Government induced inflation on autopilot

For this week’s report, I want to raise an issue that goes to the heart of affordability and accountability in Ottawa.

Every April 1st, Canadians are reminded that federal excise taxes on beer, wine, and spirits automatically go up again. This year, as in recent years, the Liberal government limited that increase to 2%. While the government says this shows restraint, the reality is simple: it is still a tax increase. It comes at a time when breweries, wineries, restaurants, and bars are already facing higher costs, lower sales, and tight margins as Canadians cut back because of the affordability crisis.

The annual beer tax increase is not the real problem by itself. It is just the most visible example of something much bigger.
In 2017, the Trudeau government changed how Ottawa raises taxes and fees. It replaced the old User Fees Act with the Service Fees Act. This shift allowed tens of thousands of federal fees and charges to rise automatically with inflation. These increases no longer require Parliament to vote on them each year. Once this system was built into law, higher costs began to happen quietly and automatically.

Since those changes took effect, inflation indexed federal taxes and fees have risen by about 25%. This did not happen because Parliament debated each increase and agreed it was needed. It did not happen because government departments became more efficient. It happened because the increases were built into the system and allowed to stack on top of one another year after year.

Even at the time, there were warnings from inside the Liberal Party. Wayne Easter, a former Liberal cabinet minister under Prime Minister Jean Chrétien and then Chair of the House of Commons Standing Committee on Finance, raised serious concerns. While questioning Treasury Board officials about the change, he said: “My concern is that, once you have it in place that it’s automatically indexed, where is the pressure on the department to become more efficient? There is none.”

Mr. Easter understood how government can and does work. Having served in cabinet, he knew that when costs can be passed along automatically, the pressure to control spending disappears. Looking back, his warning was right.

Automatic indexing creates a ratchet effect. Unlike a one time tax hike that Parliament can debate and reverse, these increases never reset. Each year’s higher price becomes the starting point for the next increase. It becomes a compounding tax on a tax, even if government services do not improve and efficiency does not.

Beer prices matter because people notice them. They see the price change at the store or in a restaurant. But beer is only the public face of this yearly process. Here is where the issue stops being abstract and starts affecting everyday life. Across government, tens of thousands of federal fees and charges exist that are now built to rise automatically unless someone actively stops them. Not every fee goes up every year, but the system is designed so increases happen by default.

Clear examples include Parks Canada entry, camping, and facility fees; aviation and transportation charges such as pilot permits and aircraft certifications; regulatory approvals, inspections, and licensing fees that affect small businesses; border and customs fees that increase the cost of imported goods; and many other federally administered service and compliance charges.

When a pilot’s certification fee rises automatically, the cost is not absorbed by some government system. It is passed on to passengers through higher ticket prices. When a small business faces higher regulatory fees, those costs show up in the price of goods on store shelves. These invisible fees become hidden fuel for the affordability crisis.

By holding the alcohol excise tax increase to 2%, the government can say it is helping. But even capped, it is still a tax increase. More importantly, the broader system of automatic cost increases remains untouched. While attention focuses on beer prices, tens of thousands of other federally imposed costs continue to rise quietly in the background.

Affordability cannot be improved by managing appearances while allowing automatic increases to keep running. Real affordability requires accountability. It means forcing government to justify higher costs, find efficiencies first, and bring decisions back to Parliament.

Canadians deserve a government that treats rising costs as active decisions that must be defended, not as automated withdrawals from the pockets of taxpayers.

My question this week is this: do you believe the federal government should end automatic inflation linked increases to taxes and fees, and require Parliament to vote on them each year so affordability and accountability come first?

I invite you to share your thoughts and join the discussion on my Facebook page. You can also reach me directly at Dan.Albas@parl.gc.ca or toll free at 1 800 665 8711.