NEWS
02/11/2014 04:16 EST | Updated 04/13/2014 05:59 EDT

Budget 2014: Flaherty comes close to surplus while keeping promises vague

Vague promises and a fourth straight year of federal spending cuts marked Finance Minister Jim Flaherty’s 10th federal budget Tuesday, putting him within the margin of error of balancing the books a year ahead of schedule.

Updated figures in the budget show the Conservatives with a $2.9-billion deficit, just within the $3 billion contingency Flaherty has built in in case of major blows to Canada’s economy. The Finance Department upgraded its projected surplus for next year to $6.4 billion from $3.7 billion.

Flaherty defended his decision to err on the side of a deficit, saying Canada has carried a contingency fund for a long time and “it’s proven necessary quite frequently, so I think it would be imprudent not to do that.”

“If you do the arithmetic we could have had a budget balanced by $100,000,” he said. “I prefer to have a nice clean surplus.”

The government also dug in its heels on last year’s signature job-training program, the Canada Job Grant, after a year of bickering with the provinces over how to pay for and administer the program. The budget says the program will start April 1 as planned and will be offered through Service Canada centres in places where the federal government can’t reach agreement with a province or territory.

Much of the savings this year come from pushing back defence procurement spending and booking savings from cutting spending on health coverage for retired public servants, despite not having a deal with public service unions.

Lack of details

Despite advance hints of consumer-driven measures and help for youth employment, the budget contains mostly vague promises and small programs aimed at big problems, with most spending set to start after 2014.

Big investments include $500 million over two years to an auto sector innovation fund, $1.5 billion over 10 years for research post-secondary institutions and $391 million over 5 years to repair aging infrastructure at Canada's National Parks.

The free-market Conservatives promise to make it illegal to charge Canadians more for products that are cheaper in the U.S. by giving the Competition Bureau the mandate and powers to go after clear price gouging. It’s not clear what would qualify as price gouging, but details are expected in the next few months.

Flaherty said Canada is relatively affluent and therefore a target for “country pricing,” where companies target consumers with higher prices than in other countries.

The budget also promises to assess whether last year’s cuts to import tariffs made a difference on the cost of sports equipment and baby clothes. The government is relying on retailers to pass on savings to Canadians.

On youth unemployment, the government promises to “review the Youth Employment Strategy to better align it” with the modern job market and is continuing its focus on apprenticeships and careers in the skilled trades. The budget promises a Canada Apprentice Loan to provide interest-free loans to apprentices registered in certain trades, as well as to $40 million for up to 3,000 internships in high-demand fields over the next two years.

Wireless rates, credit cards

The budget also pledges to give the CRTC and Industry Canada the power to fine companies that break the CRTC’s new Wireless Code of Conduct and other competition rules. The government has targeted big cell phone service providers recently, running an ad campaign questioning their prices and quality of service.

After a lot of talk about the high costs merchants pay to accept premium credit cards and a Competition Board decision that it’s up to Parliament to legislate the issue, the budget promises only to consult “with stakeholders” to lower some of the highest credit card acceptance costs in the world.

Other consumer-friendly promises include:

- $305 million over five years for broadband internet access in rural and northern communities.

- A further update to liquor laws to let people to transport beer across provincial boundaries, much as Parliament did for wine nearly two years ago - if provincial governments also accommodating the change.

- New intellectual property rules based on a variety of international agreements: the Madrid Protocol, the Singapore Treaty, the Nice Agreement, the Patent Law Treaty and the Hague Agreement.

- A consumer awareness campaign to promote made-in-Canada products.

- Clarifying rules for a much-lauded wireless spectrum auction intended to bring more competition into the sector. The government has had a hard time attracting new entrants to the market despite the high-quality spectrum up for grabs.

- A cap on wholesale domestic wireless roaming rates, which the government hopes will keep costs for consumers in check.

The budget also pledges consumer awareness campaigns on payday loans, reverse mortgages, and powers of attorney and joint bank accounts.

Boutique cuts abound

Just a year away from the promised deadline for balancing the budget, Flaherty still found room to include boutique tax breaks, like a credit for search and rescue volunteers and a promise to ease regulations for craft breweries.

Service dogs used to detect plummeting blood sugar in severe diabetics will now fall under a medical expense tax credit.

Breweries, meanwhile, are being promised new standards under the Food and Drug Regulations to allow beer to include more ingredients and still be labeled as beer.

But the budget will also raise the cost of cigarettes, increasing taxes on a carton of 200 cigarettes from $17 to $21.03, which works out to about 50 cents a pack. That’s worth $96 million over the next fiscal year, up to $660 million in 2015-16. The tax will be indexed to inflation if the budget bill passes.

Other niche promises include:

- A pledge to secure international recognition that Canada’s continental shelf extends to the North Pole.

- $11.4 million over four years to expand vocational training programs for people with Autism Spectrum Disorder.

- $10 million over two years for snowmobile and recreational trails.

- Legislation to stop suspended senators from counting that time toward their pensions.

- Exploring options for “a national approach to residential flood insurance.”

- Exempting acupuncturists’ and naturopathic doctors’ services from HST and GST.

The government is also pledging $2.1 million to improve online access to Veterans Affairs Canada, which some veterans have recently said is difficult to use. The government has closed nine Veterans Affairs offices across Canada.