On Monday April 19, 2021, Finance Minister Chrystia Freeland delivered her first federal budget in the House of Commons, the first in over two years. CCUA has been in regular contact with the Minister’s team and senior finance officials in the weeks and months leading up to the budget on key credit union sector issues, and we saw some progress on them in today’s fiscal plan as laid out by the federal government.

Notably, COVID-19 relief measures were extended and a further consultation on electronic communication and virtual meetings for federally-regulated financial institutions was included in today’s budget.

Today’s budget has been presented largely as a recovery plan as we move towards what we all hope to be the final stages of the COVID-19 pandemic. The full budget can be found here.

CCUA staff participated in a detailed briefing today from the department of Finance, since the traditional stakeholder “lockup” did not take place due to the pandemic.

This year’s budget plan – like the deficit – is larger than normal, coming in at over 700 pages and unprecedented in scope. On a tight timeline for this note it’s very possible we missed something! We will continue our analysis in the days to come and will reach out to relevant officials and political staff to continue to further key issues as addressed by today’s budget.  We will continue to communicate with you about the implications of today’s many announcements.

The government has doubled down on their commitment to spend heavily to support recovery.  Headlines include $30 billion for a new national child-care program, a $15 per hour federal minimum wage, and billions for green infrastructure. The federal deficit is projected to be $354.2 billion for the year that just ended, and to be reduced by more than half to $154.7 billion in the current 2021-22 fiscal year. Previous rosy fiscal projections have not always come to pass, though the economy is expected to grow strongly this year as pandemic restrictions ease, which will almost certainly bring down last year’s large deficit number. Whether Ottawa will be able to shave $200 billion off the shortfall in a year remains to be seen.

The Budget will require the support of at least one other party to pass in this minority parliament. It did not contain the types of fiscal restraint that the Conservatives were looking for, but is likely to garner support from the NDP due to its commitments on childcare, green recovery, as well as vulnerable populations and an enhanced federal minimum wage. 

In addition to progress for the sector, we also saw some surprises. For example, the Bank Act review has been pushed back two years to 2025, to allow full consideration of the impacts of the pandemic on the financial sector.  The extension will also give us a little more runway to bring the sector together on this critical process. While the Bank Act is important to our federally-regulated members and those going through the federal continuance process, it also serves as an important benchmark for provincial regulators who often take cues from federal regulators and legislation.  Additional details of importance to the sector are included below.

CCUA will continue to advocate for credit unions’ interests at the federal level on key sector priorities such as open banking, tax and regulatory policy, and ensuring credit unions continue to be at the table to participate in any support programs delivered by the financial sector. 

More details on subjects of importance to credit unions can be found at the links below.

Should you have any questions about this year’s budget please feel free to email Michael Hatch at mhatch@ccua.com.

Details of Relevance to Credit Unions:

As has been typical during COVID-19, many implementation details regarding announcements within Budget 2021 are forthcoming.  CCUA will monitor major announcements and communicate with credit unions as details become available.

Business Supports

• Budget 2021 proposes to extend the existing wage subsidy, rent subsidy, and lockdown supports for businesses and other employers until September 25, 2021. CEBA was also recently extended until June. The Budget also proposes to gradually decrease the subsidy rate for the wage and rent subsidy programs, beginning July 4, 2021, in order to ensure an orderly phase-out of the program as vaccinations are rolled out and the economy reopens.
• Budget 2021 proposes to introduce a new Canada Recovery Hiring Program for eligible employers that continue to experience qualifying declines in revenues relative to before the pandemic. The proposed subsidy would offset a portion of the extra costs employers take on as they reopen, either by increasing wages or hours worked, or hiring more staff. This support would only be available for actively employed staff and will be available from June 6 to November 20, 2021. Eligible employers would claim the higher of the Canada Emergency Wage Subsidy or the new proposed subsidy.
• Budget 2021 proposes to amend the Canada Small Business Financing Program. These proposed amendments are projected to increase annual financing by $560 million. They include expanding loan class eligibility, increasing the maximum loan amount to $500,000 and extending the loan coverage period to 15 years for equipment and leasehold improvements, expanding borrower eligibility to include non-profit and charitable social enterprises, introducing a new line of credit product to help with liquidity and cover short-term working capital needs.
• Budget 2021 suggests that the government is seeking to work with stakeholders to lower the average overall cost of interchange fees for merchants, ensure that small businesses benefit from pricing that is similar to large businesses and protect existing rewards points of consumers. Following consultations with stakeholders, detailed next steps will be outlined as part of the 2021 Fall Economic Statement, including legislative amendments to the Payment Card Networks Act that would provide authority to regulate interchange fees, if necessary.

Financial Sector Framework

• Budget 2021 proposes measures to further strengthen Canada’s financial sector framework, including: modernizing corporate governance; strengthening Canada’s anti-money laundering and anti-terrorist financing framework (see below); targeted legislative initiatives that will support consumers, promote innovation, and enhance the stability, security, and integrity of the financial system in advance of the next legislative review, in 2025 (see Annex 3).
• Budget 2021 proposes a public consultation on measures that would expand federally regulated financial institutions’ use of electronic communications with their owners, including the delivery and provision of governance documents, as well as virtual meetings.
• The government will introduce legislation to implement a new retail payments oversight framework that would promote growth, innovation, and competition in digital payment services while making these payments services safer and more secure for consumers and businesses. In doing so, the government will work with provincial partners in recognition of complementary objectives and powers in this area.
• Budget 2021 proposes a public consultation on measures that would adapt and apply the Canada Business Corporations Act diversity requirements to federally regulated financial institutions. This would promote greater gender, racial, ethnic, and Indigenous diversity among senior ranks of the financial sector. Details on the consultation will be announced soon.
• The government will work with financial institutions to develop a voluntary code to help support the inclusion of women and other underrepresented entrepreneurs as clients in the financial sector.
• The Government of Canada will launch a consultation on lowering the criminal rate of interest in the Criminal Code of Canada, applicable to payday loans.

Strengthening Canada’s Anti-Money Laundering and Anti-Terrorist Financing Framework

• Budget 2021 proposes to introduce amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to enable the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to recover its compliance costs, clarify its ability to obtain information from reporting entities and expand the information that it can disclose; strengthen criminal penalties and the registration framework for money services businesses; regulate armoured car services for AML/ATF purposes; amend certain disclosure recipients and definitions; and make other technical amendments to the Act.
• Also proposed are amendments to reduce the administrative burden for financial institutions filing reports under the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law).
• Budget 2021 proposes to provide $2.1 million over two years to support the implementation of a publicly accessible corporate beneficial ownership registry by 2025.
• Tax measures are also proposed that

Housing Affordability

• The government intends to implement a national, annual 1 per cent tax on the value of non-resident, non-Canadian owned residential real estate that is considered to be vacant or underused, effective January 1, 2022. The tax will require all owners, other than Canadian citizens or permanent residents of Canada, to file a declaration as to the current use of the property, with significant penalties for failure to file.
• Budget 2021 proposes to provide an additional $2.5 billion over seven years, starting in 2021-22, to the Canada Mortgage and Housing Corporation, including investments in affordable housing and transitional housing.
• Budget 2021 proposes to advance and reallocate $1.3 billion, on a cash basis, of previously announced funding under the National Housing Co-Investment Fund and the Rental Construction Financing Initiative (to support the conversion of vacant commercial property into housing.)

Highly Affected Sectors

• To assist the tourism sectors’ recovery, the government proposes to make available a further package of supports, totalling $1 billion over three years, starting in 2021-22, including  a $500 million Tourism Relief Fund, administered by the regional development agencies. The Fund will support investments by local tourism businesses in adapting their products and services to public health measures and other investments that will help them recover from the pandemic and position themselves for future growth.
• Budget 2021 proposes legislative changes to ensure that all self-employed fishers who submit an Employment Insurance (EI) claim for the winter 2021 fishing benefit period are treated equally, by extending temporary eligibility changes for the entire benefit period. Budget 2021 also proposes legislative changes and funding of $99.9 million over three years, starting in 2021-22, to extend the rules of an existing EI seasonal pilot project for an additional year, until October 2022. The measure would provide up to 5 additional weeks of EI regular benefits to seasonal claimants in 13 regions of Atlantic Canada, Quebec, and Yukon.
• Beyond offsetting climate related costs and support for the Temporary Foreign Worker program, there was not much in terms of agricultural specific supports aside from previously announced programs.

Vulnerable/Marginalized Populations

• Budget 2021 proposes to provide up to an additional $51.7 million over four years, starting in 2021-22, to Innovation, Science and Economic Development Canada and the regional development agencies for the Black Entrepreneurship Program.
• Budget 2021 proposes to provide up to $146.9 million over four years, starting in 2021-22, to strengthen the Women Entrepreneurship Strategy. Women entrepreneurs would have greater access to financing, mentorship, and training.
• The government will work with financial institutions to develop a voluntary code to help support the inclusion of women and other underrepresented entrepreneurs as clients in the financial sector.
• Pensioners 75 years of age or older are getting a one-time taxable grant payment of $500, to arrive in August. The federal government will boost Old Age Security for the same age group by 10 per cent annually, starting in July 2022.

Green and Inclusive Recovery

• The government will engage with provinces and territories, with the objective of making climate disclosures, consistent with the Task Force on Climate related Financial Disclosures, part of regular disclosure practices for a broad spectrum of the Canadian economy.
• The government will publish a green bond framework in advance of issuing its inaugural federal green bond in 2021-22, with an issuance target of $5 billion, subject to market conditions.
• Budget 2021 proposes to explore the potential for social bonds to complement the government’s existing debt program.  The government intends to include this topic as a part of the Debt Management Strategy consultations this fall.

Broadband Access

• Budget 2021 proposes to provide an additional $1 billion over six years, starting in 2021-22, to the Universal Broadband Fund to support a more rapid rollout of broadband projects.