Canada Budget 2012: Tories To Lay Down Majority Markers With First Unfettered Budget

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OTTAWA - After six years in office, Prime Minister Stephen Harper's Conservatives finally get to flex their majority muscles today with a budget of deep spending cuts and government streamlining.

Everything appears up for a rethink, from the way major resource projects are assessed to how immigrants are selected, research and development is funded and the eligibility age for certain pension benefits.

The first budget since last May's majority victory, Foreign Affairs Minister John Baird boasted Wednesday in the Commons, "will help the middle class by ensuring the long-term prosperity of this great country."

"It will support the priorities of working families, creating an environment for job creation, supporting health care, supporting education. It is going to do great things over the next year on this plan."

The Conservatives have been pushing a "jobs and growth" mantra for months, including some $12 million in pre-budget advertising by Finance and the Canada Revenue Agency.

But a more frank appraisal might frame the budget as short-term pain for longer term gain.

Among the expected measures:

— Cuts totalling about $7 billion, or 8.5 per cent of government program spending, over three years that will have an impact on everything from military spending to environmental monitoring and the CBC.

— Changes in the long term that will raise the age of eligibility for old age security to 67 from 65, affecting most Canadians younger than 50.

— Streamlining the environmental assessment process for major projects such as mines and pipelines.

— More targeted government subsidies for research and development.

— Changes to skills training, the qualifications of economic migrants and some employment insurance programs in an effort to make Canada's labour market more productive.

The official Opposition NDP is already accusing the Harper government of engineering an ideologically driven race to the bottom.

Harper's minority run of politically popular tax cuts and lavish pork-barrel spending, say New Democrats, have set the table for this day of reckoning.

"The Conservatives have caused the problem by gutting the fiscal capacity of the government," Thomas Mulcair, the newly crowned NDP leader, said Wednesday.

"Now they're saying, oh, gee whiz, no more fiscal capacity in the government, we know what we'll do, we'll start cutting the services of the government."

With more than three years of unobstructed majority rule ahead until the next federal election in the fall of 2015, former government ministers agree now is the time for the Conservatives to act boldly.

With so much international economic volatility, Finance Minister Jim Flaherty pushed back the budget date as long as possible.

The spending blueprint, typically delivered in February, comes on the second-to-last business day in the government's fiscal calendar before the April 1 start Sunday of the 2012-13 year.

And despite better-than-expected numbers that have economists predicting the 2011-12 federal deficit could come in as much as $10 billion below the $31 billion projected last November, deep government cuts remain on track.

"Any of the hard things you believe you are going to have to do, you got to get them out of the way early," John Manley, head of the Canadian Council of Chief Executives and a former Liberal industry minister, said in an interview.

"First of all it shows a direction, and secondly it enables you to have time to deal with any political fallout."

Perrin Beatty, president of the Canadian Chamber of Commerce, said that after almost a decade of Liberal and Conservative minorities, it's time for some long-term budget thinking.

"In a majority government, you look at where Canada will be four years from now," said Beatty. "In a minority parliament you look at where you'll be four weeks from now. And that's very different."

And in just under four years, Harper's Conservatives will be going back to the electorate looking to extend their government for a fourth term.

They've already made expensive promises — contingent on balanced books — that would allow them to campaign in 2015 on income splitting for families with children and a doubling of the limit on tax-free savings accounts to $10,000 annually.

Those measures, if enacted, will further erode federal revenues by billions in subsequent years, constraining the ability of future governments to restore program spending without increasing taxes.

— With files from Julian Beltrame

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