Feds forecast declining deficit, billions more committed to COVID-19 fight

Feds project a $144.5 billion deficit for 2021-22

COVID-19 dominated the federal government’s fiscal and economic update on Tuesday, and it also put Finance Minister Chrystia Freeland on the sidelines. Freeland delivered her update in isolation after two staff members tested positive for the virus.

The Liberals projected a $144.5 billion deficit for 2021-22, which is actually $11 billion less than had been predicted thanks to a slower than expected response to COVID-19 programs in the summer and fall and higher tax revenues.

The government will spend an extra $8.1 billion in the fight against COVID-19.

Those big-ticket promises Justin Trudeau promised on the campaign trail have been moved to the back burner, at least until the spring budget, like health transfer hikes, climate change initiatives and new housing supports.

The economic update is committing $7.3 billion to procure boosters this year and in the coming years, if needed. Ottawa will also spend $2 billion to buy new COVID-19 treatments like antiviral drugs made by Pfizer and Merck.

The Trudeau government is also promising to spend $1.7 billion to buy 180 million more rapid tests for provinces and territories. Ottawa wants the tests to be distributed to workplaces, schools and individual Canadians free of charge.


  • Vaccines for Children and Free Booster ShotsNearly 3 million Pfizer pediatric doses have been delivered to all provinces and territories, which is enough for all eligible children to receive their first dose.The government is also ensuring that third doses and booster shots are free for all Canadians, as was the case with first and second doses. Canada’s existing agreements with Pfizer and Moderna are such that there are enough vaccine doses for all eligible Canadians to receive first, second, and third doses.
  • Paid Sick Leave for WorkersOn November 26, 2021, the government introduced Bill C-3 to amend the Canada Labour Code to provide 10 days of paid sick leave per year to workers in the federally regulated private sector, covering almost one million workers. The government will consult with federally regulated employers and workers on implementation of this legislation.The government will also convene provinces, territories, and other interested stakeholders to develop a national action plan to legislate paid sick leave across the country, while respecting provincial-territorial jurisdiction and clearly recognizing the unique needs of small business owners.
  • Clean and Healthy Indoor Air by Improving VentilationProper ventilation makes indoor air healthier and safer, helping reduce the risk of COVID-19 transmission. The government is proposing a refundable Small Businesses Air Quality Improvement Tax Credit of 25 per cent on eligible air quality improvement expenses incurred by small businesses to make it more affordable for them to invest in safer and healthier ventilation and air filtration.To improve ventilation in schools, the government proposes to provide up to an additional $100 million to provinces and territories through the existing Safe Return to Class Fund, as well as $10 million to First Nations for on-reserve schools.The government is also providing an additional $70 million to support ventilation projects in public and community buildings like hospitals, libraries, and community centres.
  • Help for Guaranteed Income Supplement Recipients and Students Affected by CERB PaymentsThe government proposes to provide up to $742.4 million for one-time payments to alleviate the financial hardship of GIS and Allowance recipients who received the Canada Emergency Response Benefit (CERB) or the Canada Recovery Benefit in 2020. The government will continue to investigate ways to limit potential benefit reductions for vulnerable seniors who received emergency and recovery benefits.The government also proposes to provide debt relief to students who received, but were ineligible for, the CERB but were eligible for the Canada Emergency Student Benefit (CESB) by allowing their CERB-related debt to be offset by the amount they would have received from CESB during the same benefit period. The fiscal impact of this measure is estimated at $67.9 million.
  • Enhancing the Home Office Expense DeductionMillions of Canadians were required to work from home during the pandemic. To help support this transition to working from home, in 2020 the government permitted workers to use a temporary flat rate method to calculate their deduction for home office expenses. As workplaces around the country continue to grapple with the return to the office, many Canadians continue to work from home for all or part of their jobs.To continue to support Canadians working from home due to the pandemic, the government will extend the simplified rules for deducting home office expenses and increase the temporary flat rate to $500 annually. These rules will apply to the 2021 and 2022 tax years.
  • Extending the Canada Recovery Caregiving Benefit and the Canada Recovery Sickness BenefitThe government has introduced legislation to extend the caregiving and sickness benefit until May 7, 2022, and increase the maximum duration of benefits by two weeks. This would extend the caregiving benefit from 42 weeks to 44 weeks and the sickness benefit from four weeks to six weeks. It is estimated that the proposed extension of the Canada Recovery Caregiving Benefit and the Canada Recovery Sickness Benefit will cost $2.1 billion over 2021-22 and the first months of 2022-23.
  • Extending the Canada Recovery Hiring ProgramIn order for our economy to recover and grow, we need to make sure to support the creation of good jobs in sectors across the economy. In Budget 2021, the federal government created the Canada Recovery Hiring Program to do just that. By extending the Canada Recovery Hiring Program, the government can encourage employers to hire back workers and increase workers’ hours and wages. On November 24, 2021, the government introduced the necessary legislation to extend the Canada Recovery Hiring Program until May 7, 2022, for eligible employers with current revenue losses above 10 per cent, and to increase the subsidy rate to 50 per cent.
  • Targeting Supports for Businesses Affected by the Pandemic
    • Support for Tourism and Hospitality BusinessesThe Tourism and Hospitality Recovery Program would provide support through wage and rent subsidies to organizations in the tourism and hospitality sectors such as hotels, tour operators, travel agencies, restaurants and organizations that plan and host festivals or live performances, with a subsidy rate of up to 75 per cent.
    • Support for Hard-hit Businesses in All SectorsThe Hardest-Hit Business Recovery Program would provide support through wage and rent subsidies to organizations that have faced deep losses, with a subsidy rate of up to 50 per cent.
    • Support for Businesses Facing Pandemic LockdownsThe Local Lockdown Program would provide organizations that face new local COVID-19-related lockdowns with up to the maximum amount available through the wage and rent subsidy programs.
  • Relieving Supply Chain CongestionSince the beginning of the pandemic, supply chain disruptions around the world have made it harder for Canadians and businesses to get the products and supplies they need, and in many cases are contributing to rising prices. The recent devastating flooding in British Columbia has only exacerbated these pressures.To help strengthen supply chains and address bottlenecks, in 2021-22, the government will launch a new, targeted call for proposals under the National Trade Corridors Fund to assist Canadian ports with the acquisition of cargo storage capacity and other measures to relieve supply chain congestion. The Fund will dedicate up to $50 million to support eligible priority projects. Further details on the targeted call for proposals will be announced in the coming weeks.