Canadian Budget: Top Contracting Priorities for Federal and Provincial Governments

For many governments in Canada, the recent budget cycle was an exercise in fiscal restraint. It was also an opportunity to prioritize the programs and initiatives they most want to see launched. Across the country, the focus of many budgets was education, healthcare and the environment. Affordability was also a major concern, which governments are tackling through a range of programs and tax rebates.

Deltek’s GovWin IQ solution tracks government spending across all levels of government in Canada, supported by a team of expert researchers. In this article we will pull from that research to share highlights from the Canadian federal and provincial budgets, as well as takeaways for government contractors.

2023 Canadian Federal Budget

The Government of Canada made its priorities clear in Budget 2023, targeting three main areas: health care and dental, a clean economy and affordability. Dubbed “A Made-in-Canada Plan: Strong Middle Class, Affordable Economy, Healthy Future,” the federal budget includes $43 billion in net new spending over six years and projects higher than expected deficits for the next five years.

Budget 2023 is a direct response to two major factors: rising inflation and cost-of-living expenses; and the U.S. Inflation Reduction Act (IRA). It offers targeted supports for Canadians, while being more restrained in spending compared to the Liberal government’s previous budgets. It also aims to keep Canada on par with clean energy investments the U.S. made in 2022 when it passed the IRA. The Government of Canada’s budget includes five new and enhanced investment tax credits designed to accelerate the growth of clean energy solutions.

The budget follows through on the federal government’s plan to increase health funding to the provinces and territories over the next ten years, including almost $50 billion in new funding. It also launches the next phase of the dental care plan, which the Liberal government agreed to as a condition of its confidence-and-supply agreement with the New Democrats. The plan is set to be fully implemented by 2025. Other major budgetary commitments include reworking Canada’s supply chain and addressing labor market shortages.

While the 2023 federal budget is more moderate in its spending than in previous years, it targets a variety of areas from healthcare to space exploration:

Healthcare and Addiction Treatment

• $195.8B over ten years in health transfers to provinces and territories, including $46.2B in new funding.
• $13B over five years to implement a dental care plan for families earning less than $90K.
• $2B over ten years towards the Indigenous Health Equity Fund.
• $505M over five years to improve health data and advance digital health tools and interoperability.
• $359.2M over five years for programs addressing the opioid crisis.
• $250M over three years to establish an Oral Health Access Fund.
• $158.4M over three years for a suicide prevention hotline.
• $36M over three years for reproductive health.

Clean Energy

• $24B over five years in the form of investment tax credits to promote green technology:
• $6.9B to expand eligibility for the Clean Technology Investment Tax Credit.
• $6.3B for the Clean Electricity Investment Tax Credit.
• $5.6B for the Clean Hydrogen Investment Tax Credit.
• $4.5B for the Clean Technology Manufacturing Investment Tax Credit.
• $520M to expand the Carbon Capture, Utilization, and Storage Investment Tax Credit.
• $20B to the Canada Infrastructure Bank to support building clean electricity and clean growth infrastructure projects.
• $3B over thirteen years for the Smart Renewables and Electrification Pathways Program.
• $500M over ten years for the Strategic Innovation Fund to support the development and application of clean technologies.
• $20M over five years to reduce corporate tax rates for zero-emission technology manufacturers.

Affordability

• $4B over seven years for the Urban, Rural, and Northern Indigenous Housing Strategy.
• $2.5B for a one-time Grocery Rebate that will provide payments between $225-$467 to eligible Canadians.
• $813.6M in 2023-24 for student financial assistance.
• Announced intention to work with key stakeholders to reduce junk fees such as higher telecom roaming charges, event and concert fees, excessive baggage fees and unjustified shipping and freight fees.
• Secured commitments from Visa and Mastercard to lower credit card transaction fees for small businesses.

Transportation and Infrastructure

• $210M over five years to VIA Rail to conduct maintenance on its trains and maintain service levels.
• $119.6M over five years to reinforce the integrity of the Canadian Coast Guard’s helicopter and marine vessel fleets.
• $27.2M over five years to establish a Transportation Supply Chain Office to increase the capacity, efficiency and reliability of Canada's transportation supply chain infrastructure.
• $25M to Transport Canada and Statistics Canada to work together to develop transportation supply chain data.

Jobs

• $625M in 2023-24 to bolster the Labour Market Transfer Agreements that provide Canadians with the supports they need to get a job.
• $197.7M in 2024-25 for the Student Work Placement Program to create quality work-integrated learning opportunities for students.
• $108.6M over three years to expand the College and Community Innovation Program to boost research and development.
• Announced plan to collaborate with key stakeholders to develop concrete reciprocal procurement measures that will benefit Canadian workers and businesses.

Space Exploration – the Canadian Space Agency will receive several funding streams:

• $1.2B over 13 years to contribute to building a lunar utility vehicle with international partners.
• $1.1B over 14 years to continue participating in the International Space Station until 2030.
• $150M over five years to fund the development of new technologies.
• $76.5M over eight years to support participation in the Lunar Gateway station.

Budget 2023 also commits to cutting back on $7.1B worth of travel expenses and outsourcing, specifically management consulting, over five years. The Government of Canada is hoping to demonstrate fiscal responsibility after coming under fire for its excessive use of contracted professional services. However, management consulting only represents a small portion of overall professional services spending so savings will likely have to come from other areas as well. Furthermore, outsourcing and the size of government are both growing because there is so much more work. The Liberals are an activist government with many initiatives and their ministers have substantial mandates of intended changes.

2023 Provincial Budgets

For the four major provinces in Canada – Ontario, British Columbia, Alberta and Quebec – economic outlooks differ yet many common priorities emerge when analyzing their budgets. Increased federal funding has boosted provincial healthcare budgets and many provinces intend to dedicate a significant portion of these funds to recruiting more doctors, nurses and other health professionals. Many provinces are investing heavily in infrastructure, with a particular focus on building schools and roads. Transportation and public safety are also featured in many budgets but not as prominently as other priority spending areas.

Ontario’s $204.7 billion budget targets healthcare, education and infrastructure. Indeed, more than $20 billion is earmarked for highway, hospital and transit projects. Although the province began the current fiscal year in a deficit, a $4.4 billion surplus is anticipated by 2025-26. Additional highlights from the budget include:

• $22B to build more schools and child care spaces.
• $5.4B to modernize classrooms, upgrade technology, carry out repairs and improve sustainability in post-secondary education facilities.
• $425M over three years to expand mental health services.
• $202M every year for homeless prevention and supportive housing programs.
• $200M to address healthcare staffing shortages.
• $80M over three years to expand nursing education in universities and colleges.

British Columbia’s $80 billion budget invests $8.7 billion in new program spending and a record $37.5 billion in new capital spending for schools, hospitals and highways over the next three years. The increased spending accompanies a projected deficit of $4 billion for the current fiscal year. However, the Government of British Columbia did not want to cut back on spending or reduce services. One of the most highly anticipated items in the budget is the Renter’s Tax Credit, which will save renters up to $400 annually. Other key initiatives over the next three years include:

• $4.2B for a new affordable housing strategy.
• $1.4B to support inclusive economic development and climate resiliency.
• $1.3B to expand K-12 school food programs and provide additional financial supports for students and other Canadians in need.
• $1B to support a new healthcare workforce strategy.
• $867M for mental health and addiction treatment services.

Alberta’s $68.3 billion budget was released a few short months before a provincial election, serving as a campaign platform for Premier Danielle Smith. It represents a four percent increase in spending and would leave the province with a $2.4 billion surplus by March 2024. The budget prioritizes healthcare and education; operational health spending is set to rise by 4.1 percent, while K-12 operating expenses are set to increase by 5.2 percent. Over the next three years, additional highlights include:

• $23B for various infrastructure projects, including roads, bridges, recreational facilities and schools.
• $800M for programs to reduce greenhouse gas emissions and support green technology.
• $178M in revenue reductions to make post-secondary education more affordable for students.

Quebec’s 2023 budget provides investments totaling $24.5 billion and commits to several key goals for the province. These include increasing economic potential, developing the potential of youth, reforming the healthcare system and maintaining sound public finances. To help achieve these goals, healthcare and education spending will grow by 7.7 and six percent respectively. Budget initiatives will last until 2027-28, by which time the province anticipates achieving a balanced budget:

• $9.2B in income tax cuts that will benefit 4.6 million Quebecers.
• $5.6B to make the healthcare system more effective and humane.
• $2.4B to support the Green Economy and other environmental measures.
• $2.3B to support youth, including improving access and retention and graduation rates at all educational levels.
• $1B to improve housing affordability.
• $649M to promote culture and the French language.

Key Takeaways for Government Contractors

At a time when Canada is dealing with economic uncertainty, shifting geopolitics and an ambitious transformation agenda, the most recent budget cycle aimed to balance fiscal restraint with bold government initiatives. Affordability, education, healthcare and the environment are the major themes of the 2023-24 fiscal year. Across the country, governments are simultaneously looking to lower escalating living costs, provide quality educational opportunities, improve healthcare, and meet a slew of new climate goals and targets. Suppliers should not only be aware of these budget priorities but actively adjust their operations and seek opportunities accordingly.