Former finance minister says he’ll be looking for fiscal anchor in upcoming budget

Before the pandemic struck, the federal government was committed to maintaining a low debt-to-GDP ratio as a fiscal anchor — a benchmark to serve as a theoretical cap on spending and deficits — but has since been reluctant to commit to a new one.

“There are some key things that I’m looking for,” Manley told Catherine Cullen on Power & Politics. “Will the minister establish a fiscal anchor?”

The fall fiscal update, tabled in late November, stopped short of placing guardrails on federal spending in the long term. Instead, it promised to look at indicators such as the employment rate to decide when to taper down spending.

Manley said he’s “not so excited about the fact that it’s two years” since the last budget was tabled, but acknowledged things have changed since he was finance minister.

“Budgets aren’t what they used to be because major spending announcements are made literally any time during the course of the year,” he said.

Finance Minister Chrystia Freeland announced in the House of Commons that the Liberal government will table a federal budget on April 19. 0:41

The budget is expected to provide a full accounting of all government spending through the pandemic, which has sent the deficit for the fiscal year to almost $400 billion.

It is also expected to outline the Liberals’ plan to spend between $70 billion and $100 billion over the coming years on stimulus to help the economy recover.

Ralph Goodale, another former finance minister, said the government has to decide upon the right time to deploy stimulus spending to support a post-pandemic recovery.

“We hope we are coming to the end of the emergency period,” Goodale told Power & Politics.

“But that’s one of the great challenges the minister of finance has. When is the end and where is the end?”

On Thursday, the government announced plans to provide a one-time payment of $7 billion to provinces, territories, cities and First Nations communities to help them cover the cost of health services, COVID-19 vaccination campaigns and infrastructure projects.

That funding includes a $4 billion one-time increase to the Canada Health Transfer — the federal government’s primary contribution toward the cost of delivering health services in the provinces and territories.

A ‘polite pause’

But premiers have been asking for a more permanent increase in the federal share, which would mean an increase of $28 billion for this year.

Both Manley and Goodale said the debate about health transfers likely will carry on past budget day.

Manley said the $4 billion offered by Ottawa might create a “polite pause” in the provinces’ demands, but not for long.

“Truthfully, the federal share has been falling and not surprisingly, the provinces love to point that out and ask for more,” Manley said.

Goodale added that the “discussion will be ongoing forever. That is the nature of federalism.”