Pressure to increase defense spending, NDP’s big ticket demands add to Freeland’s budget dilemma

Beyond their commitments made for NDP support, the Liberals still have to account for $50B in their own campaign commitments that were not in last fall’s economic update

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OTTAWA – Prime Minister Justin Trudeau’s deal with the NDP will now become Chrystia Freeland’s problem as she moves to find room in an already crowded budget for new spending.

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The finance minister hasn’t announced a date for the budget, but it is expected to be sometime in early April. In addition to the Liberals own priorities, she will now have to find money for a new dental care program, more funding for housing, and a big dollar request on pharmacare.

In question period, interim Conservative leader Candice Bergen said the deal would be bad for the nation’s finances.

“High tax, high spend and higher cost for everything is all that this NDP-Liberal government will be delivering for Canadians,” she said.

Freeland’s budget math will be helped by higher oil prices and a proposed surtax on big banks, which should lead to higher government revenues.

But beyond the commitments the Liberals made for NDP support, the Liberals still have to account for $50 billion in their own campaign commitments that were not in last fall’s economic update.

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Plus, Defense Minister Anita Anand has said she’s considering “aggressive options” to increase defense spending in the wake of the war in Ukraine, and would present a range of options to cabinet, including exceeding NATO’s two per cent of GPD target.

Liberal MP John Mckay said it was going to be an issue for the government as the budget took shape.

“No question there will be spending challenges and you layer onto that our security challenges. We need some pretty serious refreshment of military funding and so I don’t envy the finance minister,” he said.

Mckay said in addition to the war in Ukraine, Russia was militarizing the Arctic and launching cyber attacks, leaving Canada no choice but to increase spending on defence.

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“Everyone of us here is in this war and so we’re being forced into choices that probably this time last year we probably wouldn’t want to make,” he said.

On Tuesday, Trudeau announced a pact with the NDP that will allow the Liberals to govern until 2025. Many of the details of the 28-point deal came with little or no dollars attached — commitments to prohibit replacement workers in strikes and creating a homebuyers bill of right, for example — which will not impact the federal treasury.

But there are several big ticket items; a proposed dental care plan could cost up to $1.5 billion a year when fully phased in by 2025, according to a Parliamentary Budget Officer estimate, with additional costs to deal with a backlog of care that people have delayed.

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In the NDP-Liberal deal, the plan would be phased in, but it would start with children under 12 years of age this year.

The deal also includes a one-year extension of the rapid housing initiative, a program that allows cities to create social housing quickly, often by converting motels or purchasing apartment buildings. That program cost $1 billion in its first year, and $1.5 billion last year. There is also a proposal to add $500 for recipients of the Canada Housing Benefit, a program that the government has targeted to go to 300,000 Canadians.

I don’t envy the finance minister

In what is potentially the most expensive commitment, the Liberals agreed to work towards a national pharmacare system. The confidence and supply deal contemplates only small steps forward on that proposal, but the Parliamentary Budget Officer has estimated a full system could cost more than $19 billion.

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Asked what she expected to see in the budget, NDP MP Jenny Kwan noted the agreement between the Liberals and NDP lists out policies the two parties agreed to implement.

“I expect to see something in there to support those measures and to move things forward. And so I’m going to be looking at this budget very closely,” she said. “I hope that there’s an opportunity to continue to engage in this process, to move things further along the way. And for items that are not there, I can tell you, I can guarantee you, New Democrats will continue to hold the government to account, to continue to push forward until we get things done.”

The war in Ukraine is also putting pressure on Canada to increase its defense spending.

Canada spends about $23 billion on national defence, which amounts to 1.39 per cent of our national GDP, putting us towards the bottom of spending among NATO partners.

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The NDP have traditionally been opposed to big hikes in defense spending and their 2021 budget focused more on ensuring defense spending would create jobs in Canada.

Asked how his caucus colleagues felt about having to support a budget that included an increase in defense spending, NDP deputy leader Alexandre Boulerice said Wednesday his party still had freedom of speech on issues.

“We can oppose anything that is not a confidence vote,” he said.

Under the proposed deal, the party won’t have that freedom on the upcoming budget — like all budgets over the next four years, it will be a confidence vote.

NDP leader Jagmeet Singh said Tuesday that he did not think Canada should hit the two per cent target, but didn’t indicate he would oppose a budget that had an increase in spending.

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