The current state: Budget and our economy
With a slump in oil prices and a volatile Canadian economy, Finance Minister Joe Oliver made a decision to delay his first federal budget to ensure that the forecasts, expenditures and proposed tax breaks were feasible in Canada’s current economic climate. It is now up to Canadians to decide if the delayed budget was worth the wait.
The budget supports the ongoing focus on jobs, community safety and Canada’s place in the world—it’s focused and it appears to deliver on promises, including the delivery of a balanced budget. Included for families are personal tax cuts/breaks such as an increased TFSA limit and child benefit credits in 2015. However, many of the major investments announced in the budget will not come into effect until the 2016 fiscal year or beyond.
The federal government will boast a $2-billion deficit in the 2014-2015 fiscal year (ending March 31, 2015) and a projected surplus of $1.4 billion for 2015-16. While the budget does contain some surprises—including the Home Accessibility Tax Credit—many of the large initiatives included in it have been announced in preceding months. This is an election budget, after all.
The budget refers to the impact of dropping oil prices on business investment in Canada. The government has responded in this budget with measures to encourage manufacturing, LNG and small businesses. The Private Sector Forecasters are projecting an average of 2.6 percent Real GDP Growth for Canada over the next year. As a result, the government has provided a number of opportunities for businesses to take advantage of key programs in their sector to help stimulate growth.
The government’s positioning leading into the fall general election is emerging, with headline-grabbing announcements such as $750 million over two years starting in 2017-18 to rejuvenate transit infrastructure in our largest cities and tax breaks for families. Providing much needed infrastructure funding to Canada’s biggest cities, which are areas with the highest concentrations of voters, targets many of the battleground ridings for the election campaign.
Budget consultations and communications: The election influence
The Conservative government is always keen to emphasize that extensive consultations went into creating this budget, starting with the Finance Minister’s invite-only retreat last summer and continuing over the fall and winter with numerous budget roundtables, parliamentary consultations and meetings. Particular attention was paid to the large number of consultations that government MPs held in their own ridings—especially in battleground ridings in the next election. The government hopes that those organizations that did not receive good news in the budget will understand that choices had to be made and that they may be included in future budgets under different economic circumstances.
For months, the government’s public messaging, complemented by a slow drip of pre-budget leaks and announcements, has given an indication of the budget’s emphasis. The early release of this information helps to pre-condition the public and to make sure the government doesn’t try to present too many new messages at once on budget day. This year, the early communication also served to convey the message that a limited amount of money was available, important decisions have already been made and, if the opposition parties want to make expensive promises in the election, they will either have to raise taxes or cut spending elsewhere.
The government will be relying extensively on regional Cabinet ministers to convey the key messages and announcements contained in the budget over the next few weeks to ensure the message gets to where it is intended. The real question that Conservatives will be wanting Canadians to be asking themselves is, “In tough economic times, who do you trust more, Stephen Harper, who is willing to make the tough decisions and still deliver a budget like this one, or the other guys?”
The weeks and months to come: A turn to the fall election
To no great surprise, especially in an election year, the budget has not received the endorsement of the opposition parties, and opposing initiatives such as income splitting and the increase in the TFSA will form the basis of the opposition election platforms. The narrative is that the middle class has once again been ignored. However, the Conservative majority in the House of Commons will ensure the motion to approve the budget will be passed. The same is true of the budget implementation bill that will be introduced, likely in early May, which will contain the actual enabling legislation for any budgetary commitments that require parliamentary approval. The budget implementation bill may also contain important legislative changes the government wants to see actioned before the general election, and it is very likely that some of the legislative changes included in the implementation bill will not have been included in the budget presented today.
That is why it is important not to overlook the budget implementation bill, as it will likely be the last piece of significant legislation tabled and passed in the House before the election (other than items already tabled in the House and Senate).
It’s also important to remember that the next federal budget—which will, for all intents and purposes, be presented by a “new” government regardless of the electoral result—is only about 10 months away.
The current state: Budget and our economy