Friday 22 March 2013

The Budget: Conservatives stick to deficit-cutting strategy

The Harper Conservatives stuck to their deficit-reduction mantra in a federal budget that includes departmental cuts, a clampdown on tax evasion and help for the manufacturing industry.

OTTAWA—The Harper Conservatives stuck to their frugal, deficit-reduction mantra in a bargain basement federal budget that keeps the cash flowing for urban renewal projects but looks to corporate Canada to refurbish the struggling economy and get more Canadians into the workforce.

Finance Minister Jim Flaherty mixed departmental cuts, modest spending, a clampdown on tax evasion and support for Ontario’s hard-hit manufacturing industry in a strategy aimed above all at eliminating the $25.9 billion federal deficit by 2015.

The budget largely ignored demands by the NDP and some economists for Ottawa to engage in another round of stimulus spending to boost the economy, which Thursday’s document said will only grow by a mediocre 1.6 per cent in 2013.

“We will not spend recklessly,” Flaherty declared in the Commons on Thursday. “In uncertain global economic times, the most important contribution a government can make to bolster confidence and growth is to maintain a sound fiscal position.”

NDP Leader Tom Mulcair labelled the package a “shell-game con job.” He said austerity budgets are no way to cure a weak economy. The finance minister’s predictions for deficit-reduction and economic growth have been consistently wrong, Mulcair stated.

“When we’re here together next year, we’ll find out that that was also wrong,” he told the media after Flaherty delivered the budget.

The 2013 package is a grab-bag of measures and policies. To help return Ottawa’s books to black, the Conservatives are counting on ferreting out tax cheats and closing tax loopholes, which could pull in an extra $300 million in revenue this year alone. Ottawa for the first time is offering rewards for tips that help tax collectors track down people using foreign tax havens.

“What we’re after are people hiding their money offshore and avoiding Canadian taxes,” Flaherty told the media.

Responding to complaints that the same products cost more in Canada than the United States, the government is cutting $76 million worth of import tariffs on ice skates, skis and snowboards as well as baby clothing.

“This is an important test” to see if Canada’s retailers pass on savings to consumers, Flaherty remarked.

In a smattering of other measures, the budget:

1.     Scraps a tax deduction for owning a safety deposit box.

2.     Eliminates a wrinkle in the taxation of small business income, saving the government $500 million a year.

3.     Expands the adoption tax credit.

4.     Provides $248 million over five years to improve weather forecasts.

5.     Commits Ottawa to working with the provinces to regulate payday loan companies.

6.     Extends a small business hiring tax credit.

No across-the-board income tax increases, or cuts, were announced.

With 1.3 million unemployed, Flaherty unveiled a proposal to enlist the provinces and employers to expand skills training through the Canada Jobs Grant. Ottawa would provide $5,000 to a business willing to train an employee if the employer and provincial government each kick in an additional $5,000.

But the program, which would be funded with a portion of the $500 million the federal government already sends annually to the provinces for training, won’t start until 2014. And it will depend on successful federal-provincial negotiations. Quebec has already balked at such proposals.

Municipal leaders will be pleased by Flaherty’s commitment to renew the Building Canada Fund, which will provide approximately $14 billion over a decade to cities and towns to finance improvements in transit systems, bridges and other infrastructure.

In recognition of the tough times faced by Ontario’s manufacturers, the budget allocates $920 million to encourage economic activity through the Federal Economic Development Agency for Southern Ontario. Also, there will be $200 million over five years to promote innovative product development in Ontario under the Advanced Manufacturing Fund.

The 2013 package also helps manufacturers by providing $1.4 billion in tax relief when buying new machinery and equipment.

The frugal nature of the understated budget was driven home by continued belt-tightening, all with an eye to balance the budget by 2015, the year that Conservatives are due to face voters again.

Flaherty was adamant that goal would be met, saying a balanced budget was vital to safeguard the country against future global economic upsets.

“We can get there by 2015 by quite moderate choices . . . we do not need to slash and burn,” he told reporters.

The cuts announced in last year’s budget, including reducing the civil service by 19,200 workers, continue to bite. This year’s budget adds another $500 million in savings. Since 2010, the Conservatives have cut federal spending by $15 billion.

For 2013-14, Flaherty predicts an $18.7 billion deficit, followed by a $6.6 deficit in 2014-15 and a slight surplus the following year.

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