Andrew Coyne on decoding the budget: What Jim Flaherty didn’t want you to know

Posted on March 24, 2013 in Governance Debates – FullComment
March 13, 2013. Andrew Coyne

The convention of budget secrecy has governed the release of budgets for many decades, on the principle that sensitive tax or regulatory changes that might move markets ought to be announced to everyone at the same time. Hence the “lockup,” in which hundreds of reporters are herded into drafty conference halls hours ahead of the budget speech and imprisoned there, incommunicado, lest they call their brokers with hot tips on, say, the doubling of veterans’ funeral allowances.

Under this government the convention of budget secrecy has evolved somewhat. Nowadays, most of what’s in the budget has been leaked well in advance. It’s only after the budget has been released that the secrecy begins.

That is to say, the budget document itself has become a kind of coded palimpsest, written with the intent of disclosing as little as possible. Everything is in the ellipses. Whole passages are included for no purpose but to distract attention from other passages; others, seemingly innocuous, are later discovered to contain the government’s entire fall agenda. Everything else is just left out.

Over the years we’ve grown used to seeing finance ministers shuffle spending forward and back in time, or claim that a spending program is really a tax cut, or re-announce old programs as if they were new. But I don’t think I’ve ever seen a budget quite so opaque as this one.

It isn’t just the many significant details it omits — for example, the content of the government’s spending plans. It’s that what is included is so maddeningly misleading, not to say vexingly vague.

The sheer emptiness of the budget, indeed, led many reporters to assume there was nothing in it. We should have known. This government has a peculiar gift for understatement. When it wants to claim credit for something, it is careful to call attention to it in the best way it knows how: by leaking it to a member of the press. But when it has something controversial to announce, it whispers it in Swahili at the bottom of a well.

Here, then, are some of the subtler cryptograms in the budget, together with their probable meanings:

• Investing $241-million over five years to improve the on-reserve Income Assistance Program for First Nations.

Elsewhere this is described as “helping improve educational and labour market outcomes for aboriginal peoples,” or ensuring “First Nations youth can access the skills and training they need.” You’d never know that what they were describing was workfare. Only if you read on do you learn that recipients’ Income Assistance benefits “will depend on participation in training.” Moreover, access to the fund will be limited “to those reserve communities that choose to implement mandatory participation in training for young Income Assistance recipients.”

• Going forward, the government will continue to ensure that the public service is affordable, modern and high-performing.

Well, who could argue with that? Except, what exactly does it mean? As it turns out, it means the government will “examine overall employee compensation and pensioner benefits and will propose changes to the labour relations regime.” It will also examine “its human resource management practices … including disability and sick-leave management, with a view to ensuring that public servants receive appropriate services that support a timely return to work.” Translation: stingier pensions and fewer sick days.

• The new Building Canada plan provides approximately $53.5-billion in new and existing funding for provincial, territorial and municipal infrastructure.

If you blinked, you’d miss it: $53.5-billion in new and existing funding. The “new” plan is in fact an extension of the old plan. About $6-billion of the total is in funds that were already committed. That eye-popping total, moreover, is achieved only by summing over 10 years: provinces and cities will receive about the same amount per year under the “new” plan as they do now.

• The current DTC and gross-up factor applicable to non-eligible dividends overcompensate individuals for income taxes presumed to have been paid at the corporate level.

Buried deep in the budget, this eye-glazing bit of jargon is bad news for lots of people. The key phrase is “non-eligible dividends” — the dividends small-business owners pay themselves. The tax system credits dividend recipients for the tax already paid on that income by the corporation, with a view to ensuring they pay the same rate of tax as they do on other sources of income. But the system credits small-business owners, who pay a lower tax rate than the general corporate rate, for more tax than they actually pay. Closing that discrepancy is big news: at roughly $500-million annually, the biggest single revenue measure in the budget.

• Modernizing Canada’s General Preferential Tariff Regime for Developing Countries.

Chances are you heard about the tariff cut on imported sporting equipment and baby clothes: estimated to save consumers a cool $76-million a year. Chances are you didn’t hear about this: an increase in tariffs on imports from 72 countries, mostly in emerging economies, some of whom have grown quite wealthy. Previously they were eligible for a special lower tariff, as a form of aid. Now they’ll be charged — that is to say, you’ll pay — the regular rate. Estimated revenue yield: $333-million, nearly five times what you’ll save on skates.

• The budget for the Department of National Defence will be cut by $2.7-billion.

Actually this phrase does not appear anywhere in the budget, though we know from the Estimates that’s what’s coming. Neither does the budget contain any breakout of spending by department, nor any explanation for the remarkable decline in operating expenditures, from $80.5-billion last year to $74-billion in 2014-15, beyond a bland reference to “spending reductions implemented in earlier budgets.”

That’s presumably a reference to the $5.2-billion in cuts outlined last year, the details of which have never been revealed. (By coincidence, the Parliamentary Budget Officer is now in court, seeking the authority to compel departments to hand them over.) You’d think that would be the sort of basic information you’d put in a budget, but as I say, these days it’s a secret.

Read the full text of the 2013 Federal budget: < >

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