OTTAWA – Finance Minister Joe Oliver guided his maiden budget voyage into port Tuesday with a precious cargo of targeted pre-election measures on board — and just enough leeway to keep the federal books above water.
The razor-thin $1.4-billion surplus projected this year — the first in eight years and just the third since Prime Minister Stephen Harper took office riding a $13-billion surplus in 2006 — is entirely dependent on a lengthy series of bookkeeping measures, including asset sales, reduced reserve funds and unrealized collective bargaining gains.
“A promise made, a promise kept, Mr. Speaker, this budget is written in black ink,” Oliver told the House of Commons in a budget speech remarkable for its sharp partisan rhetoric.
The election subtext was also written all over the 518-page budget document.
Popular pocketbook measures for targeted voting blocs, a dominant emphasis on security spending and a play to patriotism are the Conservative election pennants.
They’ve also left precious little room for campaign spending promises by their opponents.
NDP Leader Tom Mulcair called the surplus “economic sleight-of-hand” and said the budget measures will “help the wealthiest few at the expense of everyone else.” But he denied the fiscal framework would foreclose NDP initiatives.
“I have been around the cabinet table, I know what it is to make those tough choices day in, day out, and I know what it is to have priorities,” said Mulcair.
Liberal Leader Justin Trudeau was equally dismissive.
“They’re doing everything they can, including artificially keeping (employment insurance) rates higher than they need to be, in order to be able to say in an election year that they’re balancing the budget,” Trudeau said.
“This is about politics, not economics.”
The template was set months ago, when Harper announced a five-year, $27-billion package of family benefit increases and targeted tax cuts. The first retroactive cheques will arrive in family bank accounts this July, with an election call expected by the first week of September.
However, shortly after Harper’s Halloween spending binge, global oil prices took a precipitous dive and the ship of state began leaking revenues. As a result, the 2015-16 budget showed up late — and barely afloat.
Total program expenses this year are budgeted at $263.2 billion, up from $254.6 billion in 2014-15, while revenues are forecast at $290.4 billion in 2015-16, an increase of $11 billion over last year. Public debt charges are projected to fall by a billion dollars to $25.7 billion.
Marginal surpluses are projected for the next five years, topping out at $4.8 billion in 2019-20.
“If you want to come to the most important reason that we’re in a budgetary surplus today it’s that we’ve restrained public expenses,” Oliver told a news conference.
However, the Conservatives also threw overboard their usual $3-billion contingency reserve, cutting the cushion to $1 billion for the next three years at a time when global economic turbulence makes prudent assumptions all the more advisable.
They sold off a stake in General Motors for a net gain of $2.1 billion. They’ve booked $900 million in savings from civil service negotiations that have yet to take place, while offloading $1.6 billion in spending on veterans benefits into the previous fiscal year — effectively killing the 2014-15 surplus in order to preserve one for this election year.
“There’s a lot of things booked in here that are not based on economic fundamentals,” said Randall Bartlett, the senior economist at TD Economics.
“I wouldn’t necessarily call it the healthiest balance. Is it on the strength of the economy and the strength of revenues? It’s not.”
Business groups and small-government advocates nonetheless applauded.
“Credit where due,” said Aaron Wudrick of the Canadian Taxpayers Federation. “The Harper government has shown the necessary discipline to get the books back into the black.”
What the budget may lack in fiscal depth, it more than makes up for in eye-catching policy (including balanced budget legislation), even if many of the new spending measures don’t ramp up immediately.
The major pre-election spending is aimed at families, with other priorities temporarily put on hold.
Starting in 2017, there’s money for major public transit systems that eventually will hit $1 billion annually. Those funds are expected to target Toronto, Vancouver and Montreal.
There are significant increases in the military budget, again starting in 2017, and more than $290 million over five years for the RCMP and Canada’s spy services to enforce the government’s new anti-terror law.
Seniors will see a relaxation of the rules on registered retirement savings redemptions, a near-doubling of the annual tax-free savings account limit to $10,000, and new writeoffs for home retrofits to accommodate disabilities.
The tax rate for small businesses will gradually drop to nine per cent from 11 per cent, and there’s a 10-year accelerated capital cost allowance for manufacturers and new lifetime capital gains exemptions for fishermen and farmers.
Even as he made an ideal election-year pitch, the rookie finance minister denied having geared his budget to an election-year audience.
“We believe, as we’ve said again and again,” Oliver said, “Canadians need a break.”
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