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Flaherty must show action with little money to spend in Tuesday's budget

OTTAWA - Lowering consumer bills, training workers to fill in-demand jobs and balancing the books will be key themes Tuesday when Finance Minister Jim Flaherty presents his latest spending plan.

With an eye on eliminating the deficit in 2015 — in time for the next election — Flaherty's budget must show voters he's taking substantive action to grow the economy with little or no new spending.

With a $3-billion risk cushion built into the budget, some observers say Flaherty could eliminate the red ink as soon as this year — a notion the country's treasurer was quick to shoot down.

"If we really forced the numbers, we might be able to get close to a balanced budget. I've never been a believer in that," Flaherty said Friday.

"I think when we balance, which will be next year, we need to have the confidence of the Canadian people that we are clearly balanced and without question."

The Tories have offered a sneak peak at some of the measures in Tuesday's budget, including $800,000 to help skilled newcomers to Canada find work in their fields or explore other lines of work.

Flaherty said the budget will also outline plans to curb the link between terrorists, organized crime and charities, and take measures aimed at dealing with price differences between Canadian and U.S. goods as the loonie continues to fall.

Some are expecting benefits for veterans, measures on injury prevention and help for Canadians suffering from dementia and related diseases, as well as their caregivers.

The budget may also address the Northern Gateway pipeline project by way of improvements to tanker safety and beefing up consultations with aboriginal groups, as well as spelling out exactly how Ottawa plans to pay for its recently announced reforms to First Nations education.

But making government more efficient and cutting costs wherever possible will continue to be a central budget theme, said Andrew Saxton, Flaherty's parliamentary secretary.

"We've been successful at doing that in the last couple of years, we've saved taxpayers quite a bit of money by finding areas in government where we can improve and so that will continue to be a theme," the Conservative MP said.

Peter DeVries, a former senior official at the Finance Department, isn't convinced the Tories will inject much excitement in the spending plan, choosing instead to keep their powder dry until the 2015 budget.

"The only commitment that the government seems to be willing to fulfil is his commitment to balance the budget in 2015-16," said DeVries, an economics professor at Ottawa's Carleton University.

"It doesn't seem to have anything else on its plate except for that, nor does it seem to want to tackle anything else except for that."

The Tories could then lay out a more detailed spending plan aimed at making good on their previous election promises, such as income-splitting for tax purposes and providing more room in tax-free savings accounts.

Observers point to the timing of the Feb. 11 budget — right in the middle of the Sochi Winter Olympics — as a sign Flaherty will deliver a stand-pat budget designed to bridge the gap between a $5.5-billion deficit and the anticipated surplus in 2015.

Saxton said people shouldn't read anything in to it.

"It's simply a coincidence and I believe that Canadians have the ability to focus on two things at the same time," he said.

Former Liberal finance minister Paul Martin also delivered a bad-news budget during the 1994 Lillehammer Olympics, embarking on a string of deep cuts aimed at lifting Canada from a deep fiscal hole that threatened its economic well-being.

The cuts stifled economic growth and hurt the provinces, forcing those governments to make massive cuts to cherished public services such as health care. But Flaherty insists he won't slash transfers or raise taxes to balance the books.

Left-leaning groups have warned that austerity measures could still do damage to the fragile economic recovery. The International Monetary Fund says the Tories don't have to stick to their deadline if there's an economic downturn.

"Fiscal policy should strike the right balance between supporting growth and rebuilding fiscal buffers," the Washington-based agency said in a recent report.

"If significant downside risks to growth materialize, the federal government has room to slow its planned return to a balanced budget."

The cost of erasing the financial shortfall could be steep. The Tories have already said they'll freeze departmental operating budgets and target civil service benefits, such as sick days and pensions. Procurement at National Defence may be delayed to save dollars as well.

Public-sector unions say it could be months before they know the full details of what those cuts will mean.

"You've almost got to keep your powder dry until you see the budget implementation bill," said Paul Moist, national president of the Canadian Union of Public Employees.

"They're very circumspect about what they plan to do. Putting this budget out at this point in time ... when the Olympics is going on, is kind of like announcing the Canada Post end of home delivery the day after Parliament stands down."

Five collective agreements covering about 100,000 members of the Public Service Alliance of Canada expire this summer. Negotiations are still underway for employees at the Canada Revenue Agency and the Canadian Food Inspection Agency.

The New Democrats question whether the Tories are going to war with unions to save money, or score political points with their party base.

"The people who serve our veterans, the people who collect our taxes, the people who make sure that people get their pension benefits — these are the people we count on to deliver our services in Canada," said NDP finance critic Peggy Nash.

"It will be a very sad thing if they think that somehow it's good for them to be attacking these folks."

Others fear Flaherty will make deep cuts to foreign aid after cutting almost $380 million, or 7.5 per cent, from Canada's $5.3-billion annual aid budget in 2012.

A coalition of non-governmental organizations, including the Canadian chapter of Engineers Without Borders and the Canadian Council for International Co-operation, has launched an online petition urging the government to keep foreign aid off the chopping block.

The Canadian Press


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