2018 Federal Budget Overview
On February 27, the Federal Government tabled its 2018-19 federal budget. The budget themes focused on science and economic innovation, Indigenous services, tax benefits targeted at middle-class workers and their families, and gender equality. Beyond the continued funding of the Pan-Canadian Framework on Clean Growth and Climate Change and the introduction of the new Canadian Energy Regulator, there was not much specific to the energy sector.
Many of the new spending initiatives announced in Budget 2018 are targeted at bolstering social services. The budget has injected significant new funding into infrastructure and services for Indigenous communities, while also allocating increased spending to scientific research and facilities, and government benefits for families and the working poor.
Another key aspect of the budget was a focus on gender-based analysis in developing fiscal policy. Key proposed initiatives, amongst the many stemming from the gender analysis, include a commitment to table pay equity legislation and, beginning in June 2019, the introduction of an EI Parental Sharing Benefit – available only to parents that split their parental leave.
Science and Innovation
Budget 2018 is largely concerned with federal support for fundamental science, while positioning the importance of scientific research as a driver for innovation and the broader economy. Budget 2018 proposes spending more than $1.7 billion over five years on the federal granting councils (NSERC, CIHR, and SSHRC), research institutes, and the Canada Research Chairs program, plus another $1.3 billion over five years on investments in research infrastructure.
A new Canada Foundation for Innovation will be endowed with $763 million over five years to fund scientific research tools and facilities.
Meanwhile, $572.5 million is allocated over five years to develop and implement a Digital Research Infrastructure Strategy, with the aim of using ‘big data’ in science and innovation.
Budget 2018 provides the final details of the government’s plan to limit the financial benefits of holding passive savings in a corporation. The measures contained in the budget are much-adjusted versions of the draft changes to the taxation rules for Canadian-controlled private corporations (CCPCs) that the government originally proposed in the summer of 2017. Beginning in taxation years after 2018:
- Corporations earning more than $50,000 of passive investment income per year will see the amount of their total income that is eligible for the small business tax rate diminish by five dollars for every dollar of passive income earned above $50,000 – reaching zero dollars at $150,000 of passive income; and
- CCPCs will no longer be able to obtain refunds of taxes paid on investment income if they are also issuing dividends from income taxed at the general corporate rate.
Indigenous Services and Infrastructure
Budget 2018 allocates $5 billion in additional funding for services for Indigenous children and families, including increased spending to end boil water advisories on reserves, skills training for Indigenous peoples, and health services in Indigenous communities.
Previously announced as part of the National Housing Strategy, the Federal Government is also working with Indigenous stakeholders to improve housing in their communities. Budget 2018 outlines the parameters of that initiative, proposing an additional $600 million over three years to support housing on First Nations reserves, $400 million over 10 years to support an Inuit-led housing plan, and $500 million over 10 years to support a Métis Nation housing plan.
Over the last two budgets, the government allocated significant funding to developing and implementing the Pan-Canadian Framework on Clean Growth and Climate Change, and associated measures to reduce pollution and greenhouse gas emissions. With those programs now in place, including federal funding for building green infrastructure and incentives for renewable technologies, the environment file occupies a comparatively smaller place in budget 2018.
Budget 2018 plans for about $1 billion to be spent over five years in support of the new environmental impact assessment system and the Canadian Energy Regulator – proposals that are currently before Parliament – and to implement other federal environmental oversight mechanisms. There is also a $500 million allocation for a new $1 billion Nature Fund that will also draw on corporate, not-for-profit, and provincial partners.
Tax Benefits and Wage Protection Support for the Middle Class
The 2017 Fall Economic Statement announced a plan to bolster the Working Income Tax Benefit (WITB) by $500 million. Budget 2018 has rebranded the WITB as the Canada Workers Benefit. Increased payments under the Benefit will begin flowing in 2019. Similarly, the Canada Child Benefit, a signature policy of the Liberal Party’s 2015 platform, will be indexed to inflation beginning in July 2018.
The government is also bolstering the Wage Earner Protection Program by increasing the maximum eligible amount of insurable earnings under the Program to seven weeks from four. That measure, along with a pledge to begin consulting on stronger protections for pensions, indicate the government’s appetite to address controversy that has stemmed from several major company bankruptcies in recent years and the hardship that caused workers and retirees.