Some Government Spending Items Will be Cut if There’s ‘Less Fiscal Room’ in 2023, Freeland Says

Some federal government spending items outlined in this year’s budget and the 2022 Fall Economic Statement could be cut if economic pressures bring about “less fiscal room,” says Finance Minister Chrystia Freeland.

Freeland made the comments at a press conference on Jan. 24 in Hamilton, Ont., where she is attending the Liberals’ post-holiday cabinet retreat, which Prime Minister Justin Trudeau previously said is focused on finding ways to make life more affordable in Canada.

A reporter questioned Freeland on comments made earlier in the day by Associate Finance Minister Randy Boissonnault, who said there is “lots of uncertainty” with the economy’s future direction.

Boissonnault also said Ottawa still has “fiscal room to be able to do the things we need,” but added that “the fiscal room has tightened.”

“Is that the approach you’re taking to budgeting? That some spending items that your government has promised will be taken off the table depending on how the recession plays out this year?” the reporter asked.

“I think that’s the approach that governments should always take to putting together a budget,” Freeland replied. “If there’s less fiscal room, you can do less.”

The reporter noted that the current Liberal government has not practised that principle in the past.

“I disagree,” said Freeland. “I think that in the April [2022] budget and in the fall economic statement we were very very focused on taking a fiscally responsible approach.”

“There’s a lot of uncertainty in the world economy and we have wanted to keep our powder dry.”

Economic Outlook

The day before Freeland made her comments, a report co-authored by former Bank of Canada governor David Dodge was released saying that the federal government was been overly optimistic in its economic outlook for 2023.

The report, released on Jan. 23 by Bennett Jones and the Business Council of Canada, also said the Liberal government’s projected spending outlined in its most recent budget will most likely fall short of meeting its policy objectives.

Some key spending items likely to be pursued by the government this year include a potentially large deal to increase health-care transfers to the provinces and also investments to begin transitioning to a low-carbon economy.

Freeland also reiterated on Jan. 24 that Ottawa will continue sending military and financial support to Ukraine, adding that a clear victory over Russia “would be a big boost for the global economy and a big boost for Canada.”

“We’re supporting Ukraine because it’s the right thing to do … but we are also supporting Ukraine because it is in our national interest to do so,” she said.

The Canadian Press contributed to this report.