Federal budget expected to bet on child care, green economy to drive the recovery

The stakesare sky-high for the Trudeau government'sApril 19budget itsfirst budget in two years. Large portionsof the country are suffering through adeadly third waveof COVID-19, resulting in renewed lockdowns,stay-at-home orders and more damage to theeconomy.

Senior government sources tell CBC News thebudget will include items that balance pandemic measureswith efforts to setthe stage for the post-pandemiceconomic recovery andclues to the budget's contents can befound inlast fall's speech from the throne andthe Fall Economic Statement (FES).

"We've never been so transparent about our spending priorities and our fiscal track," said one senior government official familiar with this year's budget process. "It's all there in the throne speech and FES."

Sources say the budget will presenta full accounting of pandemic program spending to date, including the cost of promised extensions of several benefits the wage subsidy, therents subsidy and the recovery, sickness and caregiving benefits. Some business groups have pressed for further extensions and they will be looking to see if their demands are beingmet.

But many of those pandemic-fighting measuresare already in play. Much of the throne speech's "roadmap" is aboutwhat comes next. The FES committed $70 to $100 billion over three years to economic stimulus.

Child care andthe 'she-cession'

Sources say one safe assumption about this year's budget is that it will includemoney to create a national early learning and child care system because the governmentpromised it in the throne speech andbecause itbelieves there's a strong economic argument to justify the spending.

Morequality child care spaces means more parents especially women,who typically shoulder the largest share of child care responsibilities can enter or re-enterthe workforce. Sources say the government sees it as a measure that eventuallywill pay for itself through increased productivity resulting from having more womenin the workforce.

"This is the first budget of Canada's first-ever female finance minister in the first self-declared feminist government amidst the first ever global she-cession. There's an opportunity here for a new narrative to be set out and a new way of doing things to be set out," said economist Armine Yalnizyan, who sits onthe government'stask force on women in the economy.

Child care is a provincial responsibility which means there's a risk thatany new federal initiative could gethung up on squabbling between Ottawa and the provinces.One senior government official saidit comes down to who has the money.

"The feds have the spending power. If we set out the terms and the money, the provinces who want to be early movers on this will come on board. Those that don't will have to reckon with their electorate."

Tackling inequality

The pandemic has exposed and aggravatedpoints of inequalityin Canadian society and the economy. The budget is expected to offernew moneyfor skillstrainingfor young people, Indigenous people, women andracialized Canadians.

The budget is alsolikely to earmark fundsfor thepandemic-afflictedlong term care sectorbeyond the $1 billion in the FES, for increased access to mental health supports and forfurther investments in affordable housing.

The federal government has made a number of funding announcements alreadyunder its National Housing Strategy but with affordable housing in short supply and many renters being pushed to the brink of eviction by the pandemic, the budget could put more on the table.

Andwith housing bubbles swelling rapidlyin some cities, the budget also offers anopportunity for Ottawato follow through on the foreign home buyer tax it mentioned in the FES.

The government has acknowledged that the employment insurance system needs to be modernized to include the self-employed and those who work in the gig economy. Some observers say they hope that means an overhaul is coming.

"We know that the EI program is just too weak," said former parliamentary budget officer Kevin Page, now the president and CEO of the Institute of Fiscal Studies and Democracy at the University of Ottawa. "I do expect that there's going to be at least options on the table for Parliament to debate about expanding the program."

Small businesses hit hard by serial shutdownsshould see a plan in the budgetfor their post-pandemic survival. Sources alsohint the budget might offerhelptothe suffering arts, entertainment and tourism industries.

For large industries that have suffered deep losses and have called on Ottawa to help such as the airline sectorthe budget might atleast set aside a cashfigure,even ifa deal has not yetbeen announced.

Some stakeholders argue the government needs to direct spending towardmeasures todrivelong term growth to ensure the rebound is not solely dependent on consumption spending, especially given thepent-up consumer demand that will burst forth once the pandemic is over.

"That's the challenge for Canada, that for a long time we have not been able to sustain over two percent growth," said Robert Asselin, a senior vice president of the Business Council of Canada and abudget director under former finance minister Bill Morneau.

"I'm just worried if we focus too much on the short term and social spending, that we'll just have a bigger deficit and the economy won't be positioned as it could be for the future."

Asselin said Canada has to follow the lead ofother developed countries, such asthe U.S. and some European nations, by investing billions of dollarsin science,R&Dand broadband infrastructure.

Sources say that when Prime Minister Justin Trudeau, Finance Minister Chrystia Freelandand others in government talk about "building back better," they mean that stimulus money will be aimed atbuildinga greener, more sustainable economy. So look for investments inbuildingcharging stations for electric vehicles,retrofitting old-stock commercial buildings and homes and helpingnatural resourceindustriestransition to cleaner energy.

Through investments ingreening homes and buildings, the government hopes tocreatea domestic retrofit industry and supply chain for products suchas energy-efficient windows and doors.

What mightbe left out

In the throne speech, the Liberals said they remained committed to a national, universal pharmacare system. It's not clear that commitmentmeans money in the budget to move the projectforward.

National pharmacare isa key NDPdemand but some budget watchers believe the pandemic might further delay the initiative because it would require long term structural spending and negotiations with the provinces some of which are opposed tothe very idea of a national pharmacare program.

What the provinces do agree on is their demandfor alarge, ongoing and predictable increase to the Canada Health Transfer. Sources say they'll likely be disappointed. Trudeau has said that whilehe believes the federal government should pay a greater portion of health care costs,it's a discussion to have after the pandemic is over.

"I definitely am concerned about them using the pandemic as the excuse not to address the shortfall in the Canada Health Transfer," said Saskatchewan Finance Minister Donna Harpauer. "But honestly, I will be surprised if it's in the budget."

Some provincial leaders say they fear they'll be stonewalled on health care funding while being saddledwith federal policypriorities they don't share, ormoney for things they don't think theyneed.

"I think we need to raise the standards of long-term care throughout the country, but I don't want to build a whole bunch more nursing homes," said New Brunswick Premier Blaine Higgs. "Our goal is to keep seniors in their home as long as we possibly can and to provide better care for people when and where they need it."

Critics who want a plan to get back to a balanced budget are likely to come away disappointed as well. The budget is expected to projectadownward trajectory for the deficit which as of last November was on track to surpass $381 billion but is not expected to proposea timeline for eliminating the deficit.

Freeland has promised to use "guardrails," such as labour force numbers, to help the government decide when to turn offthe stimulus taps, but has not said where that cutoff point would be.