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Budget squeeze continues but federal deficit all but gone this year: Flaherty

OTTAWA - The Conservative government continues to ratchet in the iron corset that will squeeze an eye-catching election-year surplus for the Canadian body politic.

Finance Minister Jim Flaherty's 10th federal budget all but balances the books this fiscal year, leaving a negligible $2.9-billion shortfall heading into the 2015-16 election year — when Prime Minister Stephen Harper will go to the electorate sporting a surplus that could exceed $6 billion.

It's the fourth consecutive belt-tightening blueprint for Flaherty, who used Tuesday's budget speech in the Commons to echo the words of Canada's 1868 finance minister:

"I say that we ought to be most careful in our outlay, and consider well every shilling we expend," quothe Flaherty.

But amid leaks of a 2015 Conservative electioneering strategy that already appears well developed, the 2014-15 austerity budget is also stuffed with low- or zero-cost promises that wink toward the coming campaign.

Constituencies perceived to be complementary to the Conservative brand get a break — including veterans, recreational fisheries, rural web surfers and snowmobilers — while smokers and public servants take it on the chin.

It's all done on the cheap.

"Some people will say this budget is boring; I consider that a compliment," Flaherty said at a news conference, tipping his hat to former Ontario Progressive Conservative premier Bill Davis.

"It doesn't have flashy spending in it for this and for that and the other baubles that some people might want."

Actual new spending amounts to a total of $700 million against cuts that top $2 billion and another $700 million in new tobacco taxes.

The net result is that total government spending, including debt servicing charges, actually falls slightly in 2014-15, to $279.2 billion. That's down from $280.5 billion in the fiscal year just ended, and marks a dramatic decrease when inflation and population growth are factored in.

Total government spending is expected to rebound somewhat to $286.9 billion in the 2015-16 election year.

The inexorable squeeze is best illustrated by government program expenditures as a percentage of GDP. They are down to 13 per cent this year from 13.8 per cent in 2011-12 — a huge decrease on a $1.8-trillion economy — and are projected to fall to 12.4 per cent by 2018-19.

"The extent of the cuts to direct program spending are very substantial, yet we knew the government had to downsize from the recession stimulus or there was no way we could handle the aging baby boom generation," said Mary Webb, senior economist at Scotiabank.

"There's actual good, hard reasons for why they're doing this."

When the Conservatives came to office in 2006, Canada was spending 17 cents of every tax dollar on debt, down from more than 30 cents in the early 1990s. Last year, that was down to 11 cents and it should hit 10.5 cents this year.

"They're trying to put things back on a sustainable path," said Webb.

"Is there a lot of pain and dislocation? Of course there is. Austerity is never easy ...."

A new poll from Harris-Decima shows an overwhelming Canadian consensus — 57-34 — in favour of clearing up the deficit before any new spending occurs. The telephone survey of 1,008 respondents found the consensus crossed regional and party lines.

And there are some spoonfuls of sugar with the harsh medicine.

The Conservatives are moving to staunch a gaping political wound by topping up the Last Post funeral fund for veterans and expanding the eligibility criteria to veterans of modern conflicts like Afghanistan.

There's a promise of $305 million over five years to expand rural and northern broadband Internet service, and almost $400 million over five years to help fix Parks Canada's crumbling infrastructure.

They'll spend another $10 million on snowmobile trails, while giving anglers a say in the conservation of fish stocks.

The budget document, in fact, is scattered with penny-ante announcements that usually can't crowd into a fiscal blueprint that covers almost $280 billion in government spending.

There's a $150,000, for instance, "to increase mentorship among women entrepreneurs" and $200,000 to study a breakwater proposal in Saint John harbour.

There are also a host of non-budgetary measures that carry no cost, but were larded into the spare budget to pad it out to a typical 400-plus pages.

The Conservatives say they will "empower the commissioner of competition to enforce" undefined new rules against differential country pricing of consumer items.

The budget promises to publicize employment insurance benefits for apprentices, promote a "Made-in-Canada" branding campaign and interprovincial trade, crack down on terrorist financing, and assert Canada's claim to the North Pole.

Much of the froth was strategically leaked by the government in advance to colour media and public perceptions of the budget before anyone had a chance to examine the entrails.

Derek Vanstone, Harper's former deputy chief of staff, took to Twitter on Monday evening to scoff at all the talk of budget "leaks."

"It's not a (budget) leak if it's intentional; it's pre-positioning," Vanstone wisely observed.

It's an observation that might be extended to the entire budget document, which can be viewed as pre-positioning for the 2015 election.

Follow @bcheadle on Twitter

The Canadian Press


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