OTTAWA - The federal budget has endorsed a major report that urged the government to link the hundreds of billions of dollars of projected military spending to a job-creation strategy for the Canadian defence industry.
The Public Works Department commissioned the report by Tom Jenkins, chairman of OpenText Corp., who recommended in February that the government use a "once in a century" opportunity to leverage the $490 billion in defence spending over the next 20 years.
The budget document contains no new funds specifically aimed at the initiative.
But the budget affirms the core message the Jenkins report delivered: that the government must ensure future purchases of military equipment be used to "create economic opportunities for Canadians by developing key domestic industrial capabilities" on future procurement.
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2013 BUDGET HIGHLIGHTS
Revenues for 2013-14 forecast at $263.9 billion, spending at $282.6 billion, deficit at $18.7 billion. Deficit projected to drop to $6.6 billion in 2014-15 and become an $800-million surplus in 2015-16. With files from Althia Raj and The Canadian Press.
Tackling The Skills Gap
The Tories plan to create a Canada Job Grant that will provide $15,000 or more per person -- up to $5,000 provided by the federal government, the rest matched by the province/territory and the employer. Nearly 130,000 Canadians are expected to benefit when the new grant is fully implemented in 2017-2018. Essentially, this is the government saying it is taking training out of the hands of provincial governments because it hasn’t worked and placing it in the hands of individuals. The Canada Job Grant will replace the Labour Market Agreements the feds signed with the provinces, which expire in 2014.
Manufacturing and small business get tax-credits introduced in past budgets extended to help spur investment and growth. There will be $1.4 billion in tax relief for manufacturers by extending the temporary accelerated capital cost allowance for new investment in machinery and equipment. And hundreds of millions for small business owners.
The government has pledged more than $53 billion in infrastructure spending, including $47 billion in new funding over 10 years. This includes $32.2 billion over 10 years for a “Community Improvement Fund” to build roads and public transit as well as recreational facilities and other community infrastructure projects. The Fund will consist of an index Gas Tax Fund and the incremental GST Rebate for Municipalities.
Military spending will be re-jigged that it is modeled on the ship building strategy and aimed at creating more jobs in Canada and key domestic capabilities with an eye towards exports.
Foreign Affairs - Aid Agency Cancelled
The budget has cancelled the Canadian International Development Agency, the primary agency responsible for foreign aid. Its duties will be merged into the Department of Foreign Affairs.
Tax Evasion Snitch Line
The government says it is aggressively going after tax avoiders/and closing tax loopholes. They are launching a “Stop International Tax Evasion Program” where the Canada Revenue Agency will pay individuals with knowledge of “major international tax non-compliance” a percentage of the tax collected as a result of information provided. The CRA will only pay a reward if the information results in total additional assessments exceeding $100,000 in federal tax.
Public Service Cuts
Two departments -- Canada Revenue Agency and the Department of Fisheries and Oceans -- will see big cuts. Departments will see a 5 per cent cut in their travel budgets. The government also says in the budget it intends to work with the public sector unions to “further align overall compensation with other public and private sector employers.”
The federal budget says new projects related to Canada's perimeter security deal with the United States will go ahead as planned, despite budget woes south of the border. The federal budget has given the green light to almost a dozen information-sharing and infrastructure projects related to the Beyond the Border initiative between the two countries. The vaunted deal was announced with fanfare by Prime Minister Stephen Harper and U.S. President Barack Obama in December 2011 at the White House. The plan aims to speed the flow of goods and people across the 49th parallel while protecting the continent from a terrorist attack.
Tobacco Prices Going Up
The government wants to reduce import tariffs on a number of goods including baby clothing, skis, snowboards and gold clubs. But it plans to offset the $76-million revenue loss from that by hiking excise taxes on chewing tobacco and other manufactured tobaccos, to bring them in line with cigarette taxes.
Finance Minister Jim Flaherty's spring budget commits Ottawa to five more years of funding through the Investment in Affordable Housing program. The level of commitment is the same as in the past: $253 million a year over five years, which needs to be matched by the provinces and territories and can be spent on new construction, renovation, home ownership assistance, rent supplements, shelters and homes for battered spouses. But there's a new twist to the funding. Home construction in the program will support the use of apprentices so that newcomers to the construction trades can build up crucial experience. The budget also commits $100 million over two years to build 250 more units of affordable housing in Nunavut, where homes are so crowded that illness spreads easily and poverty abounds.
"The government endorses Mr. Jenkins' proposal to use key industrial capabilities as a means of fully leveraging defence procurement projects to support economic opportunities for Canadians," say the budget documents.
"A key opportunity for doing so is by targeting, as estimated by Mr. Jenkins, the $49 billion in Industrial and Regional Benefits obligations that foreign prime contractors are expected to accumulate by 2027 to support high-skill and high-value opportunities and jobs in Canadian industries."
The budget document said the overall strategy would "provide Canada with a stronger manufacturing base with a capacity for leading-edge technology and innovation. The potential benefits for the Canadian economy are significant."
Military procurement has been a political minefield for the Harper government. It was forced to set up a new secretariat within Public Works to oversee big Defence Department purchases after scathing criticism by the auditor general of the controversial F-35 stealth jet fighter procurement.
The Jenkins report said that the production and trade of military goods is "powerfully influenced by governments" that can encourage the development of a country's defence industry.
"Many of the most highly industrialized countries have thus developed, explicitly or implicitly, strategies that promote their defence-related industries, recognizing that such innovative, dynamic industries contribute importantly both to sovereignty and to growth," Jenkins wrote.
The budget touts several big spending projects, notably the National Shipbuilding Procurement Strategy, a 20-year, $35-billion plan that will see military and coast guard vessels built in shipyards in British Columbia and Nova Scotia.
The budget says the government will move this spring on Jenkins' recommendations and will begin an analysis that will look at "selecting a series of interim key industrial capabilities to help guide immediately pending defence procurement projects."
The budget also commits the government to "strengthened oversight with the use of third-party expertise" to help improve the procurement process — a clear nod to the past criticism of the auditor general on the ill-fated F-35 project, and other long-delayed procurements.