Budget hands growth baton to private sector

A penny-pinching Conservative government is loosening the reins on Canada’s business community in a budget it says will position the country for unbridled commercial opportunity.

OTTAWA — A penny-pinching Conservative government is loosening the reins on Canada’s business community in a budget it says will position the country for unbridled commercial opportunity.

With an eye to the long game after years of politically attractive, minority budgets, Finance Minister Jim Flaherty is trimming $5.2 billion in annual federal spending — scrapping the money-losing penny in the process — while raising the age of eligibility for old age security to 67 from 65, starting a decade from now.

Thursday’s federal budget, the seventh since Stephen Harper took office, is the first with an overtly pro-trade and resource development bent and a dearth of voter-friendly goodies. A majority mandate with three full years before the next election will do that for a conservative-minded prime minister.

“We are a moderate, pragmatic government that responds to the facts as they are, and not as we might wish them to be,” Flaherty said in the budget lockup.

“We are fiscal conservatives, we are a majority now, the economy is growing — albeit modestly . . . . We’re looking to the future.”

Flaherty said Canada “wants to be in the next league. We want to be with the emerging economies. We want to be with the economies of Asia and South America that are growing, and we’re in a position in this country to get there.”

The blowback was immediate: a noisy group of protesters perched in the House of Commons public gallery began to chant slogans as Flaherty delivered his speech.

“Where are we in your budget? This is not our budget!” they shouted before being led out by security guards.

The budget’s business-friendly measures include streamlining environmental assessments to speed major resource projects into existence; recasting research and development funds; tailoring the labour market, including immigration, to specific job shortages; and a focus on new free-trade deals.

There’s $500 million in government largesse for venture capital, $1.1 billion in directed research and development funding, and $205 million for a one-year extension of a temporary hiring credit for small businesses.

“What the budget is doing is handing off the baton from government to the private sector to carry economic growth,” said Craig Alexander, chief economist at TD Bank.

The transformation will come from a shuffling of priorities, not big new spending programs. Research funding, for instance, will be shifted dramatically away from pure science to more commercial applications.

“It’s a whole bunch of little things around the edges,” said Alexander.

Not so, said Greenpeace Canada, which issued a release claiming “big oil is the big winner in today’s budget.”

It’s also an austerity budget, whatever the government claims.

Total spending, including debt servicing charges, will rise to $276.1 billion in 2012-13, a marginal increase of 0.11 per cent on the current $272.9 billion envelope. Program spending is projected to rise just 2.1 per cent annually for years, effectively flatlining in real terms after inflation and population growth.

“It’s going to take an awful lot of tough decisions to restrain to that degree on such a long period of time,” said Alexander.

“In actual fact, it’s more fiscal restraint than we had in the ’90s (under the former Liberal government) because in that period we had very sharp cuts followed by a rebound in spending. This time it’s going to be slow spending for many years.

“It’s easy to say, extraordinarily difficult to do.”

The Conservatives had been signalling even deeper cuts, but Flaherty rejected recommendations from cabinet’s strategic operating review committee for cuts totalling $7.5 billion. An improving economy that lowered deficit projections convinced Flaherty and Harper more draconian cuts weren’t needed.

Thomas Mulcair, the newly installed NDP leader, nonetheless likened the budget to a “clear cut.”

Conservatives, said Mulcair, “like being in power, but they’re not very good … managers, so they’re not going to go at this with a scalpel. They’ll always go at it with a rusty machete.”

Liberals said the spending blueprint sets the country on a collision course.

“This is a budget of division that not only pits one generation against another, but also prosperous regions against regions that are suffering,” said Liberal finance critic Scott Brison.

Quebec Finance Minister Raymond Bachand said the cuts are worrying in view of the global economic uncertainty.

“The federal government must secure Canada’s economic stability,” he said. “The cuts announced today (Thursday) must not endanger the already fragile economic recovery,” he told reporters in Quebec City.

But others were equally adamant the government didn’t go far enough.

“Spending cuts announced today are a drop in the bucket,” sniffed Gregory Thomas of the Canadian Taxpayers Federation.

Catherine Swift, head of the Canadian Federation of Independent Business, lauded the government for enacting at least parts of eight of her group’s 12 recommendations, but added the budget “was too tame in terms of its actual cuts.”

The federal deficit, which Flaherty projected just five months ago would come in at $31 billion this year, will actually be $24.9 billion, falling to $21.1 billion in 2012-13 and $10.2 billion the year after.

The government continues to maintain the books will be balanced in 2015, although the spending and revenue track suggests it could come in a year ahead of schedule.

Indeed, the budget lays out a course that will put the federal books back where they were before the deep global recession of 2008 knocked governments askew from Ottawa to Canberra.

The budget document, for the most part, is careful to obscure exactly where the greatest pain will come from spending cuts, while broadly outlining that 19,200 federal jobs are to be cut — some 4.8 per cent of the federal workforce.

The National Round Table on the Environment and the Economy is being eliminated, as is the youth program Katimavik, along with a travelling leadership program for civil servants and Harper’s own, stillborn public appointments commission from his 2006 campaign platform. The CBC faces a 10 per cent budget cut.

Other significant cuts will only be felt as individual departments wield the knife internally.

National Defence will see its budget fall by more than $1.1 billion by 2014-15, Public Safety will take a $688-million haircut and international assistance falls $377 million annually within three years. Both the health portfolio — including Health Canada, the Canadian Institutes of Health Research, and Assisted Human Reproduction Canada — and Agriculture and Agri-Food Canada will lose $310 million by 2014-15.

There are some budget winners.

While the overall budget of Aboriginal Affairs is to be cut $165 million by 2015, there’s $275 million in new money over three years for native schools and education, and almost $331 million over two years to improve water systems on reserves.

The Canadian Coast Guard gets $5.2 billion over the next decade to renew boats and helicopters.

There’s also an injection of $482 million over two years for the unemployment insurance system, including incentives for accepting work and ensuring benefit levels align with local labour market conditions.