Let the cutting begin. Or is that just trimming? Or is it merely applying brakes to spending increases?
The spin from federal Finance Minister Jim “The Austere Axeman” Flaherty is that Ottawa is following through with telegraphed reductions in taxpayer outflow from federal coffers with Economic Action Plan 2012, but they are more window dressing than the rumoured austerity this budget was to deliver.
Stephen Harper’s Conservative government has never been good at cutting spending. For example, its 2009-10 program spending increased 13.1% – a rise that followed three years of annual hikes in the 7% range.
This time around there’s word of $5.2 billion in departmental spending decreases and elimination of 19,200 public service jobs, but overall the government will be increasing annual spending 2% until 2015-16. Flaherty also missed his majority government’s opportunity to improve the efficiency and effectiveness of the GST by plugging its growing number of revenue leaks from tax exclusions. A more comprehensive consumption tax could generate more funds for tax breaks to help young families and the chronically overburdened middle class.
The good news is that the country’s deficit is projected to drop to $1.3 billion by 2015 from $24.9 billion in 2012. But achieving a balanced budget by 2015-16 relies on government revenue growth of 4.9% over the next four years. That is extremely optimistic.
Flaherty is also committing $800 million over the next four years to stimulate innovation and another $700 million for research and training. Developing innovation and technological diversity is critical to maintaining Canada’s future economic well-being.
Streamlining the regulatory landscape for major economic projects and setting fixed timelines for project reviews and assessments is also welcome news, as is increasing the flexibility of the country’s immigration system to address the increasingly critical skilled worker shortages that threaten to short-circuit the huge resource and energy development projects in British Columbia and across Canada.
But elsewhere there are mixed messages from the Conservatives on the resource front, which accounts for nearly 10% of the country’s GDP. Flaherty has extended for another year the mineral exploration tax credit, but is phasing out the corporate mineral exploration and development tax credit.
Raising the age of eligibility for Old Age Security to 67 from 65 makes sense in a country where, at last count, the federal government was around $240 billion short of solvency in its pension obligations to civil servants.
But delaying full implementation of that change for 17 years seriously reduces its impact because it will miss the main wave of retiring baby boomers. And somehow the notorious gold-plated pensions of federal MPs were left untouched in this round of cuts.
The Axeman connected with several telling swings at serious economic issues across the country, but missed on many. •
