Liberal government 'not thinking about raising taxes' right now, says Morneau

Finance Minister Bill Morneau says his government is not currently thinking about raising the GST or any other taxes but that Canada will have to face tough questions about how to pay for the COVID-19 pandemic response that is costing billions. 

Trudeau dismisses calls for a budget in the short term as PBO warns debt could hit $1 trillion

Minister of Finance Bill Morneau says his focus for the moment is on ensuring the economy is in a place to grow once the pandemic ends, not on how he is going to pay for the pandemic response effort by the federal government. (Justin Tang/The Canadian Press)

Finance Minister Bill Morneau says his government is not currently thinking about raising the GST or any other taxes but that Canada will have to face tough questions about how to pay for the COVID-19 pandemic response that is costing billions.

"We're not thinking about raising taxes," Morneau told CBC's Rosemary Barton during a town hall special Wednesday evening. "What we're thinking about is preserving our economy for the future, making sure that we can get back to a vibrant place."

Morneau said he is focused on ensuring the Canadian economy is strong enough to grow once the pandemic ends so that Canadians who have lost their jobs in one sector may be able to pick up a job in a different one.

Asked if his government will either cut services or raise taxes to increase government revenues in an effort to pay off the pandemic debt, Morneau said that was a problem Canadians would have to face once they are back on their feet. 

"We know that we are going to need to face up to those challenges. We also recognize that raising taxes is not what Canadians want us to do," he said. "

Watch: Morneau 'not thinking about' raising GST despite COVID-19 relief spending:

Morneau ‘not thinking about’ raising GST despite COVID-19 relief spending

3 years ago
Duration 5:46
Finance Minister Bill Morneau says the federal government is not thinking about raising taxes to pay for COVID-19 relief measures. He says the government is instead focusing on ways to set up the economy to “pick up where it left,” while acknowledging that challenges are ahead.

Morneau's comments come as Prime Minister Justin Trudeau today sounded a similar tone, downplaying the need for a federal budget in the short term, saying the fast-moving effects of the COVID-19 pandemic would render any projections moot.

But members of the Conservative opposition are demanding that Morneau heed calls from the parliamentary budget officer (PBO) — who estimated that this year's budget deficit could be more than $250 billion — to table some sort of update to give Canadians a better sense of the country's fiscal health as government spending reaches levels not seen in decades.

Morneau was set to deliver a federal budget at the end of March. The pandemic disrupted those plans.

Since then, Ottawa has rolled out hundreds of billions of dollars in supports for workers and employers — programs that have pushed the 2020-21 deficit to an estimated $251 billion.

The PBO said Tuesday that deficit estimate, first reported on April 30, is already outdated and likely will need to be revised upwards.

Trillion-dollar debt 'not unthinkable'

He said a federal debt topping $1 trillion by year's end is "not unthinkable". At the start of the year, the federal debt was roughly $700 billion.

But Trudeau said today he has no immediate plans to table a budget because the government simply doesn't know how the economy will fare in the months ahead, as social distancing measures continue to cripple economic activity.

He also seemed to rule out tabling some sort of document that could be updated as the fiscal situation stabilizes.

Trudeau said the government is focused on "immediate" needs over long-term budgeting.

"A budget is usually something that projects what's going to happen to the Canadian economy for the next 12 months and right now, we're having a lot of difficulty establishing with any certainty what's going to happen in the next 12 weeks," Trudeau said today at his daily briefing with reporters.

"The situation is changing extremely rapidly."

Trudeau questioned on when will his government deliver a budget

3 years ago
Duration 2:40
Prime Minister Justin Trudeau spoke to reporters on Wednesday.

In the midst of the 2008-09 global recession, the previous Conservative government tabled a budget in January 2009 and a fiscal update followed in September as the Tories responded to a cratering economy.

When asked if there were any plans for a fiscal update this year, a spokesperson for Morneau said the department had no comment beyond what Trudeau said at his press conference.

Conservative members pressed Morneau in the Commons today, asking if the government had any projections of how much it would cost to finance the growing debt.

Morneau said he will give a full accounting of the costs of the government's pandemic measures "when we have the ability."

Fiscal update in the works, says Finance

The PBO said the cost to service the debt will be manageable for now, because interest rates are at record lows — but a spike in those rates would be very "concerning."

While cabinet ministers have been reluctant to say if or when the next fiscal update will be released, a senior public servant told the Senate's national finance committee Tuesday that work is underway on such a plan.

"We're in the process of beginning that fiscal update, which, of course, involves consultation with the private sector, and we expect to be able to provide a fiscal update in the coming weeks," said Alison McDermott, an official in the economic and fiscal policy branch of the Department of Finance.

"I don't think the government has made any announcements about the timing of that at this point."

Kevin Page, the country's first PBO and the president and CEO of the Institute of Fiscal Studies and Democracy at the University of Ottawa, said Morneau should produce a fiscal update by June to make Canadians feel confident that the government has its fiscal house in order.

Page said nobody is expecting a traditional 500-page budget — "We're not in that world right now, we get that," he said — but there's still a need for some sort of planning document. He said the prime minister should face pressure to release some numbers soon.

'Be transparent,' says Page

"It's pretty hard to say we don't need a fiscal strategy right now. The way to engender confidence is to be transparent," he told CBC News. "I don't think they can get away getting much past early June without a fiscal statement ... there's no accountability without a plan. We need to see a tally."

He said people need to know if the government intends to continue programs like the Canadian Emergency Response Benefit (CERB) and the wage subsidy, and, if so, for how long.

"Just tell people — this is the situation, this is how we're going to respond. We need a strategy. We need to tell people what to expect over the next few months," he said.

Such information is also important for would-be bondholders, Page said, who will be extending credit to a money-hungry government.

Sahir Khan, Page's former deputy PBO, said the government is probably reluctant to release numbers now because opponents could pounce if the fiscal situation rapidly deteriorates.

But if health officials are expected to release modelling for COVID-19 infections and deaths, he said, federal finance officials should do the same with deficit spending and debt.

As spending continues unabated, former prime minister Stephen Harper voiced concerns Tuesday with the debtload much of the Western world has taken on in recent weeks in response to this crisis.

Harper, an economist by training, said balance sheets have become an "unholy mess" and some states are likely to face sovereign debt crises in the months ahead.

Former prime minister Stephen Harper has written an article calling for 'mild' austerity to get government deficit spending back to a manageable level. (Chris Young/The Canadian Press)

"If they fail to practice mild austerity proactively, a brutal kind will be thrust on them," Harper said in an op-ed published in the U.S.-based Wall Street Journal.

Harper said "leftists" are trying to capitalize on this crisis to permanently expand the size of government by pushing ideas like a "guaranteed minimum income."

"A new era of big government in the economy is unlikely, undesirable and far from inevitable," Harper said.

"When focus shifts from the pandemic to the economy, it will need to shift from a lot more government action to a lot less."

'Nowhere near code red'

But Page, who was appointed by Harper, said now isn't the time to talk about austerity.

He said Canada is still in a strong fiscal position compared to other industrialized nations, with roughly half the average debt-to-GDP ratios of other advanced economies.

"We're nowhere near code red," Page said, when asked if belt-tightening is needed now.

"If you phoned someone from Washington, D.C. and told them Canada is hitting $1 trillion they'd say, 'Boy we wish we had your numbers,'" Page said, citing the country's projected debtload.

Page said that, rather than austerity, the government should start talking about a stimulus package — measures beyond direct payments to Canadians. "We have to take care of our citizens or else we'd be in a Great Depression-mode."


John Paul Tasker

Senior reporter

J.P. Tasker is a journalist in CBC's parliamentary bureau who reports for digital, radio and television. He is also a regular panellist on CBC News Network's Power & Politics. He covers the Conservative Party, Canada-U.S. relations, Crown-Indigenous affairs, climate change, health policy and the Senate. You can send story ideas and tips to J.P. at john.tasker@cbc.ca.

With files from the CBC's Peter Zimonjic

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