On December 14, the Deputy Prime Minister and Minister of Finance, Chrystia Freeland, delivered the 2021 Economic and Fiscal Update. The update provides a review of the state of the government’s finances and contains some new spending commitments. There were few details on specific investments, and no clear indicator of the government’s direction on health care beyond commitments to respond to the current pandemic.
Today’s update was focused predominantly on illustrating how the federal government will continue to fight the pandemic as Omicron cases surge across the country. This includes funding vaccine access with free boosters; supporting vaccine mandates on federally regulated air, train, and ship travel; supporting proof of vaccination systems; expanding rapid tests and investing in COVID-19 therapeutics procurement.
The Deputy Prime Minister confirmed that Canada’s fiscal state is beginning to improve and the deficit will be lower than expected at $144.5 billion. Largely due to significant spending in response to the COVID-19 pandemic, the federal government’s capacity to undertake new large-scale spending is questionable. The deficit may limit the future ability of the government to spend ambitiously, as pandemic support spending is reigned in from its peak in 2020. These constraints are of particular concern for health care, where the pandemic exposed the weaknesses in the system, leading to renewed calls for more robust federal transfers to the provinces and territories.
Today’s update did not shed light on the government’s plans for Budget 2022, or on how they will prioritize platform commitments moving forward. The Liberals made several high profile health care related commitments during the election, including clearing surgical backlogs, creating a new mental health transfer, further long-term care investments and creating standards for long-term care, and addressing national pharmacare. None of these commitments were highlighted during today’s update.
There is limited new funding announced as part of the Economic and Fiscal Update but the federal government has earmarked funds to continue supporting the response to the COVID-19 pandemic.
- The federal government will spend $1.7 billion to supply provinces and territories with rapid tests and will provide assistance with distribution, including through expanded school and workplace testing programs.
To support the procurement of COVID-19 therapeutics and associated logistics and operational costs, the government proposes to provide up to $2 billion over two years, starting in 2021-22, to the Public Health Agency of Canada.
The government also recommitted to protecting health care workers from harassment.
In addition to the COVID-19 response funding, the government is allocating funds towards the PEI Pharmacare Agreement in the fiscal framework, with $3 million in 2021-22, and an additional $33 million over the next three fiscal years.
The update also continues previously announced transfers to the provinces for both mental health and home care, rising to $1.5 billion in 2021-2022, and then stabilizing at $1.2 billion per year thereafter. The Liberal platform commitment to create a new Canada Mental Health Transfer would be in addition to this funding when introduced.
The Economic and Fiscal Update was light on details regarding the life sciences sector and did not include any mention of future plans for a life sciences and biomanufacturing strategy. More details regarding the government’s vision for the sector will hopefully be provided in the ministerial mandate letters.
Mandate letters: These letters have yet to be released and are expected imminently, now that the Fall Economic Statement is released, committees are back to work, and Parliamentary Secretaries have been named.
Potential new legislation: The government may table more pieces of legislation prior to the holiday break to set the Parliamentary agenda once the House resumes on January 21, 2022.
Pre-budget consultations and Budget 2022: With the Standing Committee on Finance re-convened, we can anticipate that the Budget 2022 pre-consultations will resume shortly. The consultation will likely have a quick turnaround, with limited opportunity to appear before the committee given the late opening of Parliament.
Budget 2022-2023 planning: In addition to the finance committee being reconstituted, the machinery of budget development is in full swing. Officials across the government are waiting on mandate letters to begin building departmental plans, costing new programs, and developing plans of action for identified commitments. In addition to the work of the Standing Committee on Finance, the Department of Finance will also hold a pre-budget consultation.
Read the full 2021 Economic and Fiscal Update here.