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Budget 2014: Setting the Stage for 2015

The Canadian federal budget delivered by Finance Minister Flaherty this afternoon was his tenth, but is best understood as a stage setter for his eleventh. Officially, this budget outlines how the government proposes to raise and spend $276 billion between April 1st of this year and March 31st of next; in reality, it is about defining the terms on which the 2015 federal election campaign will be fought. This isn’t to minimize the importance of the headline-grabbing initiatives like job-training infrastructure spending, taxes for smokers, or consumer protection. However, they take a back seat to the bottom line of a projected $6.4 billion surplus for 2015-16 and the “low taxes, more jobs” formula to which the government subscribes.

This budget “cleans up” the final pieces of Canada’s Economic Action Plan, the $63 billion stimulus package introduced after the 2008 economic collapse. New programs for apprentices and internships as well as a proposed Job Matching Service are intended to help more Canadians enter the workforce. Several consumer initiatives, including an attempt to force retailers to charge Canadians the same prices as they do Americans, reinforces the continuing appeal for middle-class support.

The 419-page budget document contains hundreds of measures. Among the initiatives:

  • A $500 million investment in specific sectors including automotive support, forestry and mining. There is also a $1.5 billion (over 10 years) commitment of new funding for post-secondary research. (Current funding is approximately $3 billion per year.) The intended focus of these initiatives is to encourage a closer working partnership between universities and business in order to strengthen Canada’s research position.
  • A renewed focus on the benefit costs for the civil service, with a proposed renewal of the government’s disability and sick leave program and a change to government pension systems.
  • Various measures designed to help families in specific situations. The Adoption Tax Credit will increase from $11,744 to $15,000; compassionate care Employment Insurance access for parents with critically ill children is enhanced; and a new program supporting workers who have to care for needy family members (e.g. parents) will be forthcoming.
  • Legislation to address price discrimination across borders that will give new powers to the Competition Commission to prevent unwarranted price differentials on opposite sides of the border.

The government’s opposition critics will likely describe this as a “do little” budget, concerned that the fragile economy requires more significant present stimulus and is being threatened by the Conservative focus on returning to surplus as a campaign platform. On the other hand, a think-tank report released last week argues that the overall level of government spending (including the infrastructure stimulus) is evidence that the government’s pragmatism has trumped its conservatism over its eight years of power.

Budgets are complex balancing acts in which governments have to choose between competing priorities. This government remains focused on Canadians as income earners and consumers, with social infrastructure taking a back seat to physical infrastructure. Besides modest tinkering, this budget portrays a stay-the-course agenda which will put the pressure on the government in 2015 to deliver on its income-splitting promise made during the past campaign. The NDP and Liberals, then and since, have critiqued this initiative, arguing that focus on income inequality and middle class prosperity are more significant priorities.

Cardus is not in the business of entering partisan debates. Different views regarding the responsibility and role of government divide the aisle of our Parliament. But most can agree that returning the government to a place where balanced budgets are again the norm is good policy and Canada is ahead of its competitors in achieving this. That the job market remains tenuous and that our workforce remains ill-equipped to take advantage of tomorrow’s challenges remains a real issue.

The extent to which government takes the lead in driving this agenda or facilitates other social institutions to prosper is a real issue for debate. Partisans will provide their own spin on the extent to which this budget is a step in the right direction or not. The small steps that are being taken in Budget 2014 are helpful but by no means adequate to address the broader challenge. However, they do help set the stage for a broader debate that will unfold in Campaign 2015.