The Skilled Budget
CaledonInst.org – Publications
March 2013. Ken Battle, Sherri Torjman and Michael Mendelson
Skills and training comprise the centerpiece of the federal Budget 2013. But the federal document is also a skilled Budget. The government has been training Canadians for quite some time – to dampen our expectations. The purpose of creating a scarcity mindset is to set the stage. The ground work was so carefully laid that Canadians were primed to expect doom and gloom. Any announcement actually made is hailed as nothing short of miraculous.
On the positive side, there are significant areas of spending related to manufacturing, community infrastructure, Aboriginal Canadians, social housing and employment measures for persons with disabilities. Because of lack of detail in the Budget, however, it is impossible to know how much of the proposed expenditure is ‘new’ money or how much will be diverted from other programs.
Beneath the many positive announcements lies some not-so-good news. A federal Budget guided by a scarcity mindset can result in questionable responses. A Budget shaped by a scarcity mindset can be scarce in the wrong places. A scarcity mindset can leave unresolved some fundamental problems facing the country.
On the questionable response side, the prominent Canada Job Grant likely will encounter significant problems in the required negotiations with provinces and territories. The measure as constructed would see the provinces allocating an additional $300 million a year on their matching grants over and above what they now spend on training. From a provincial and territorial prospective, all of the current $500 million is being deployed to provide training and employment preparation, much of it for social assistance recipients. Cutting out two-thirds of the money could mean mass firings, including at community colleges, and eliminating almost all employment programs aimed at persons not eligible for Employment Insurance (in Ontario and the West, this is the majority of unemployed).
The new strings for income assistance intended for Aboriginal youth were unilaterally introduced. The federal government could have announced instead that it wanted to assist willing First Nations convert from passive social assistance to active programs, and that it was ready to make a substantial investment to do so. Ottawa could have indicated its commitment to consulting with First Nations as to whether this is a goal they share and, if so, how it could be best achieved.
The scarcity mindset creates scarcity in the wrong places. Canadians have been led to believe that this country’s resources are limited. When it comes to natural resources, this is absolutely the case. Rather than turning its attention to natural resources that are indeed in relatively short supply, Ottawa has focused instead on scarce fiscal resources. Canadians have been told there are few available funds to tackle tough problems. Yet miraculously, money just happens to be found when it comes to supporting the government’s pet projects.
Last year, for example, the federal government spent millions refighting the War of 1812 when it should, instead, have been fighting the War against poverty of 2012. We appear to have lost sight of the real war against poverty and inequality in this nonetheless affluent nation. The federal government should have scrapped the Universal Child Care Benefit and non-refundable Child Tax Credit – two flawed and costly schemes – and redirected their spending to bolster the Canada Child Tax Benefit, a proven poverty fighter which delivers monthly cash payments to 90 percent of Canadian families with children and pays the most to the poor.
Budget 2013 introduces a new Building Canada Plan worth a total $53 billion, which will help tackle the massive backlog that communities currently face in repairing and upgrading their hardware. While the announced funds are crucial, their delivery remains questionable. Communities will have to apply for a grant to receive the funds. They will have to get in a very long and competitive line, and may or may not be successful in their respective bids. Moreover, Canada’s major cities should be invited to go to the head of the line. Major cities drive Canada’s economy. There must be explicit recognition of this reality and greater investment in larger centres if Canada is to be a real player on the global stage.
Far more important to resolve, however, is the need to fundamentally overhaul the existing grant relationship and for Canadian cities to have their own independent sources of revenue. Canadian cities need access to ongoing and stable financing, such as a percentage of federal or provincial income taxes. The infrastructure money is both welcome and crucial but unfortunately leaves untouched the underlying fiscal architecture – itself in desperate need of repair.
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