National Post (National Edition)
FEDERAL BUDGET 2013
Flaherty holds line on spending but few signs of cuts Tipsters who turn in tax cheats in line for share of proceeds Corcoran, Ivison, Stinson & more,
After the long winter of five straight budget deficits, there was an air of spring about Jim Flaherty’s latest budget. The Finance Minister held out the promise of warmer, sunnier days of surplus to come.
In truth, the budget was short on drama — not necessarily a bad thing. Drama usually flows from reckless spending and, if events go to plan, this budget will bring in more money than it spends.
The year-on-year increase in spending is just 0.7 %, the lowest since the mid-1990s. The 2013 budget anticipates investments of $6.9-billion over five years, but that spending is more than offset by measures like closing tax loopholes that will increase the amount Ottawa takes in through taxation and tariffs.
Hockey moms and golfers will relish the savings on sporting goods from tariff reductions, but what Mr. Flaherty gave with one hand, he took away with the other.
Ottawa has “modernized” its general preferential tariff regime for developing countries, which will make imports from more than 70 countries — including China, Brazil and Indonesia — more expensive.
The changes will yield more than $1-billion over the next five years — three times the savings offered by the duty reductions — so perhaps you might want to hold off before rushing out to Golf Town for your new TaylorMade Rocket Ballz driver.
A government that prides itself on holding the line on taxes also sneaked in a tax hike by raising the rate paid on dividends by “non-eligible” taxpayers — typically small business operators who pay lower corporate tax rates. They have just seen their tax bill rise, while the government has booked a whopping $2.4-billion over the next five years.
“The principle is that we should all pay our fair share,” the finance minister said, which is unlikely to placate those small business owners who had planned on taking money out of their companies.
Some taxpayers won on the swings; others lost on the roundabouts. But the upshot is a government that appears to be on course to balance the budget in time for the next election.
Much of the spending is not new — merely the renewal or extension of programs the government thinks are working but were about to sunset.
The broad-based, and hence expensive, Accelerated Capital Cost Allowance, that lets manufacturers write down investments in machinery more quickly, was renewed, as was the hiring tax credit for small businesses.
The Harper government is confident, with some justification, that it is on the right course, so there was no deviation from a plan that has created the conditions for 950,000 new jobs since the trough of the recession — most full-time, private sector jobs in high-wage industries.
Reading the budget, you get the sense that if this government were made of chocolate, it would eat itself. The only area of fallibility in its eyes is skills training, currently administered by the provinces. This is likely to be the next political battlefield, as Ottawa tries to wrest con- trol of the $2.5-billion it currently mails out to the provinces for training every year.
Government officials say they are merely responding to the needs of employers, who claim they can’t find the workers they need. The “demand-driven” solution is the creation of the new Canada Jobs Grant, under which businesses with a plan to train unemployed Canadians can apply for up to $5,000 per person in federal contributions that must be matched by the relevant province and the employer.
The feds will claim that the money is still being sent to the provinces to distribute but clearly all discretion has been drained from provincial labour and training ministries.
The resulting furor should ensure that a couple more Conservative MPs in Quebec will have more time to spend with their families after the next election.
The other front on which the Conservatives are likely to find themselves fighting will be the aboriginal file. The budget proposes $241-million over five years to improve training for the pool of unemployed on-reserve natives claiming Income Assistance. More money is being made available for training but benefits will depend on participation — no training, no benefits. Idle No More will doubtless defend the right of its supporters to remain idle.
But the government should be given the benefit of the doubt on both programs. Clearly neither is a vote-winner, so we must conclude they are being introduced for policy reasons.
Circumstances have contrived to produce a string of deficits and $150-billion in new federal borrowing that cost Canadians $81-million a day in interest payments.
But Mr. Flaherty has brought down a disciplined budget that shows a clear route back to balance through what he called “quite moderate choices.” Most of the heavy lifting was done last year, since when the public service has shed 16,000 jobs and government has found $5.2-billion in operational savings. By 2017/18, program expenses as a share of GDP and net debt to GDP will fall to pre-recession levels.
The snow swirled around Parliament Hill as Mr. Flaherty delivered his budget speech. Yet there was an undeniable feeling that the darkest days are behind us and an economic spring, which seemed so far away for so long, may soon by upon us.