$1.75B in mystery money could let Ottawa to start compensating farmers soon

Source says some of the money will go to dairy, egg and poultry producers to offset impact of trade deals.
The Canadian Press
November 29, 2018
By The Canadian Press
The government is still talking with farmers and processors about compensation for the new USMCA and CPTPP.
The government is still talking with farmers and processors about compensation for the new USMCA and CPTPP. Chicken Farmers of Canada
The federal government says it plans to spend $1.75 billion by March without having said what the money is for, though at least some of the cash is likely to go to farmers hurt by new trade deals.

The government remains tight-lipped about how it will use the rest of the ''non-announced'' spending it allowed for in last week's fall economic statement.

In all, the government has made room for $9.5 billion worth of still-to-be-unveiled commitments over the next six years.

A government source says some of that will go to dairy, egg and poultry producers, whose protected domestic markets were opened up to more foreign competition under new North American and Pacific Rim trade deals. The source, who was not authorized to discuss the matter publicly, spoke on condition of anonymity.

The fall statement said the government is still talking with farmers and processors about compensation for the new United States-Mexico-Canada Agreement (USMCA) and the recently ratified Asia-Pacific trade pact known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The negotiations will determine the size of the final package and how the money will be rolled out over the coming years.

In 2016, the Liberal government dedicated $350 million to help dairy producers deal with the impacts of Canada's trade agreement with the European Union. The amount included a five-year, $250-million fund for milk producers and a second program worth $100 million for cheese-makers.

The Liberals also have outstanding mandate commitments they will be looking to address before the 2019 election campaign and, looking further ahead, Ottawa is facing litigation related to Indigenous issues, including land claims. Both could draw on some of the money.

Most of the yet-to-be announced funding has been dedicated to the later years of the projection, with $2.1 billion set aside for 2021-22, $1.85 billion for 2022-23 and nearly $2.8 billion for 2023-24.

One possible use for the cash: national pharmacare.

The governing Liberals have put together a group of advisers to consult Canadians and to explore options for a national program. The council is due to report in 2019, when the topic of pharmacare is likely to become an issue during the election campaign.

A spokesman for Finance Minister Bill Morneau argued the list of the government's funding commitments in the fall update is comprehensive.

But Pierre-Olivier Herbert noted some measures cannot be disclosed yet due to cabinet confidentiality or because ministers have yet to make decisions. Issues of national security, commercial sensitivity, litigation or certain matters related to trade agreements must also be kept under wraps, he said.

''The net fiscal impact of these confidential or sensitive measures is rolled up and presented at an aggregate level and will be detailed in due time,'' Herbert wrote in an email.

Thanks to the stronger economy, Morneau had more than $20 billion in extra fiscal room over the coming years to work with, compared to the forecasts in last February's budget.

He chose to announce new initiatives – including billions of dollars worth of tax incentives for corporate Canada – that will use up all that space and then some, contributing to slightly larger annual deficits beginning next year.

The document contained Ottawa's long-awaited plan to help the country compete with the U.S. for investment dollars. It came in response to major American tax and regulatory reforms that many in the business community warn have eliminated Canada's edge as an investment destination.

The package includes new write-offs that are expected to lower federal revenues by about $14 billion over the next half-decade all by themselves.

Peter DeVries, a former senior Finance Department official, said Morneau has now made spending commitments of nearly $33 billion over six years since the February budget. In comparison, he said the budget itself contained $20.3 billion worth of new measures, although the initiatives were aimed at a much-broader range of issues.

''There's some big numbers in there,'' said DeVries, who writes articles about government finances and recently examined the fall statement.

The next budget will serve as the Liberals' election platform, but DeVries wonders how the party will finance it.

''Where are you going to find the money for that platform, unless you go into deficit even more or unless you believe that you've put aside sufficient reserves in the framework to manage it?'' he said. ''It doesn't look like they've done that, except for that one line that says (non-announced measures).''

The fall update also contains no timeline to eliminate the Liberals' shortfalls, which are now projected to be higher than $18 billion in each of the next couple of years.

The opposition Conservatives and some economists have criticized the Liberals for not providing a date to balance the budget. There are warnings the government could face big fiscal challenges when the next economic downturn arrives.

After the 2015 election, the Trudeau government abandoned vows to run yearly shortfalls of no more than $10 billion and to balance the books by 2019.

Instead, it has focused on reducing the net debt-to-GDP ratio – a measure of how burdensome the national debt is – each year.

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