This week will be the last week the House of Commons sits before the winter break.
It is frustrating, as the House of Commons only began sitting less than a month ago, on Nov. 22. The House will resume sitting Jan. 31.
Much of the work done over the past few weeks involved electing a new Speaker of House and establishing parliamentary committees, while only a limited number of government bills came before the House.
However, one important event that did occur this week was the fiscal update from the government.
What is a “fiscal update”? In the absence of a properly tabled budget, a fiscal update provides an opportunity for the government to reveal our fiscal status, as well as announce and introduce budgetary measures that were not in the previous budget.
By the numbers in the 2021/22 fiscal update, this year’s deficit is forecast to hit $144.5 billion.
While that is an incredibly large number, it is actually down from the $154.7 billion forecast in the previous budget.
On the surface there is other positive news. The update also shows the deficit declining over the next five years, reduced to $13.1 billion in 2026/27.
However, I say “on the surface” because this update contained very few of the many Liberal
election promises expected to be released in the upcoming budget in the spring of 2022.
There were also new spending measures announced in the fiscal update. In total there is COVID related spending of roughly $13 billion. That includes $3.3 billion to expand rapid tests and enact other measures such as border testing and tracking.
For British Columbia there has been $5 billion set aside to assist with clean up and rebuilding as a result of the recent flooding. There has also been $4.5 billion allocated for costs related to the Omicron variant of the Covid-19 virus and a total of $4 billion to provide support to indigenous communities.
From my perspective, there are a few areas for concern.
Much of this forecast will be significantly changed once the Liberal budget is introduced, where there will be newly announced spending measures. There may also be newly announced taxation measurers.
The challenge with any new taxation measure is, with rising inflation (currently at 4.7% in Canada), your net after tax income has less buying power. If taxes are increased, it further lowers your net income and that means many households have less money to buy basic necessities. For those on fixed incomes, inflation is very challenging.
Another challenge the fiscal update illustrates is the cost of debt servicing. The interest that we pay on our public debt for 2020/21 is $20.4 billion. By 2026/27 those interest costs are forecast to rise to $40.9 billion.
For context, the Canada Health Transfer today is $45.9 billion and is forecast to rise to $55.2 billion in 2026/27.
In other words, over the next five years the cost to service our debt is doubling and increasing at a rate faster than our health transfers are increasing.
My question this week:
Are you concerned about the rising costs of inflation?
I can be reached at [email protected] or call toll free 1-800-665-8711
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.