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The 2006 Tory Budget

J.J

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Mary Nersessian, CTV.ca News

OTTAWA -- Seeking to appease a broad swathe of taxpayers, Finance Minister Jim Flaherty has crammed the federal Conservatives' maiden budget full of personal and corporate tax reductions.

"There is more tax relief in this budget than in the last four budgets combined," Flaherty declared to the House of Commons on Tuesday, his Tory colleages cheering.

As the minority Conservatives move to put their own stamp on Canada's finances with the first Tory budget in more than 13 years, their inaugural fiscal agenda delivers more than twice as much tax relief as new spending, with the sweeping measures valued at nearly $20 billion over the next two years.

Because of the unexpectedly strong performance of the economy over the past 12 months due to tax revenue from the booming resource sector, the Tories find themselves awash in cash, with the 2005-2006 federal surplus estimated at $8 billion on spending of $213 billion ($15 billion more than the Liberal economic update estimated in the fall of 2005).

Spending for the current fiscal year, 2006-07, is projected to rise to $223.6 billion.

The budget fulfills Prime Minister Stephen Harper's main campaign promises, with a much-anticipated reduction in the goods and services tax and a $1,200 annual allowance for parents of children under six.

But a shift in priorities is reflected in the dearth of spending in the realms of arts and the environment, while spending on the military, law and order, and border infrastructure is underscored.

Top of Flaherty's fiscal agenda is the promised tax reductions, the centrepiece of which is Harper's controversial plan to cut the much-maligned GST by one percentage point.

The 1-point rate reduction will also apply to the federal portion of the harmonized sales tax in New Brunswick, Nova Scotia and Newfoundland and Labrador.

But in an unexpected turn of events, the budget also reneges on the Tories' pledge to completely eliminate the Liberal's planned income-tax relief.

The Conservatives say they will follow through on the previous Liberal commitment to have the lowest income tax rate at 15 per cent from January 1, 2005 to June 30, 2006.

But Canadians in the lowest personal income tax bracket will see a slight difference in their take-home pay beginning July 1, when the rate will be bumped up to 15.5 per cent.

The aim of this exercise appears to be an attempt to meet Harper's campaign pledge to save more than $4 billion by eliminating Liberal income tax reductions.

But at the same time, the measure could be a way to avoid claims the Conservatives are raising income taxes to pay for their GST reduction.

The Conservatives have also introduced an unexpected tax credit on employment income of up to $500, effective July 1, 2006. The eligible amount will double to $1,000 as of January 1, 2007.

Other reductions include cutting the general corporate income tax rate from 21 per cent to 19 per cent by 2010; scrapping the corporate surtax for all corporations as of January 1, 2008; and eliminating federal capital tax as of January 1, 2006.

Meanwhile, defence will receive $1.1 billion ($5.3 billion over five years) to strengthen the Canadian Forces' "capacity to defend our national sovereignty and security."

The Tories pledge to crack down on crime in Harper's famous five priorities is reflected in the budget's plan to provide $161 million for 1,000 more RCMP officers and federal prosecutors, as well as another $37 million for the RCMP to expand training.

The fiscal agenda also promises unspecified funds to expand Canada's correctional facilities "to house the expected increase in inmates as a result of changes in sentencing rules."

Meanwhile, $20 million is promised to communities in a bid prevent youth crime and another $26 million for victims of crime.

Border security will see a significant cash injection, with $101 million to begin arming border officers and eliminating so-called work-alone posts, and another $202 million to implement a border strategy.

The budget also outlines, as promised, the Tories' child-care plan that will provide families with $100 a month for each child under six.

The plan also promises $250 million to support the creation of 25,000 additional child-care spaces each year beginning 2007/2008. However, this allowance will replace the $5-billion arrangement the Liberals had negotiated with the provinces to build a national child-care program, a move that is sure to draw fire from Opposition MPs.

Other highlights of the federal budget plan include:

Commitment of $3 billion a year in debt paydown (National debt now stands at $483.4 billion and the debt charges in 2006/2007 are $34.8 billion)
Elimination of capital gains tax on listed stocks donated to charity, effective immediately
Tax credit of up to $2,000 for employers who hire apprentices
New $1000 grant for first- and second-year apprentices
Reducing the Right of Permanent Residence Fee from $975 to $490, effective immediately
Increasing immigration settlement funding by $307 million
Fitness tax credit for up to $500 in eligible fees for physical fitness programs for each child under age 16
New tax credit for textbooks, which is to provide a tax reduction of about $80 per year for a typical full-time post-secondary student
Elimination of current $3,000 limit on amount of scholarship, bursary and fellowship income a post-secondary student can get without paying federal income tax
New $500 tax deduction for tradespeople, for costs in excess of $1,000 for tools they must acquire as condition of employment
Tax credit on cost of monthly public transit passes, or passes of longer duration, effective July 1, 2006
Increase to $2,000 the maximum amount eligibility for pension income credit, effective 2006
The budget proposes $460 million ($1 billion over five years) to further improve Canada's pandemic preparedness
The agenda also includes $19 million per year to Public Safety and Emergency Preparedness Canada
Up to $320 million in 2005-2006 to fight polio, tuberculosis, malaria and HIV/AIDS and to help low-income countries cope with natural disasters or sharp rises in commodity prices
Additional $2 billion over two years to the farming sector, which includes cash to assist farmers in transition to more effective programming for farm income stabilization and disaster relief
$5.5 billion for the Wait Times Reduction Transfer, including a six per cent rise in health care transfers this year and next
$52 million yearly to the Canadian Strategy for Cancer Control
"Conservatives believe health care is already well funded -- it just needs to be reformed," CTV's Ottawa Bureau Chief Robert Fife told CTV.ca.

While it was widely expected that the Conservatives will aim to moderate spending by $22.5 billion over five years, the budget's summary statement of transactions shows that program expenses are up nearly $10 billion from the Liberal agenda.

However, it is expected that there will be more details on the anticipated spending cuts when the supplementary estimates come out in the fall.

Notably absent is funding to arts and culture, but for the $50 million promised to the Canada Council for the Arts.

Further, there is no mention of the Liberals' $10 billion commitment to implement the international Kyoto accord, which aims to reduce the greenhouse gases that cause climate change.

Also missing from the fiscal agenda is the 10-year, $5.1 billion federal-provincial deal to help aboriginal people signed in Kelowna, B.C. last year under the former Liberals.

However, natives will receive $450 million in 2006-2007 and 2007-2008 in areas of priority that include education; advancing socio-economic conditions for women, children and families; and improving the water supply and housing on reserves.

Harper's Conservatives are also dipping into last year's budget surplus for $3.3 billion, which is going to the provinces for spending on post-secondary education, affordable housing, public transit, northern housing and off-reserve aboriginal housing.

CTV's Chief Political Correspondent Craig Oliver called the budget an "instant gratification" document that caters to just about every demographic.

Oliver told CTV.ca that unlike budgets in the past, the tax relief in the Tory fiscal agenda was immediate for taxpayers.

"But the important thing politically is, you cannot find an individual or group untouched by this budget, right in their pocketbook," Oliver said.
 

Sheerin

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So is this 5.3 billion over five years in addition to the what the liberals announced in their budget last year (which said they would make the DND's budget about 23 billion in 5 years) or is this in lieu of it?
 

scoutfinch

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Defence: Troops get a pittance

MICHAEL DEN TANDT

Globe and Mail Update
http://www.theglobeandmail.com/servlet/story/RTGAM.20060502.wmilitary0502/BNStory/budget2006/home

Ottawa — Finance Minister Jim Flaherty unveiled a surprisingly modest defence-spending package, offering the hard-pressed Canadian military just $1.1-billion in new spending over the next two years.

Neither the budget speech, nor the 315-page budget document, made a single mention of Afghanistan, where Canada has deployed 2,300 troops in an effort to bolster the Western-backed regime.

Nor does the budget outline how the government intends to fulfill a campaign promise to buy new strategic airlift – a purchase that could run up to $3-billion, depending on which aircraft is purchased and in what number — or three armed icebreakers to patrol the Arctic Ocean.

In his speech to the Commons, Mr. Flaherty briefly paid tribute to Canadian soldiers. “These soldiers exemplify the character and dedication of our Canadian forces, and all our men and women in uniform deserve our gratitude and full support,” he said.

He also repeated the long-held Tory mantra that “our men and women in uniform have not been given the tools they need to do their job.” During last winter's federal election campaign, the Conservatives vowed to undo years of Liberal neglect of the military.

The budget book, however, devotes just one of 315 pages to defence.

It reiterates some Conservative campaign promises – such as a pledge to recruit 13,000 new regular force service people, and 10,000 reservists, restore a regular army presence in British Columbia, and “initiate the establishment of territorial battalions.”

The budget also affirms the top-line defence spending promise of the election campaign — $5.3-billion in new money for defence over five years, which when added to previous spending increases would bring the defence budget to just under $20-billion by 2010, from the current $14.5-billion.

But on the critical spending questions facing the military – such as the current open-ended deployment of 2,300 Canadian soldiers in Afghanistan, and the pending purchase of a fleet of new transport aircraft, the Mr. Flaherty was silent.

“We will invest in the equipment needed to support a multi-role, combat-capable maritime, land and air force,” he told the Commons.

For weeks, Defence Minister Gordon O'Connor and Chief of Defence Staff Rick Hillier have been engaged in a behind-the-scenes tussle over how to replace key pieces of military hardware, most notably transport aircraft.

Mr. O'Connor had promised long-haul, strategic aircraft during the campaign. Gen. Hillier has long said that short-haul or tactical aircraft are a greater priority, not least because of their workhorse role in the current Afghan mission.

Leading up to the budget, it was believed that the dispute had been resolved and that the government had decided to buy both types of aircraft – U.S.-built long-haul C-17s first, and Lockheed-Martin C130s, as well as fixed-wing search and rescue aircraft, in two or three years.

Defence industry insiders speculated that, in order for the Tories to do this, as well as buy new icebreakers and recruit thousands of new troops, the defence allocation in the budget would have to be significantly greater than $5.3-billion in new money over five years.

The central plank of the Tory defence platform is “Canada First,” a policy designed around the notion of enhanced continental defence – in particular, Arctic sovereignty.

In his speech, Mr. Flaherty did not mention the word “Arctic.”

The budget document, however, promises to “increase the [Canadian Forces'] capacity to protect Canada's Arctic Sovereignty and Security.” But there is no mention of new icebreakers, or of a deep-water port on the Arctic Ocean, both of which figured prominently during the election campaign.
 

Kat Stevens

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Looks like the troops have been sold a cat in a bag.....again.
 

scoutfinch

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I wish I could say I were surprised... but sadly, I expected nothing less of the Conservatives.  They said what they had to say to get elected.  Now they are saying only what they think they have to say to stay in power and not offend the long term memory of the electorate in light of their precarious status as a minority. 

There was no consultation with the Liberals or the NDP.  They cut a deal with the Bloc (we'll address the *fiscal imbalance* and give Quebec more power if you support the budget) so they had a free for all in drafting the budget best for business. 

Can you imagine what they would have done if they had a majority government and didn't have to worry about facing the electorate in the next 18 months or so?
 

Allen

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It may not be as bad as it looks. Note that the budget documents say "budgetary basis" - i.e. accrual basis, not cash basis. The outlays for new equipment purchases would be over and above this. Cash is forwarded for new equipment purchases by Treasury Board when the project is given effective approval.

So the $400b in the first year would include your usual recurring annual expenses e.g. O&M, add'l personnel/recruiting costs, plus only a year's depreciation on any expected new capital equipment.
 

Infanteer

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scoutfinch said:
The budget book, however, devotes just one of 315 pages to defence.

Gotta love Cabinet Wars....
 

Allen

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And yes, the $5.3 billion is on top of the $12.8b, 5-yr increase in the previous (Lib) budget. The capital portion of this can be spent earlier than projected if, and only if, departments and Cabinet get their acts together and allow effective project approval to be accelerated.

In my view, the obstacle to new acquisition is not so much lack of funding as massive red tape.
 

RangerRay

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Restore a regular army presence in British Columbia?  Are they going to bring back 1 CER or 3 PPCLI?  IMHO, 1 CER would be more useful in the event of a massive earthquake on the coast...
 

mdh

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But on the critical spending questions facing the military – such as the current open-ended deployment of 2,300 Canadian soldiers in Afghanistan, and the pending purchase of a fleet of new transport aircraft, the Mr. Flaherty was silent.

I wouldn't get too worked up over one Globe and Mail reporter's budget story based on rather dubious assumptions about what is supposed to  be included in a budget speech. Since when is the Finance Minister supposed to determine the parameters of our policy in Afghanistan or the details of capital purchases?

Overall I think defence is better off than it was.

cheers, mdh
 

COBRA-6

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recceguy said:
Overall, I think the country is better off than it was. ;)

+1, this is a transition budget, and they've got us pointed in the right direction.

Next year's budget, after they've had time to review everything, will be the big one.
 

Infanteer

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Mike_R23A said:
+1, this is a transition budget, and they've got us pointed in the right direction.

Next year's budget, after they've had time to review everything, will be the big one.

So, are we taking bets on whether the next budget is going to bring about the next election?
 

Bart Nikodem

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Restore a regular army presence in British Columbia?  Are they going to bring back 1 CER or 3 PPCLI?  IMHO, 1 CER would be more useful in the event of a massive earthquake on the coast...
True, but you would need to station them somewhere where they wouldn't be affected by an earthquake. Kamloops perhaps? Kelowna maybe?
Personally I can't wait for it (the restored army presence, not the earthquake), it will totally rule, as well as increase class "B" opportunities for those of us in the molitia.
All the best,
Bart
 

geo

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(Quoting Mike Blanchfield - Canwest news)

1.1billion over the next two years.
beyond offering a vague commitment to live up to its ambitious defence platform, the budget made no firm commitment to begin the THE LENGTHY AND LUCRATIVE tendering process to buy billions worth of new equipments....
the budget gives the military an extra 400million for this fiscal year over what the Libs promised in their heavily baclkoaded budget and another 725million in 07-08 but the budget gives few specifics about how the remaining 4.2billion will be delivered beyond promising to deliver the full 5.3billion promised over the next five years (06-10).... which means that we'll have to ask the gov't that follows this one if we get the money or not...........

 

paracowboy

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I dunno. I'm more inclined to trust a man who has been trained as an economist with my money, than a lawyer. Seems he'd be more likely to know how to handle it responsibly.

But, that's just me.

And I'm disinclined to believe anything a Globe and Mail reporter has to say on much of anything related to the Conservatives.

But, that's just me.
 

geo

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well.... the Minister of ND and the CDS are surprisingly quiet today........
Guess they're busy
 

Cdn Blackshirt

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Just out of curiosity, even if we walked with a bag of money to Lockheed or Boeing, anyone have an idea on timelines for a first possible delivery?


Matthew.  :salute:
 

a_majoor

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What no one seems willing to acknowledge is the fact the Conservative Government has a very narrow minority government, and even if they were all Libertarians just foaming at the mouth to cut government, they could not move very far from the present path without loosing their hold on parliament. I am not personally impressed by the spending bonanza, but maybe we will see targeted cuts in the next go round.

We (the military members) are also aware of the huge hurdles in the way of the procurement process, and should also be aware of just how limited our capacity to expand really is. Care to explain how 20,000+ recruits are going to be processed and trained without boots, rifles, small arms ammunition, radios etc. to equip them or sufficient NCO's to lead and train them? While we can look back at pictures of recruits in civilian cloths doing drill with broom handles in 1914 and 1939 and shake our heads, do we really want to be seeing those pictures in 2007 or welcoming those same troops into our units after that type of training?

Face it, Prime Minister Harper is tackling multiple problems with very deep roots with a very small platform to stand on. Imagine if you moved into a house neglected since the 1960s and had to replace the plumbing, wiring, insulation, drywall, roof, patch the leaking foundation, repair or replace the septic system etc. by yourself using only hand tools. (Oh yes, you also have to do your day job as well).

 
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