Liberals likely to turn off spending taps
The size of the deficit in the coming fiscal year will be “broadly similar” to the $27.8 billion shortfall revealed in the fall fiscal update, says a senior government official familiar with the plan.
The “not dissimilar” fiscal projection to be revealed in Wednesday’s budget by Finance Minister Bill Morneau suggests that the Liberal government will resist the urge to let the spending taps gush, leaving some potential beneficiaries unhappy.
“It’s not a stand-pat, nonews budget but it is not a large change in direction from budget 2016,” the official said. “We have placed a lot of money into the fiscal framework already and the budget will offer more details on where it’s going.”
The fall fiscal update revealed additional infrastructure spending of $81 billion over 11 years. The budget will offer details on where some of that money will be spent.
The Federation of Canadian Municipalities has recommended $12.6 billion over eight years to be spent on social housing but there are concerns from some big city mayors that this amount could be trimmed and the roll out time extended.
Other major decisions that might have been included in the budget, such as the privatization of big city airports and a hike in defence spending are not likely to appear Wednesday. The official said the government is not yet in a position to make any moves on selling off airports or ports. “We are still at the discussion stage,” he said.
Lack of progress on the airports file is likely to frustrate some institutional investors.
“They have a sweetly naive attitude,” said one Bay Street pension fund official. “The money may go somewhere else and they may not be able to make the deal they think they can.”
The budget will have some defence-related news but major initiatives, such as the decision on whether or not to sign up to the U.S. ballistic missile defence program, will appear in the defence policy review, due later this spring.
The focus of the budget will be on innovation and it is likely to include a radical overhaul of the way Ottawa spends billions of dollars on business innovation programs.
The finance minister’s advisory council on economic growth has “strongly recommended” reviewing and re-tooling the billions of dollars handed to companies in the hope they will successfully commercialize good ideas.
“Canada lacks data about program effectiveness to make evidence-based policy choices about how to allocate funds,” the council’s report concluded. It suggested eliminating programs that are not effective, and redirecting resources to fund new programs.
The government is also likely to kill off tax credits that are either deemed redundant or which disproportionately benefit high income earners.
The government has already felt the blast of concerted opposition to ending a popular tax credit when word leaked that it was considering taxing health and dental benefits, a move the Liberals later ruled out.
But the official said the finance department has looked at 75 different tax credits and a number are likely to be chopped in an attempt to free up some money.
Speculation has centred on tax credits like the $670 million spent every year subsidizing drinks and fine dining for corporate executives — 50 per cent of which is tax deductible.
When the move was suggested by the Ontario government in 2012, the Ottawa Senators hockey club said the move would put the team out of business.
IT’S NOT A STAND-PAT, NO-NEWS BUDGET BUT IT IS NOT A LARGE CHANGE IN DIRECTION FROM BUDGET 2016. WE HAVE PLACED A LOT OF MONEY INTO THE FISCAL FRAMEWORK ALREADY AND THE BUDGET WILL OFFER MORE DETAILS ON WHERE IT’S GOING. — SENIOR GOVERNMENT OFFICIAL