Federal budget: Chrystia Freeland will have to deal with reduced room for maneuver | Federal Budget 2023

Minister Chrystia Freeland will present the federal government's 2023 budget on March 28.

The upcoming federal budget will focus on three priorities, according to sources speaking confidentially to CBC: measures to make life more affordable for Canadians, investments in the green economy and enhanced increases in health transfers.

But while new spending stemming from these priorities will require billions of dollars of investment, Finance Minister Chrystia Freeland's room to maneuver will be limited by a worsening fiscal situation caused by a global economic slowdown.

Fundamentals are strong, but the fiscal outlook is much bleaker than immediately after the COVID-19 pandemic, and bleaker than during the economic statement November, says a senior official.

Inflation has declined since hitting a record high in June, largely due to eight consecutive Bank of Canada interest rate hikes. Still, many Canadians, especially those living on low incomes, are still struggling with the rising cost of living.

The federal government can't do everything; he cannot solve the problem overnight; but people still feel like they're short on money, the senior official notes.

“Our thinking is: what can be helpful, but won't make inflation worse? So, some things will be offered to people to address their concerns and release the pressure.

— A senior Canadian government official who requested anonymity

In these circumstances, measures that have already been adopted in the past, such as the doubling of the GST tax credit and the one-time supplement for rental housing for low-income Canadians, could be announced on March 28.

Efforts to help Canada's transition to a green economy will be visible in the budget as well, if only to follow the momentum given by US President Joe Biden , which passed legislation to inject $500 billion into the manufacturing and clean technology sector in the United States.

We cannot afford to delay these investments just because of the worsening fiscal situation, another Canadian government official said. The question is not whether to do it, but how.

The passage of the US Inflation Reduction Act has had an accelerating effect on the desire of countries around the world to move towards a clean economy, says Merran Smith, founder of Clean Energy Canada, a think tank based at Simon Fraser University in British Columbia.

She shook the global balance of power and created a sense of urgency all over the world, he says. Some people even see this change in trajectory as the next industrial revolution, Professor Smith adds.

President Joe Biden's Inflation Reduction Act has been a real shocker.

Since Canada cannot afford to inject so much money, experts argue that the federal government must be strategic and focus on his strengths.

If you look at the last three budgets, significant investments have been announced for different funds, concedes Robert Asselin, senior vice-president of policy at the Business Council of Canada and director of the budget under former finance minister Bill Morneau. /p>

The problem is that they lack industry orientation, he continues.

“Canada's innovation policy is to sprinkle money all over the place, in all regions, and this has so far yielded very limited results.

—Robert Asselin, Senior Vice President of Policy at the Business Council of Canada

Early on, the government focused on electric vehicles, batteries and critical minerals. Adding the aerospace, green manufacturing and biosciences sectors, for example, would give Canada a solid plan, experts argue.

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And since this transition will require a reorientation of job skills, many observers say the budget needs a training component.

President and CEO of Canadian Manufacturers & Exporters, Dennis Darby is hoping for a formal commitment from Minister Freeland. You can buy hardware, you can buy robots, but you have to train people to use them, he illustrates.

Mr. Darby proposes making existing temporary federal job subsidy programs permanent.

The Canadian Council of Innovators welcomed some of the budget announcements from the #x27;last year, such as the promises to reform certain tax credits and to establish a regime that would have the effect of keeping the intellectual property of the products and services developed in Canada.

What we haven't seen is the urgency to follow through on those commitments, said Nick Schiavo, the council's director of federal affairs. Sometimes, he says, well-meaning tax credits end up benefiting multinational corporations that don't really need the help.

“Let's make sure we don't disadvantage Canadian companies. »

— Nick Schiavo, Director of Federal Affairs, Council of Canadian Innovators

Experts also warn the government that new incentives, credits and programs must be easy to access, easy to access, and easy to access. #x27;image of measures arising from the US Inflation Reduction Act.

Money promised to increase the Canada Health Transfer to the provinces and to fund other bilateral agreements will also be set aside in the budget — $198.6 billion over 10 years, including $49 billion in new spending.

The majority of provinces are in surplus and have the money to deal with the crisis, but we understand that they are reluctant to spend if they don't have long-term certainties – and that's what we have brought with the agreements reached in recent months, explained a senior official.

To date, nine provinces have signed agreements in principle with the federal government on health. Only Quebec and the territories continue to negotiate with Ottawa.

While the numbers have already been announced, the budget will outline the financial implications of health programs on Canada's bottom line.

The Fall Economic Statement called for a balanced budget by 2028 – a first since the election of the Liberal government of Justin Trudeau, in 2015. However, sources told CBC that slower economic growth could make such a projection obsolete.

Some observers also wonder how long it will take. must pass before Ottawa is forced to invest heavily in defense, while the Canadian military, which continues to help Ukraine defend itself against Russia, is under great pressure.

Based on reporting by CBC's Karia Roman