Flaherty has done more than anyone to make life more affordable for Canada’s most vulnerable citizens
NationalPost.com – Full Comment
February 11, 2014. John Ivison
There are no finer cooks in Ottawa than the fiscal epicureans who work at the federal department of Finance.
The Conservatives desired a narrative that features a graph swinging upward from left to right, reflecting the government’s “Road to Balance” theme.
But they clearly decided that the deficits they projected in their November fiscal update were a tad too gloomy, so Finance was asked to fluff them up a bit. A deficit of $17.9-billion for the current year, turned into $16.6-billion with the stroke of a pen. The shortfall of $5.5-billion in the coming fiscal year has become a deficit of just $2.9-billion. If the $3-billion rainy day contingency fund is not used, this actually means we will be in the black before next year’s budget.
Table 4.2.3 on page 266 of the budget offers a glimpse inside the fiscal kitchen.
As we said, in 2014/15, the deficit was projected to be $5.5-billion in the November update. Economic developments since then have improved the landscape to the tune of $500-million. The 2014 budget is so light on spending – just $700-million in the coming financial year – that its effects are cancelled out entirely by a massive hike to the cost of tobacco ($4.03 in new taxes per carton of cigarettes).
The government expects to save a further $1.5-billion next year from managing the compensation costs of the public service – a combination of wage restraint; overhauling the sick leave management system; and, forcing retired federal employees to pay half their health care costs, up from 25%.
But it’s the final measure that brings the 2014/15 deficit within touching distance of balance at $2.9-billion and where the Finance chefs really earn their corn.
Under the heading “responsible management of National Defence capital funding”, they simply remove $600-million next year (and escalating amounts in the following years, to a total of $3.1-billion) from the spending column. That doesn’t mean the spending on military equipment has been cancelled – simply that it has been shifted to future years, so far out that they are not included in the financial framework. At some point, $3.1-billion will have to be found to buy the gear we are already committed to, but that will presumably be on someone else’s watch, so who cares?
This makes a mockery of any discussion of whether we are in the red or the black. The budget is like an old harlot – it will be whoever the government of the day wants it to be.
That major complaint aside, it is not a bad budget. Program expenses in 2014/15 will be lower than the previous year – the first time this has happened since 1995. Total net new spending is just $1.8-billion over the next two years – and that’s before the $1.4-billion in new tobacco revenue kicks in.
Much of that new spending could justifiably be tagged as investment, rather than consumption – except, of course, for the obligatory millions spent on snowmobile trails and small craft harbours. Let’s hope snow-mobiling and small crafting become Olympic events in the near future – after all the years of investment by the federal government, we would surely own the podium.
On the investment front, money has been allocated to raise the completion rate for apprentices that currently hovers around 50%. The government will provide up to $100-million in interest free loans to help apprentices with training. Small amounts of cash will also be sprinkled around to help entrepreneurs set up companies and on internships in high demand fields.
Millions more will be spent on boosting Canada’s research and development performance – principally $1.5-billion over the next decade on the new Canada First Research Excellence Fund; $222-million over five years for the world-class physics facility TRIUMF in British Columbia; new money for the Quantum Computing research program at the University of Waterloo; and funding for a new centre to study neuro-degeneration in the aged.
The largest single line item is an additional $500-million over two years for the Automative Innovation Fund, much of which appears to be destined for Chrysler’s minivan plant expansion in Windsor. Critics might argue this is closer to corporate welfare than investment in cutting edge technology.
Proponents might argue that federal and provincial treasuries often come out ahead in the long-run from major investments such as Chrysler’s $2-billion proposal in Windsor.
Regardless, the additional money in the AIF will at least have the effect of softening the blow for the auto industry of the imminent free trade deal with South Korea, which is likely to remove the 6% tariff on Korean cars entering this country.
One defensive measure being taken by the Conservatives is the allocation of $390-million over five years to strengthen Canada’s food safety system. This includes the hiring of an additional 200 food inspectors, which the opposition is likely to characterize as slamming the abattoir door after the beasts have bolted.
If this is Mr. Flaherty’s last budget – and there is a strong feeling around Ottawa that it may well be – it is not a bad swan-song for a fiscal conservative. “People might say this budget is boring but I consider that a compliment,” he said.
The budget is balanced to all intents and purposes and the projection is for surpluses totaling $33-billion over the next five years.
On a more personal level, he has put his stamp on one distinct policy area – the way the federal tax system supports Canadians those with disabilities and the people who care for them.
Perhaps it’s because he has a son with developmental challenges but whatever the reason, he has been the champion for measures like the Disability Tax Credit and the Registered Disability Savings Plan in previous budgets. This time around, he has found money for vocational training for people with autism and labour market agreements to help people with disabilities get the skills they need.
It may be an uncomfortable truth for Mr. Flaherty’s critics, who are only to happy to believe he’s been cooking the books for the past nine years, that he’s also the man who’s done more than anyone to make life more affordable for some of the country’s most vulnerable citizens.
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