Federal budget to commit more than $2B for child care, deficit not to exceed $400B: source

(Note: This is an earlier story posted before the budget was tabled. Read CBC News' updated coverage of the budget here.)

Finance Minister Chrystia Freeland will deliver the Liberal government's first budget in two years on Monday, laying out more than $2 billion for a national child-care program while keeping the federal deficit for the past year under the $400 billion mark, CBC News has learned.

A senior government source who spoke to CBC News Sunday — on the condition they not be named because they are not authorized to speak publicly about the subject — said unlike the way some programs have been announced in past budgets, the forthcoming child-care announcement will not be about striking expert panels, undertaking further study or be entirely subject to negotiations with the provinces.

The initial investment will be in excess of the $2 billion a report by the federal finance committee recently said should be the starting point of any national child-care program, and will be enough to lay the foundations of a full-scale national system that puts both affordability and quality at its start.

WATCH | Finance Minister Chrystia Freeland delivers 2021 budget speech

The source said the program will be the centrepiece of the budget and will be crafted to help women quickly, which means Canadians should expect to see something tangible in the next year to 18 months.

The child-care investment plays into the federal government's three key budget components, which include introducing measures that address critical needs in the short, medium and long term. 

To deal with immediate concerns, the source said, the federal budget will acknowledge that pandemic financial supports are still needed and will not be cut off as the crisis drags on with the worsening third wave. 

That information is roughly in line with reporting by the Toronto Star earlier Sunday that said Freeland will roll out a $12 billion extension to the Canada Emergency Wage Subsidy (CEWS) as well as the Canada Emergency Rent Subsidy and lockdown support — key programs that have helped keep small businesses afloat over the last year. 

The Star also said that all of the "main pandemic support programs" will be extended until the fall. 

Targeted supports coming, source says

The second component of the budget, the senior government source said, will include efforts targeted at supporting women, low-wage workers, students and those in essential jobs as the economy comes back.  

Child care will be a big part of that, the source said, as will assistance targeted at small businesses.

As federal pandemic-related financial supports eventually begin winding down, they will be transitioned into something that is more targeted, the source told CBC News.

That information dovetails with reporting from The Toronto Star, which said Sunday the federal government intends to introduce a new program called the Canada Recovery Hiring Program. 

It's important for us to invest in rebuilding an economy that's still 300,000 jobs short of where we were before the pandemic.- Environment Minister Jonathan Wilkinson

Under the program, the Star reported, companies that have relied on the CEWS would instead be able to access up to $1,100 for each four-week period of a new employee's term. 

The third component of the budget will be focused on longer-term efforts that help reduce the deficit and set the stage for a sustainable recovery that addresses both climate change and the social inequalities laid bare by the pandemic. 

"We want to give people the confidence that they can make decisions now so that they're ready when the economy comes back," the government source said.

The size of the deficit

The $70 to $100 billion the federal government said it will use to help stimulate the economy will not all be allocated in Monday's budget but general direction of where that money is going will be included.

The federal government has faced criticism for the stimulus program it outlined in the fall economic update unveiled in November as being unnecessary in the face of what many expect to be a strong economic rebound as pent-up Canadians prepare to splash out once the pandemic peters away. 

"While temporary stimulus of this magnitude would likely provide a significant boost to the Canadian economy, it would result in materially larger budgetary deficits and higher federal debt in the medium term," a recent report by the Parliamentary Budget Officer (PBO) said.

The size of the deficit will likely be targeted by the Conservatives.

"We need a plan to get back to fiscal balance," said Conservative Leader Erin O'Toole before the budget was tabled.

"The Conservatives have a plan to do that over the next decades, so we don't burden or children and grandchildren with out-of-control debts. That's what seems to be Mr. Trudeau's intention. We'll see if there's any sort of plan for balance today."

WATCH | Opposition leaders react to federal budget

That opinion was also expressed by the shadow budget put out by the C.D. Howe Institute, which said "fiscal stability" would be "jeopardized" by spending up to $100 billion on stimulus.

Despite that criticism, Environment Minister Jonathan Wilkinson told CBC chief political correspondent Rosemary Barton on Sunday that financial supports rolled out in 2008-09 were rolled back too quickly and that organizations such as the International Monetary Fund have warned Canada not to move away from investing in jobs and growth if it wants to get the economy fully firing again. 

"Our view is aligned with our European colleagues which is; it's important for us to invest in rebuilding an economy that's still 300,000 jobs short of where we were before the pandemic," he said on Rosemary Barton Live. 

"Our intention is to move forward, to invest for jobs and growth, to rebuild this economy and ensure that Canada will be strong and prosperous as we move forward."

The senior government source also said that the expected deficit for the past year will not exceed $400 billion and may be slightly lower than expected but refused to provide an exact figure. 

The PBO estimated the deficit for the 2020-21 fiscal year stands at $363.4 billion, without including any of the stimulus spending. The C.D. Howe Institute, which also does not include stimulus spending, puts that number at $388.7 billion.

The fall economic statement put the deficit for the preceding year at $381.6 billion. 

Regardless of the exact spending totals for the past year, bringing the federal government's books back into balance will take time, and the source said Canadians should not expect to see major changes to the tax code — including the introduction of a wealth tax — geared toward paying that money back just yet.

Tax tweaks

Reuters reported late Sunday that there will, however, be some tax news in the budget — including the imposition of a sales tax for online platforms and e-commerce warehouses starting from July and a digital services tax on big web companies starting from Jan. 1, 2022.

Online platforms include foreign-based vendors with no physical presence in Canada that sell products such as mobile apps and online video gaming. Both measures were originally promised last year.

Reuters also reported that the budget will contain a tax on new cars and private aircraft valued at more than $100,000 and boats worth over $250,000. RVs and snowmobiles would be exempt.

The government is also planning to tax vacant residential property owned by non-resident, non-Canadian owners from Jan. 1, 2022, sources told Reuters.

WATCH | Federal budget to include spending for national child-care program:

NDP Leader Jagmeet Singh said he will continue to push the government on issues like paid sick leave, universal child-care and pharmacare, but signalled Monday morning that his party would support the budget, avoiding a snap election while parts of the country struggle under the weight of a third wave of COVID-19.

"This would be unsafe and unfair," he said. "I'm going to be responsible and make sure that I'm making a decision that does not in any way jeopardize the health of Canadians. So we are not interested in triggering an election, we're interested in fighting for the help that people need."

You can watch full episodes of Rosemary Barton Live on CBC Gem, the CBC's streaming service.