be enhanced at a cost of about $500 million over five years.

• The federal government says it will “engage” with the biofuels industry to explore opportunities to grow the sector.

• The Public Sector Pension Investment Board will manage the assets of the Canada Growth Fund.

Taxes and spending review

• The government plans to reduce spending on professional services, consulting and travel by 15 per cent, generating $7.1 billion in savings over five years.

• A planned cut of three per cent in departmental spending is expected to save $7 billion over five years.

• Government plans to make changes that will limit the use of deductions, credits and other tax preferences for wealthy Canadians, generating $3 billion over five years.

• A proposed tax on stock buybacks would start Jan. 1, 2024.

• The federal government will begin to tax dividends that financial institutions receive from Canadian shares, generating $3.8 billion over five years.

• The budget recommits to the Pillar Two global minimum tax rate regime.

Health and dental care

• The government proposes $13 billion over five years to implement the new dental care plan, almost half of which had already been budgeted.

• Incremental investments in health care will total more than $20 billion over five years.

Other initiatives

• Budget 2023 allocates an additional $2.5 billion to low-income families through the GST tax credit.

• The Liberal government is promising to crack down on “junk fees” that are often tacked on and inflate the total price, citing telecom roaming charges, hidden concert fees and excessive baggage, shipping and freight fees.

• Almost $4 billion in new funding is being allocated to support investment in Indigenous communities, including $2.8 billion to fund legal settlements related to residential schools.

• Canada’s financial sector regulator, Office of the Superintendent of Financial Institutions (OSFI,) will receive greater powers to address emerging “integrity and security” threats including protection against foreign interference.

• The government is planning to lower interest rates that apply to “predatory” lending laws.

• According to the budget, Visa and Mastercard have agreed to lower credit card fees for small businesses.