OTTAWA — The Conservative government’s first majority budget focuses on business-friendly incentives aimed at creating jobs while reducing the size of the public sector and eliminating or cutting many programs that don’t jibe with the party’s ideology.
“It signals a very profound change in direction,” said Ian Lee, an assistant professor at Carleton University’s Sprott School of Business.
“This is going to be a transformational budget and ironically, not because of the budgetary stuff in the budget, it’s going to be transformational because of so many policy initiatives, changes and direction,” he added.
Budget 2012, titled Jobs, Growth and Long-Term Prosperity, has the Tories slashing $5.2 billion from public services — a figure they’ll reach by 2014-2015.
Some of the departments hardest hit include National Defence, which is wrapping up operations in Afghanistan, Public Safety, Health Canada and the International Assistance Envelope. The federal government will spend $900 million to eliminate approximately 19,200 federal jobs (including attrition), mostly in the national capital region.
A measure to eliminate the penny will garner plenty of attention and headlines, perhaps a distraction from other Conservative cuts in areas they have long shown disdain for.
GALLERY: FEDERAL BUDGET HIGHLIGHTS
They plan to scrap the National Roundtable on the Environment and the Economy, a group that provides advice on the environment, saying they don’t need their advice any more. They will make it more difficult for charities, such as environmental groups that oppose pipeline developments, to engage in so-called political activities. The CBC will be chopped by $115 million. The youth program Katimavik will be killed.
Diplomats will have to live in less ritzy accommodations and public sector workers will be forced to work until age 65. Public employees will see some of their severance packages eliminated and, eventually, they will contribute more to their pensions. MPs will be asked to do their part too, the government said, but any pension changes for them won't take effect until the next Parliament.
The federal government will streamline environmental reviews to ensure the speedy approval of natural resource development projects, such as the Northern Gateway pipeline. It will spend $306 million next year for research and development, business investments, and help for entrepreneurs to bring their products to market.
The Tories aim to refocus the National Research Council toward “business-led, industry-relevant research” while slashing the Social Sciences and Humanities Research Council of Canada’s budget by $14 million – all while chasing free-trade agreements with renewed vigor.
On the labour front, the Tories will revamp the immigration system, killing a backlog of 300,000 skilled foreign worker applicants by sending them their money back. New applicants will be judged on whether they fit with current labour demands and applications have been capped at 10,000 annually.
The government will also invest heavily in Aboriginal education, as well as infrastructure to provide clean water on reserves. The budget also aims to help young people get “tangible skills.”
The budget will bring significant changes to Employment Insurance (EI), encouraging people to work while receiving benefits and standardizing qualification standards.
As expected, the age to qualify for Old Age Security and the Guaranteed Income Supplement benefits will be raised from 65 to 67, but the change won’t take effect until 2023 and will be gradually implemented over six years. Starting in 2013, however, the federal government will allow seniors to defer receipt of their OAS benefits for up to five years, a move which will result in a slightly higher benefit. The government predicts the cost of the program will explode as the Baby Boom generation retires.
Finance Minister Jim Flaherty said he has used the budget to lay out a clear policy direction for the country.
“The plan’s measures focus on the drivers of growth. Innovation, business investments, people’s education and skills that will fuel the new wave of job creation,” he told reporters Thursday.
“This is the largest budget we have done, it is looking at the longer term … up to 2020 and beyond,” he said, waving the 500-page book in the air.
GALLERY: FEDERAL BUDGET HIGHLIGHTS(Story Continues Under Gallery)
The government is calling the budget a plan for Jobs, Growth and Long-term Prosperity. "In this budget, our Government is looking ahead not only over the next few years but also over the next generation," said Finance Minister Jim Flaherty. "The reforms we present today are substantial, responsible and necessary. They will ensure that all across government we are focused on enabling and sustaining Canada's long-term economic growth." However, while the budget does include many investments, it also make a number of cuts and changes that will save money. Here are some of the highlights. (File photo by THE CANADIAN PRESS/Sean Kilpatrick)
The government is cutting spending by $5.2 billion on an ongoing basis, but it says it will not reach that total until 2014-2015. Ottawa says 70 per cent of these savings will come from "operational efficiencies." The planned reduction in spending is expected to result in the elimination of 19,200 public service jobs over a three-year period, 4.8 per cent of total federal employment. The government expects 7,200 of those positions to be eliminated through attrition. Six hundred executives positions are expected to be slashed. Roughly $900 million will be spent making these job cuts, on things such as severance and benefits. After 2014-2015, the public service cuts will save the federal government $5.23 billion per year.
The government is cutting the budget of Canada's national broadcaster by $115 million per year by 2014-2015. Currently, the CBC's total budget stands at roughly $1.1 billion per year, making for a cut of roughly 10 per cent.
The federal government is eliminating the penny. But prices won't necessarily be rounded. The cent will continue to be the smallest unit of sale and non-cash transactions, such as spending done with credit cards, will continue to be settled to the nearest cent. Existing pennies will continue to be legal tender for an indefinite period of time, but the Mint will stop producing new ones and distribution will cease in Fall 2012. If no pennies are available for a cash transaction, it will be rounded to the nearest five cent increment after GST/HST. The government says it currently costs 1.6 cent to manufacture a penny and that supplying them to the economy costs $11 million per year. (CP photo)
The government says it has no intention of building any new prisons, despite the passage of the omnibus crime bill that some experts suggests will increase the number of people incarcerated. The Tories plan to slash $295 million from Corrections Canada by 2014-2015. The RCMP will also receive major cuts, $195.2 million by 2014-2015. But the government will spend $9.6 million over three years to combat counterfeiting.
The government is moving to alter the current process for the environmental assessment of resource-based projects. It plans to move to one review for one project and to give these reviews a definite deadline. The change will affect the Northern Gateway pipeline. Additionally, the government wants to focus resources on reviewing the largest plans with the greatest potential for environmental impact. The federal government says it will do this while continuing to protect the environment. The government says this change is aimed at simplifying a complex system of reviews that imposes costly delays and deters investment. Canada's first near-urban national park will also be declared in the Rouge Valley in suburban Toronto. Other highlights include: - By 2014-2015, Environment Canada's budget will be reduced by $53.8 million per year. - $50 million will be spent over two years to protect species at risk.
The government is increasing the eligibility age for receiving Old Age Security (OAS) and Guaranteed Income from 65 to 67. The change will be made starting on April 1, 2023 and will be fully implemented by January 2029. The government will also allow individuals to choose to defer payment for a maximum of five years starting in July 2013. If a person does defer, they will receive a larger adjusted pension than if they had begun collecting at 65. The government says it is making the changes primarily due to demographic shifts. The pending retirement of the Baby Boomers will increase the total cost of the program from $38 billion in 2011 to $108 billion in 2030.
The feds are planning to reduce Health Canada's budget by nearly $310 million per year by 2014-2015. Health Canada and the Public Health Agency of Canada will consolidate many services, reducing what the government calls duplication, in order to achieve some of these savings. The government will also eliminate Assisted Human Reproduction, a group involved in the study of potential uses for stem cells. They also propose: - Expanding GST/HST and income tax breaks for health care services. - $51.2 million over two years to improve food safety. (Alamy photo)
The government is making an investment of more than $1 billion in science and technology. Canada currently lags behind other similar economies in terms of private sector investment in R&D and overall innovation, according to the government. Here are a few highlights of the spending: - $400 million to help increase venture capital investment by businesses. - $100 million for the Business Development Bank Of Canada for venture capital investment. - $110 million per year for the Industrial Research Assistance Program. - $105 million over two years help pay for innovation in the forestry sector. - $500 million over five years for the Canada Foundation for Innovations to pay for new competitions. Funding will start in 2014-15.
The government will revamp the immigration system by killing a backlog of 300,000 skilled foreign worker applicants by sending them their money and applications back. Up to $130 million will be spent refunding fees to skilled worker applicants who paid under outdated criteria. The feds are planning to improve the system for the recognition of foreign credentials The government will move to ensure businesses first look to domestic sources of labour before using the Temporary Foreign Worker Program. CORRECTION: A previous version of this story stated that the budget will kill a backlog of 460,000 skilled foreign worker applicants by sending them their money back. The actual number is 300,000. (pwenzel on Flickr)
The budget will implement the Beyond the Border security pact with the United States (The Action Plan on Perimeter Security and Economic Competitiveness and the Action Plan On Regulatory Cooperation). But the coming changes don't mean the Canada Borders Service Agency will escape cuts. The department's budget will be reduced by $143.4 million by 2014-2015 It will also seek to streamline for the process of bringing goods home from abroad by increasing the dollar amount exempted from tariffs for travellers. (Photo by Bill Pugliano/Getty Images)
The budget seeks to continue the government's work to expand Canada's international trading relationships. "Our government is undertaking the most ambitious trade expansion plan in Canadian history," said Flaherty. In his speech, Flaherty also signals that, while the U.S. will remain our largest trading partner, Canada needs to open its export economy to emerging economies. China, India and the Trans-Pacific Partnership are mentioned by name. However, there will be cuts. The International Assistance Envelope, which includes the Canadian International Development Agency, Foreign Affairs and International Trade Canada, the International Development Research Centre the Royal Canadian Mounted Police and Natural Resources Canada, will be cut by $377.6 million by 2014-2015. Most of that money will come from The Canadian International Development Agency -- $319.2 million. Foreign Affairs and International Trade Canada will be cut by $29.1 million. The federal government also plans to find $80 million in saving by selling official residences abroad. (Israeli Prime Minister Benjamin Netanyahu meets with Prime Minister Stephen Harper March 2, 2012 in Ottawa -- Amos Ben Gershom/GPO via Getty Images)
The budget touts the government's progress in modernizing the Canadian Forces through major investment. However, the Defence budget is about to fall substantially. Some of this reduction will come from improvements in efficiency, but much will come from the end of the combat mission in Afghanistan. The cuts will amount to roughly $1.12 billion by 2014-2015. According to Armine Yalnizyan, of the Canadian Centre for Policy Alternatives, these cuts are over and above the roughly half a billion announced during a previous round of strategic review. The size of the military will not shrink but it won't grow either. The regular Canadian Forces will remain at 68,000 members and the reserve force at 27,000. Veterans Affairs will also be on the receiving end of cuts - $66.7 million by 2014-2015. The budget will also provide $5.2 billion for the Coast Guard over the next 11 years. (Canadian soldiers prepare to leave Kandahar military base in southern Afghanistan on July 17, 2011 -- ROMEO GACAD/AFP/Getty Images)
The government is eliminating the Trudeau-era youth program Katimavik, as The Huffington Post Canada first reported. The federal government says the program benefits a very small number at an excessive cost per person. (CP photo)
The budget reduces spending on Fisheries and Oceans by $79.3 million by 2014-2015 The department will undergo a substantial restructuring. Services will be consolidated and the size of its motor vehicle fleet will be cut. It will also focus less on research, relying more on academia. (AFP/Getty Images)
The government will spend $275 million over three years on First Nations education. The money is budgeted for the building and renovation of schools on reserves. Ottawa is also set to spend $27 million over two years on the Urban Aboriginal Strategy. $330.8 million will also be provided over two years to build and expand water infrastructure on reserves. (CP)
Coming changes to MP Pensions are not outlined in the budget. Finance Minister Jim Flaherty said the changes he wants to make, increasing pension contributions by the MPs themselves and raising the age of eligibility will have to be discussed. (Alamy photo)
The government is making a number of changes to Employment Insurance (EI) it says are aimed at creating a more efficient program. -$387 million over two years for matching benefit amounts to wages in different local labour markets. Depending on the unemployment rate in the region, claimants will need between 14 and 22 weeks to qualify for EI. -$74 million over two years to help make sure claimants benefit from getting a job. EI claimants will be able to keep 50 per cent of their earnings without getting their benefits clawed back. - Limiting premium increases to no more than 5 cents per year. - $21 million over two years to improve the content and timeliness of information provided to job seekers. (Alamy photo)
Flaherty called his cuts “moderate” and dismissed the notion they were ideological.
“I’m not a very ideological guy, I guess because I get people mad at me for not being a strong enough fiscal conservative,” he said. “We are a moderate, pragmatic government that responds to the facts as they are,” Flaherty added.
The focus is more on prosperity than austerity, said Lee. “What they are saying is this isn’t just about doom and gloom and downsizing and layoffs, I think what they are trying to say is we are not just doing this for the sake of doing this, we are doing this because … this is going to free up resources to allow us to go down a different path.”
Allan Maslove, a former editor of the series “How Ottawa Spends,” believes there is no argument to be made for severe budgets cuts.
“The deficit is already coming down quite rapidly … (and) the economy is still pretty weak. Over the last several months there's been no real growth in employment,” he said. Cutting expenditures to balance the budget is not a way to strengthen the economy. If it does anything, it weakens the economy,” he told HuffPost.
“They didn’t need to cut, they could have invested in infrastructure …They could have done more for young people who are waiting to get into the labour market,” said Armine Yalnizyan, a senior economist with the Canadian Centre for Policy Alternatives. “There is no response to the middle class getting hollowed out.”
Despite the opposition, Flaherty’s fiscal plan will receive guaranteed smooth sailing in Parliament. As the first budget in a majority mandate, it’s also the time when big and painful changes — if a government wants to make them — are usually made, before spending ramps up again just in time for another federal election.
“If they are going to do anything controversial or unpopular, now’s the time to do it,” said Liberal MP John McCallum. “It’s the first time that (Harper) is in an unfettered position and can do what he wants.”
Weakening environmental reviews for pipelines plus major cuts of services to Canadians at a time when unemployment is so high, “those are not really Progressive Conservative actions,” McCallum added, “those are hard core Conservative action ... It’s ideological.”
Budgets are ideological tools, argued Donald Savoie, the Canada research chair in public administration and governance at l’Université de Moncton. “It is the most important instrument to give life to your policies.”
He believes that just like Liberal Finance Minister Paul Martin’s budget in 1995, which slashed services and health and social transfers to provinces, Flaherty’s budget 2012 will be a “game changer.”
But, he cautions, if people are sitting at home thinking this budget will redefine the role of the federal government, it is not going to happen.
“No government will redefine the role of the public sector in one budget, it’s done over a series of budgets,” he said.
CORRECTION: A previous version of this story stated that the budget will kill a backlog of 460,000 skilled foreign worker applicants by sending them their money back. The actual number is 300,000. The story also stated applications will be capped at 10,000 annually, the number has already be capped.