Federal Budget Leak Points To Few Surprises
THE CANADIAN PRESS -- OTTAWA - In a way, it will go down as the ultimate budget leak.
When Finance Minister Jim Flaherty stands up in the House of Commons on Monday to deliver the government's fiscal blue-print for the upcoming year, Canadians could be forgiven for thinking they have heard it all before.
They have. As Flaherty has repeatedly said since his party won its first majority on May 2, he intends to bring back essentially the same document he unveiled two months ago and that all three opposition parties rejected.
Taking what remains of the drama out of the process, Flaherty has also unveiled the two major changes he does intend to bring in -- setting aside about $2.2 billion for Quebec's adoption of the harmonized sales tax, and beginning the process of phasing out political party financing.
"Basically this is the March 22 budget with a couple of additions from the platform," the minister said recently. Officials have also let it be known there will be few surprises, if any, reducing the usual all-day lock-up for reporters to a slim two hours.
The difference is this time there is little the opposition can do except complain.
And that makes Flaherty's insistence on recycling the March budget at least a mild surprise.
"If you had asked me the day after the election what's the next budget going to look like, I would have supposed some of the measures that were brought in to garner some support (from the opposition) would have been dumped," said Bank of Montreal deputy chief economist Douglas Porter.
No to that, says Flaherty. The minister has pledged that the $400 million restart of the home retrofit program will stay. So will the $300 million boost for low-income senior pensions.
Both measures were among the demands made by the NDP for backing the March 22 budget and heading off an election. In the final analysis, the party judged Flaherty hadn't made enough concessions.
If Flaherty hasn't had second-thoughts about the inducements, neither have the New Democrats, who say the budget only went part-way toward meeting the needs of the elderly, among other failings.
And the NDP has good reason to stick to its guns, since Canadians almost tripled the party's standing in the House of Commons to 103 in the May 2 election.
"I think they have to remember a majority of Canadians did not vote for them ... so we will continue to propose the things Canadians supported us on," said Peggy Nash, the party's new finance critic.
But there's little doubt Flaherty is on solid political ground in re-introducing the March 22 policies, said pollster Frank Graves of EKOS Research.
Graves has recently concluded a major post-election survey that shows the budget, so much as it represents the government's economic policies, was identified as the single most important factor for voting Conservative.
"It was absolutely crucial. If you were to point to a single factor why they pulled a majority out it was the economy and the budget ... even more than leadership," he said.
Given that Prime Minister Harper campaigned on the budget and was rewarded with a majority, he would be taking a political risk if Flaherty were to significantly alter course only weeks after receiving a mandate to proceed.
TD Bank chief economist Craig Alexander said the one change he expects to see is an update on the economy, particularly as it is now known growth topped at 3.9 per cent in the first quarter.
That will likely lead to a lower deficit for the just completed 2010-11 fiscal year from the March 22 estimate of $40.5 billion, he said.
But on the future direction of the economy, Flaherty has already declared he intends to plug in the same projections for growth even though he concedes the risks to the recovery have risen.
Following a meeting with economists last week, the minister said the new budget will stick to the 2.9 per cent forecast for growth this year, and 2.8 per cent next year.
In a caution Wednesday, Parliamentary Budget Officer Kevin Page judged growth would only amount to 2.2 and 2.3 per cent in the two years.
But that doesn't mean the slower growth, even if it materializes, will significantly impact the fiscal projections, analysts said.
While real gross domestic product growth has slowed, nominal GDP -- which takes into account inflation and is more directly tied to government tax revenues -- is currently coming in stronger than the March budget estimated.
In the end, it may be a sawoff in terms of Ottawa's books, said Porter.
In March, most economists were pleased Flaherty established a firm timeline for eliminating the deficit in five years. Since then, the government said it would reach the goal in four.
For either target to be reached, however, Ottawa will need to limit annual spending growth to 1.6 per cent over the period, no mean feat for a government that was hiking spending by over six per cent annually in the years preceding the recession.
The target is more credible now, says Alexander.
"They have to make tough decisions ... so it would have been much harder to achieve the spending restraint with a minority government, that's very safe to say," he explained.