March 29 Federal Budget Won't Detail Cuts
The federal budget will be delivered on March 29, Finance Minister Jim Flaherty announced Wednesday, but it won't contain all the details of the government's planned spending cuts.
All government departments were asked over the last year to find savings amounting to between five and 10 per cent of their budgets, with the ultimate goal of cutting $4 billion in spending annually.
Flaherty told reporters the results of the spending review won't be laid out in detail in the budget.
"There's not going to be intimate detail," he said. "We never have all the intricacies in the budget. The budget would have to be 1,000 pages if we did that. There will be enough information that it will be comprehensible — that it will describe what we're doing in terms of the deficit reduction action plan and much more than that."
Flaherty described the plan as "a jobs-and-growth budget" and said cuts are "just one aspect of it."
He would not indicate how deep the cuts will reach when he presents the budget in exactly one month.
'Relatively small' cuts
Though the announced total savings target is $4 billion a year, CBC reported recently that the government is becoming more aggressive in its targets and the overall target could end up reaching $8 billion.
"The key is this: We have a $265-billion budget. We're talking about relatively small spending reductions, certainly nothing more than moderate spending reductions in a budget of that size," Flaherty said.
Canadians shouldn't expect to see the kinds of austerity budgets that were experienced in the mid-1990s, the finance minister told reporters. "This is not in that order of magnitude."
The federal public service, which numbers about 300,000, is bracing for job cuts and is vowing to fight whatever cuts end up being made. Flaherty said some of the estimated job loss numbers he's seen from the unions are "outrageous."
"I don't know where they're getting their numbers from," he said, adding he thinks Canadians believe it's realistic to ask the public service to "participate in the belt-tightening that the rest of the country has been doing."
Flaherty said the government is still on track to erase the federal deficit by 2015. Last week, his department said the federal deficit stood at $17.7 billion at the end of December, prompting speculation about whether the books might be balanced sooner than 2015.
Sticks to fall projections
But Flaherty said Wednesday that he hasn't revised the projections given in his fall economic update.
"We have a track going forward and we are on the track," he said. "It's possible we'll do a bit better but I think right now when I look at the numbers we're still on the track we were on in the autumn."
In addition to possible spending cuts, recent government talk about changing Old Age Security has also raised the anticipation surrounding the budget. The Conservatives have given no details on how they intend to change the income program for seniors, only that changes must be made to ensure it is sustainable for future generations.
Human Resources Minister Diane Finley has promised that seniors now receiving the cheques and those nearing retirement will not be affected by changes to the program.
The NDP has been pushing the government in question period to say whether it plans to raise the eligibility age for OAS from 65 to 67 but the government has refused to answer.
"If [Flaherty] talks about cuts or raising the retirement age, he will see, I think, a very significant push-back from the Canadian public," NDP finance critic Peter Julian said after Flaherty's announcement.
Julian said the budget date is later than usual, and his party is "hoping what's happened is the government is backing off from what seemed to be a very precarious course that they were setting a few months ago — looking at massive cuts in services, massive cuts in jobs, that would lead inevitably to a worsening of what is a very precarious economic performance right now in Canada."
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OAS vs CPP
Here is a look at OAS and the CPP and how they differ. (Getty) <em>With files from CBC</em>
What is OAS?
The Old Age Security pension is a monthly payment available to Canadians aged 65 and older who apply and meet certain requirements. Unlike CPP, it is not dependent on a person's employment history and a person does not need to be retired from a job to qualify. The government adjusts the OAS payment every three months to account for increases in the cost of living according to the Consumer Price Index. The average monthly amount was $508.35 in the last quarter of 2011. The maximum payout for the first quarter of 2012 is $540.12. There are also supplementary programs, including the Guaranteed Income Supplement, which provide additional income to low-income seniors. The government claws back OAS payments from high-income Canadians. In 2011, for example, if you were retired but had an income of more than $67,668 (from things like pensions and personal investments), the government would reclaim part of your OAS payment - 15 cents for every dollar of income that you had above the $67,668 threshold. That means that if you were retired with an annual income of around $110,000 or more in 2011, your OAS payout would be reduced to zero. (alamy)
Who Is Eligible?
OAS is available to Canadian citizens and legal residents living in the country who have spent at least 10 years in Canada after they turned 18. It is also open to people outside of the country who were Canadian citizens or legal residents on the day they left the country, as long as they spent at least 20 years of their adult life in Canada. (Getty)
When Should You Apply?
A person should apply for OAS six months before they turn 65. If you have not lived in Canada continuously or were not born in Canada, the government requires a statement containing all the dates when you entered and left the country. It may also ask for supporting documentation. If a person applies after age 65, they can receive up to 11 months in retroactive payments along with a payout for the month in which a person applies to receive OAS. So if a person applied after their 66th birthday, they would receive 12 months of OAS payments. (<a href="http://www.flickr.com/photos/elwillo/" target="_hplink">Flickr:Keith Williamson</a>)
How Is The Rate Calculated?
In order to qualify for a full pension, a person must have lived in Canada for at least 40 years after turning 18. People also qualify if they reached the age of 25 on or before July 1, 1977, and either lived in Canada, had some residency in the country after age 18, or held a valid Canadian immigration visa and spent the 10 years immediately before appying in Canada. For those who do not qualify for a full pension, a partial amount is paid out based on the number of years spent living in Canada. For instance, if a person has spent 36 years of their adult life in the country, they will earn 36/40th of the full OAS amount. Based on the eligibilty requirements, the minimum payout is one-quarter of the total, to account for a total of 10 years spent in Canada. Once a partial pension has been approved, the percentage of the total OAS pension received will never increase even if a person spends more years in Canada. (Matt Cardy/Getty Images)
What Is CPP?
The Canada Pension Plan is a form of retirement income that is open to all Canadians who have worked and paid into the system through deductions from their paycheques. The amount a person receives under the system depends on how much and for how long a person contributed, along with the age at which a person started receiving CPP payments. There are three types of CPP benefits: disability benefits, retirement pension and survivor benefits. For the purposes of clarity, this article focuses on retirement pension form of CPP. The average monthly CPP benefit in 2011 was $512.64. The maximum payment in 2012 is $987.67. The government adjusts the CPP rate every January to account for changes in cost of living as measured by the Consumer Price Index. According to Service Canada, "If you have lived and worked in Canada most years between age 18 and 65 and earned about the average Canadian wage ($39,100 in 2002), at age 65 you would receive a CPP retirement pension of about $788 a month." (Getty)
Who Is Eligible?
Anyone who has made a payment to CPP is eligible for full retirement pension benefits once they reach the age of 65. A person can begin receiving CPP anytime after age 60 if they stop working or reduce their income, although they incur a financial penalty by doing so. In 2012, a person receiving CPP early will be subject to a 0.52 per cent reduction for each month before the age of 65 that they received payments. That number is slated to rise to 0.6 per cent each month in 2016. On the other hand, if a person chooses to delay CPP payments they receive a similar increase for each month they wait between the age of 65 and 70. In 2012, that increase works out to 0.64 per cent per month and will rise to 0.7 per cent next year. (alamy)
When Should You Apply?
This is really up to the individual and whether they want to receive a smaller or larger CPP benefit. However, the government recommends applying six months before a person wants their pension to begin. Canadians can apply online or print out an application and deliver it to a Service Canada location. Similar to OAS, a person can receive retroactive payments covering up to 12 months if they delay applying for CPP until after their 71st birthday. (alamy)
How Much Do I Contribute To CPP?
A person contributes 4.95 per cent of of their total pensionable income -- set at a maximum of $50,100 in 2012 -- to a total of $2,306.70 in contributions per year. Their employer contributes an equivalent amount. Self-employed people, on the other hand, must contribute both portions. Anyone earning less than $3,500 is automatically exempt from CPP contributions. At age 70, a person stops contributing to CPP even if they continue working. (alamy)