Missing In Action: CUPE Federal Budget 2014 Response

Conservatives ignore Canadians pressing economic needs with a do-nothing budget

Using more of their doublespeak, the Harper government calls the 2014 federal budget “The Road to Balance:  Creating Jobs and Opportunities”. Little could be further from the truth. Instead it’s a budget that glosses over the problems facing Canadian workers and continues to kill jobs and stifle economic growth. ‘Missing in Action’ are significant positive measures needed to improve the lives of Canadians by increasing good job opportunities, improving public services or ensuring decent retirement incomes.

Instead this budget further reduces and re-aligns spending and increases tobacco taxes and revenues in some areas. These will bring the deficit down to a projected $2.9 billion this coming year with a $6.4 billion surplus expected in 2015/16. The deficit for this year is small enough to be below the $3 billion cushion for risk, which means the federal government will probably declare a surprise surplus so they have more money available to promise tax cuts and other expensive goodies in next year’s budget before the 2015 election.

It’s a clear sign this government has nothing left to offer Canadians in terms of positive measures to improve the economy.

CUPE has called for:

• An expansion of better quality and accessible affordable public services, including in health care, education, child care, affordable housing, public transit and social services;
• More decent and rewarding job opportunities, particularly for youth and equity-seeking groups;
• The assurance of a decent income in retirement for all Canadians;
• Scrapping the cuts to Employment Insurance;
• Protection for the environment, of our water and food, and healthy and safe environments in our workplaces and communities;
• Reductions in poverty and inequality, protection for human rights and fair and equitable treatment of all Canadians;
• Adequate funding to meet our obligations to Aboriginal peoples;
• Progressive and fair taxes.

Instead, what we got in this budget was little more than a grab-bag of recycled and renewed measures from the Conservative’s bag of inadequate and failed economic policies.

The budget expects very little improvement in Canada’s unemployment rate, averaging 6.9% this year and 6.7% in 2015 – and that seems to be fine with the Harper government. According to a special jobs report that accompanies the budget, Canada’s labour market is in very good shape and just needs some minor tinkering to work better.

The first initiative announced in the budget press release is about the Canada Job Grant, which was announced in last year’s budget and has already been rejected by provincial Premiers and experts as being inappropriate, particularly if it takes money away from existing programs for vulnerable and unemployed workers. The federal government says now they will go it alone with this program and deliver it themselves with provinces that they can’t come to agreements with.

There’s funding for First Nations education, which was already announced, a new Canada Apprentice Loan and support for employment of workers with disabilities and autism. But the main new measure on jobs in this budget are $70 million over two years to support up to 4,000 internships for youth in high demand fields and for small to medium sized enterprises. Internships can be a much-abused way of paying youth low wages for their work and this will do little to reduce unemployment for the close to 400,000 youth who remain out of work.

Other measures include an enhanced national Job Matching Service and additional funding to better control the Temporary Foreign Worker Program. Besides the loan program for apprentices, the only measure to help students with costs of education is the announcement that they won’t include the value of their cars in applications for Canada Student Loans.

The significant new expenditure initiatives are renewed funding for programs that already exist, or funding that has already been announced. New initiatives are small and will do little or nothing to help millions of unemployed, underemployed and underpaid Canadians.

Overall new spending initiatives for “supporting jobs and growth” amount to only $1.6 billion a year and about half that after accounting for lower spending in other areas. That’s less than 0.1% of Canada’s GDP and less than 1% of federal government spending. These new measures are also exceeded by the money the federal government will take out of the economy by reducing compensation for public servants and by increasing taxes and revenues in other areas.

This demonstrates the government shows no sign of changing its austerity-first economic policies, and instead is reducing and realigning federal spending and increasing taxes in some areas so they could run a small surplus this coming fiscal year and have close to $10 billion in surplus for 2015/16 so they can promise tax cuts just before the next federal election. The government crows that 75% of its annual savings has come from departmental cuts, rather than measures to increase revenues.

In terms of new investments to strengthen the economy, the big ticket items are $500 million over two years for the Automobile Innovation Fund, which was announced before Christmas, and additional funding for the Champlain Bridge and other bridges in the Montreal area, as well as further funding for Atlantic ferries. The federal government has insisted that the Champlain Bridge proceed as a P3, which is a sign that costs for it are increasing.

Other investments are largely focused on “responsible resource development” and supporting offshore oil and gas development. Additional funding is included for various smaller innovation projects and for the federal research granting councils, but new funding of this form is provided every year. Despite these smaller measures, this federal government remains narrowly focused on oil and gas and resource development as an economic strategy, largely ignoring the needs of other sectors of the economy.

Major cuts or savings in this budget come from reducing compensation costs for federal public servants, including reducing sick leave and federal government contributions to health care plans for retired federal employees. It also includes raising the retirement age for new hires for all federal crown corporations to 65, which can include the CBC and Radio-Canada.

The government is also banking on revenues from privatizing and selling federal government assets and continuing with use of public-private partnerships and social impact bonds, but the budget doesn’t include other new major privatization measures.

Instead the budget focuses its attention more on measures for consumers, but even these are modest, such as introducing legislation to cap wireless roaming fees and legislation to prohibit unjustified cross-border price discrimination. The $300 million over five years to improve access to broadband internet connection in northern and rural communities replaces a program that the Harper government cancelled two years ago.

Not only is there very little in this budget to protect and improve the environment, but there’s also nothing to help families with their energy costs by improving energy efficiency through programs such as the eco-ENERGY Retrofit Program. These measures will do little to reduce Canadians cost of living.

On the tax side, the major new measure is an increase in tax on cigarettes by 24% and then indexing it to inflation every five years. The budget also includes a number of measures to reduce tax avoidance both domestically and internationally through tax havens, but doesn’t eliminate major tax loopholes that allow affluent and corporations to pay lower rates of tax than working Canadians. Other tax measures include exempting acupuncturists’ and naturopathic doctors’ professional services from the Goods and Services Tax/Harmonized Sales Tax, creating a new Search and Rescue Volunteers Tax Credit and extending the Mineral Exploration Tax Credit for flow-through share investors.

A concern for labour unions may be an announcement that they will consult about the income tax exemption available for various non profit organizations is properly targeted. This may extend to labour unions and non-taxation of strike funds.

There’s nothing in this budget to address to help improve the retirement incomes for Canadian workers. The federal government has rejected all proposals to improve the Canada Pension Plan and do so again in this budget. The only measure in this budget to improve retirement incomes is limited to amateur athletes. While elsewhere the budget boasts about how well Canada’s economy is performing, when it comes to improving the Canada Pension Plan, they say now is not the time to increase premiums because of the “fragility” of the economic recovery.

On Employment Insurance, the only new measures are an extension of the Targeted Initiative for Older Workers, and enhancing access to sickness benefits for claimants who receive Parents of Critically Ill Children and Compassionate Care benefits.

The Harper government has squandered another opportunity to improve the lives of Canadians with this ‘Missing in Action’ budget of 2014. Instead they are being highly cynical and politically opportunistic by

stashing away cash from cuts to public services so they can try and bribe Canadians with expensive election goodies next year. These are expected to include $3 billion annually for “income splitting” and other tax measures that will help the rich get richerand provide little or nothing for the vast majority of Canadians.

Harper’s dismal economic record

No matter how much they try and embellish them, the facts show that Canada’s economy is struggling and Canadians are suffering – and the Harper government’s austerity measures are making it worse, not better.

• For the first time in over five years– since before the financial crisis and recession of 2008 – Canada now has a higher unemployment rate, at 7% with over 1.3 million Canadians officially counted as unemployed in January 2014 compared to an unemployment rate of 6.6% in the United States.
• There are 280,000 more Canadians unemployed now than before the 2008 recession and 174,000 more than when Harper first came to power eight years ago. With higher rates of unemployment, another 400,000 have left the labour market.
• The unemployment rate for youth is still particularly high: almost 14% compared to 11% before the recession, and there are 260,000 fewer jobs for youth than before the recession.
• A majority of the jobs created in 2010 and 2011 were filled by employers hiring temporary foreign workers, a group that is often exploited and abused.
• More and more jobs are part-time, temporary or otherwise precarious, and women, racialized workers and recent immigrants are more likely to be stuck in those jobs. Employment rates are lower for women, Aboriginal and racialized workers and persons with disabilities.
• Canada’s economic growth has been slower than the U.S. for the past two years and it’s expected to underperform the U.S. by even more this year and next. Growth under Harper as Prime Minister has been the worst since under R.B. Bennett in the 1930s.
• Our recovery from this recession is considerably slower than previous recoveries, with economic growth averaging 30% lower than after the recessions of the 1980s and 90s. This will translate to economic output of $100 billion less by 2017 – or the equivalent of $2,700 less per Canadian, and $6,600 less per household.
• Inequality in wages has persisted and got worse under Harper. Overall wage growth has slowed down since he gained a majority, particularly for public sector workers. Wage inequality particularly affects women, Aboriginal peoples, new immigrants, racialized communities and persons with disabilities who suffer lower incomes and higher poverty rates.
• Meanwhile Harper and Flaherty’s corporate tax cuts have given businesses with an extra $50 billion in tax cuts and credits. They’ve added this to their growing stockpiles of cash, but have failed to invest more in the economy and create decent jobs. Instead, we’ve seen more highly profitable companies demand wage cuts from their employees and laid off workers, with nothing done by the Conservatives to stop or prevent this.

Our recovery from the financial crisis and recession was initially much stronger, but that’s because the opposition forced the Harper government to first of all, admit that Canada was in recession and then introduce strong stimulus measures. But ever since Harper gained a majority three years ago, he’s enforced his austerity agenda, made cuts to public spending and social protections, reduced future spending on health care and gone on the attack against environmentalists, women’s organizations,

First Nations, charities, workers, public servants and labour unions.

• He’s cutting federal spending and shrinking the size of the federal government to the smallest it’s been relative to the economy in 70 years. The budget projects that revenues will remain relatively flat as a share of the economy, but that federal program spending will continually decline.
• According to the Parliamentary Budget Officer, federal spending cuts under Harper have slowed down economic growth by an estimated one percentage (or $20 billion) per year and resulted in the loss of an additional 100,000 jobs in both the public and private sectors. Even the International Monetary Fund (IMF) just urged Canada to go slower on spending cuts if the economy weakens.
• Their cuts have focused on attacking public sector workers, and on public spending for the environment, women’s programs, health and safety, and services for the vulnerable and unemployed, particularly affecting equity-seeking groups.
• Meanwhile spending on security, policing, corrections and spy agencies have expanded by more than 40%and there have been major increases in spending on the Prime Minister’s Office, Minister’s Offices and on communications.

Harper and the Conservatives are attacking workers and unions at every opportunity, depriving workers of their collective bargaining rights, introducing draconian legislation meant to hobble unions, and vilifying public sector workers by spreading false information about their wages, benefits and use of sick time. They’ve cut off funding for refugee health and immigrant programs and narrowing access to citizenship. They are also now going after charities, international development, and environmental groups that might engage in advocacy with a different political perspective than them.

Since he gained a majority, he’s tried to sneak countless measures into successive omnibus budget bills that weren’t even included in the original budget. This underhanded tactic not only forces all his MPs to vote for them and restricts debate on the issues, but also deprives Canadians and their representatives debating and deciding on these issues in a democratic and open way.

They’ve used these budget bills to raze environmental protections in their obsession to build pipelines all across Canada to export our natural resources with as little value-added or tax revenue as possible. These may add to the profits of big oil and gas companies, but they won’t create many lasting or sustainable jobs after the construction boom. Other industry sectors have been almost completely ignored, making Canada’s economy less diversified, with families and communities struggling in many regions of the country. And now there’s evidence Harper has used federal spy agencies, until recently overseen by former Conservative MP Chuck Strahl who also lobbies for pipeline proponent Enbridge, to spy on citizens opposed to the pipelines and shared that information with oil and gas companies.

But the Harper government’s bulldozing tactics on pipelines and environmental issues have increased opposition from concerned citizens, the U.S. administration and First Nations. Their economic strategy of putting all our economic eggs in the oil and gas pipeline basket may also ultimately fail because of this ham-handed approach.

What’s missing from this budget:

The major things about this budget are not what’s in it, but what’s not in it:

• Harper’s spending cuts, particularly to future spending on health care, will help finance regressive measures such as the $3 billion income splitting tax cut for the rich they are expected to announce next year in their pre-election budget.
• Once again, we can expect the subsequent budget bills to include a number of other unrelated regressive measures they want to ramrod through Parliament, but we won’t find out about these until much later.

The really important things that aren’t in this budget are the measures that should be in it that would improve the lives of working Canadians, reduce poverty – particularly among children, seniors and equity-seeking groups – create quality jobs, boost the economy, improve public services, reduce inequality and ensure a more sustainable, healthy and secure future for all Canadians.

CUPE has called on the federal government to reverse its damaging cuts and introduce further measures to create quality jobs, boost the economy, improve living standards for working Canadians, and advance equality and human rights. In particular, we urged the federal government to provide funding for a national early learning and child care program, which has been shown to more than pay for itself; a national housing retrofit program to create jobs and reduce energy costs for households; increased support for First Nations education, health, housing and clean water; develop a national pharmacare program in collaboration with the provinces; increase federal funding for long-term care; affordable housing; post-secondary education; industrial development and poverty reduction.

CUPE, together with the rest of the labour movement, provincial premiers, and pension experts continue to pressurethe federal government to ensure decent retirement income for all Canadians by doubling the benefits available through the Canada Pension Plan, increasing the Guaranteed Income Supplement (GIS) benefits, and restore the age of retirement for Old Age Security to 65 years. While this is supported by
a significant majority of Canadians, the Harper government has stubbornly refused to respond to do anything to help ordinary Canadians, preferring instead to help out their friends in the financial industry who profit from excessive fees from managing private retirement accounts.

The Conservatives continue to undermine Canada’s Employment Insurance (EI) system, which is now so diminished that it provides benefits for less than 40% of the unemployed. This is the lowest proportion of people receiving benefits since the creation of the program in 1940 and well below the 80% the program supported in the 1980s. In some regions fewer people are getting EI benefits even as unemployment stays steady or grows and the proportion of available jobs decreases.

The cuts to the EI system brought in with the 2012 federal budget should be scrapped including the provision for seasonal workers that after six weeks of yearly unemployment they must accept any job available up to 100 kilometers away. CUPE and others have called for EI in Canada to be improved by establishing a uniform national eligibility requirement of 360 hours for benefits, increase the benefit level (from 55% to 60% of insurable earnings), and base the benefit and duration calculations on a 30-hour work week.

As the Alternative Federal Budget has demonstrated, these and other associated measures would generate an additional 250,000 jobs per year, bring the unemployment rate down to 5.4%, help 850,000 Canadian rise out of poverty and increase economic growth while balancing the budget within two years.

Other Issues:

This budget doesn’t include “balanced budget” legislation but this may come next year. Crowing about the surplus can only be considered a farcical charade for a government that squandered the surplus they inherited on irresponsible and regressive tax cuts. They’ve increased the federal debt by $160 billion and are planning more tax cuts for the wealthy, which will cost another $3 billion a year and lead to further public service cuts. Their $50 billion in tax cuts for businesses may have helped corporate profits reach record levels, but they’ve done little to stimulate the economy and made the deficit and debt situation much worse. Economists of all stripes consider balanced budget legislation silly politics at best that could also very likely lead to irresponsible fiscal measures.

The Harper government is set to shrink the federal government to the smallest it’s been relative to the size of the economy in 70 years. But this doesn’t mean all areas are being cut: its largest spending increases have gone to security, policing, spy agencies and to promoting privatization and P3s, including spending billions on the most expensive federal building ever constructed: a P3 palatial headquarters for the federal government’s Communications Security Establishment spy agency.

Federal spending cuts have focused on the environment, support for the unemployment, low and
middle-income Canadians, women’s programs, Aboriginal peoples, human rights, social, democratic and international development, health and safety, eliminating support for any type of advocacy organization and on squeezing public sector workers. It has also led to severe cuts and the elimination of programs across many departments, including at Statistics Canada and CBC/Radio-Canada. The Parliamentary Budget Officer found that the vast majority of these cuts will affect services Canadians value rather than represent operational efficiencies, as the Harper government claims.

Public sector workers, public services and labour unions are being targeted by the Harper government as in order to create divisions between Canadians in a cynical exercise of political opportunism. Attacking public sector workers is a also smoke-screen for cutting services that people rely upon, whether these are direct cuts such as the cuts to Veterans services or indirect cuts such as the erosion of health and safety regulations for federal workers. Undermining of workers’ rights is also creating unsafe working conditions that endanger all Canadians.

One of Harper’s key ministers, Treasury Board President Tony Clement, was caught fibbing againexaggerating the amount of sick leave federal public sector workers take, but that wasn’t enough to prevent them from using the federal budget to attack public sector workers again over sick leave and in other areas. This budget includes measures to restrict sick leave for federal public servants and to reduce contributions to health care plans for retired public servants.

The Harper government has reduced federal revenues and taxes to the smallest share of the economy in over 70 years: since as far back as 1940. This demonstrates that any deficit the federal government has is because its revenues are so low, not because its spending is high in any way. Harper’s tax cuts have provided businesses with over $50 billion in “tax relief” since 2006.

There is no evidence corporate tax cuts stimulated investment, boosted productivity growth,or stimulated the economy. Instead their increased profits have gone into increasing their surplus cash and financial assets, and share buybacks that help artificially boost the value of CEO stock options.

Restoring corporate tax rates to the rate they were when Harper first became prime minister in 2006 would increase federal revenues by approximately $10 billion a year. Preferential tax rates and loopholes that largely benefit the affluent, such as the stock option deduction, capital gains deductions, meals and entertainment expenses, tax-free savings accounts, and subsidies to the fossil fuel also cost the federal government close to $10 billion annually.

They may claim they’ve provided a two income family with two children with over $3,000 in tax relief, but this only applies to those with family income of $115,000 who maximize all tax credits and cuts.

This budget includes some measures to counter tax avoidance and evasion by closing some loopholes and tightening rules that allow corporations and wealthy individuals to use tax havens. It demonstrates the federal government has responded to pressure, but these are far less than they could do and are largely consistent with measures taken by other OECD countries. Unfortunately they pale in comparison with the loopholes they’ve kept and expanded, and with the evasion still allowed through tax havens. Other tax loopholes they are planning, including income splitting, expansion of tax-free savings accounts, and other tax credits, will cost billions and overwhelmingly benefit top incomes. There are real consequences of creating a $5 billion a year loophole that gives tax breaks to Canada’s richest families who don’t need them. If Canadian governments are concerned about supporting families with children, they could provide a universal child care program similar to the Quebec $7-a-day model for roughly the same cost as income splitting.

Unfortunately, the Harper government is using federal control over the income tax system to both attack unions through Bill C-377and to continue its attacks on women’s and environmental organizations and other charities. This budget continues that attack with measures they claim are designed to stop terrorist organizations from using Canadian charities. Increased scrutiny of charities under this government has focused on advocacy and environmental organizations that have expressed different views than this government.

The major initiative from last year’s budget, the Canada Job Grant, has already fallen flat in the face of concerted opposition from provincial premiers. They quite rightly didn’t like its Robin Hood in reverse approach of taking $300 million from effective training and skills programs for low skilled, vulnerable and unemployed people giving it to subsidize business-directed training for employed people with high skills. The federal government shouldn’t fund the Canada Job Grant by taking money from the Labour Market Agreement (LMA) funded programs with the provinces for vulnerable, unemployed and low skilled. Instead, the government should invest in increasing transfer to the Labour Market Development Agreements (LMDAs) which transfer Employment Insurance (EI) funds to the provinces and territories for training and skills development programs for EI-eligible clients.The Canada Job Grant is a federal program that will primarily benefit businesses and higher skilled workers. If the federal government insists on proceeding with it, even though it’s based on a myth of skill and labour shortages, it should provide new funding for it without taking money from the EI Fund that the provinces now use to provide effective programs for unemployed and vulnerable workers.

The Canada Job Grant is a federal program that will primarily benefit businesses and higher skilled workers. If the federal government insists on proceeding with it, even though it’s based on a myth of skill and labour shortages, it should provide new funding for it without taking money from the EI Fund that the provinces now use to provide effective programs for unemployed and vulnerable workers.

The federal government continues to ignore the most important education issue in this budget.

Post-secondary educationcreates key benefits for the economy and for young people yet this government ignores the issue as costs skyrocket, access dwindles and student debt soars. We need to replace tax-breaks with upfront funding for students.

On health care, the 2014 federal budget has confirmed the federal Conservatives’ plan to cut funding for public health care and walk away from its responsibility to protect Canada’s health care system. The government’s new unilateral funding formula removes equalization from the Canada Health Transfer (CHT) starting this year. The CHT will now be allocated on an equal per capita cash only basis, instead of a mix of cash and tax points adjusted for each province’s wealth. The Parliamentary Budget Officer reported in Fiscal Sustainability Report 2013 that this change will benefit only one province – Alberta – while all other provinces will see cuts to federal health care transfers and is creating growing fiscal gaps and imbalances. While Alberta will receive $954 million more under the new formula, the other provinces lose: Ontario, $335 million; British Columbia, $272 million; Quebec, $196 million; Newfoundland, $54 million; Manitoba, $31 million; Saskatchewan, $26 million; Nova Scotia, $23 million; New Brunswick, $18 million; and Prince Edward Island, $3 million. This change in CHT equalization, in effect from April 1, 2014, and the announced changes that will cut the escalator from 6% to a base of 3% starting in 2017-18 will download billions of dollars of health care costs onto the provinces. The federal government is balancing its books on the backs of the provinces and Canadians who need important health services.

CUPE continues to call for the federal government to protect, strengthen and expand Medicare through six measures: stable and sufficient funding, national standards, a national health care associated infections strategy, new and expanded community health centres, a national continuing care program and pharmacare. Public health care is sustainable – in fact, it costs less and delivers more.

The federal government should negotiate a new Health Accord with provinces that sets federal health transfer increases by taking into account the real health needs of Canadians and an aging population. Federal leadership to build a comprehensive public health care safety net for Canadians is the most efficient way to cover all Canadians with high-quality care at the lowest overall cost. For example, a national formulary for a core set of drugs and single-desk bulk purchasing would save Canadians more than 40% from total drug costs, almost $15 billion. The federal government should also reinstate the pre-2012 scope of coverage for refugees’ health care at a cost of $20 million per year.Federal leadership is also needed to create a national continuing care program covering both home and residential care beds. With the correct training and a proper staff complement, such a program would provide better care to seniors and save money through the significant reduction in accidents and complications from the inadequate care conditions that exists as part of a patchwork private-public system.

Negotiating free trade agreements (FTA) is not an alternative to having an industrial strategy for Canada. In the last year, we have the Free Trade Agreement between Canada and Panama has come into force and this government has signed another Free Trade Agreement with Honduras. Neither of these FTAs have a significant impact upon Canada’s economy. Announcing and re-announcing the “in-principle” CETA agreement without releasing any details of what its costs will be, particularly with regard to patent term extensions and being unable to use procurement dollars to encourage local economic development, is not a budget measure.

Last year’s 2013 Federal Budget announced a new long-term infrastructure plan to replace the existing plan which expires March 2014. While there are some positive elements to it, the funding under this program will be less than what was committed under the previous plan for municipalities. In particular, considerably more funding is needed to help municipalities upgrade to new water quality standards introduced by the federal government. And while the new Building Canada Fund doesn’t necessarily require municipalities to use P3s, support through an extension of the P3 Canada Fund requires recipients to engage in expensive and complicated P3s.

The Budget announcement that the federal government will help bring broadband Internet to more rural communities will no doubt strike most Canadians as something from the last decade, if not the last century. And if so, they would be right. The federal government has helped bring high speed internet access to communities and institutions across Canada in 1993 through the non-profit Canada’s Advanced Research and Innovation Network (CANARIE). Harper cut funding for this non-profit program in 2010 and also for the public Community Access Program, which provided free internet access through libraries. Instead Harper promised in 2008 to provide high speed Internet access to rural communities largely through private operators through the Broadband Canada Program. They cut funding for that program two years ago in April 2012 and now they’re finally renewing it.

Finding affordable housing is a major concern for millions of Canadians and it’s also a top priority for the Federation of Canadian Municipalities (FCM), with an estimated 3.4 million households waiting to get affordable housing. Agreements covering the $1.7 billion the federal government provides annually to help provide affordable housing through provinces and municipalities have started to expire and aren’t being renewed, putting 200,000 social housing units for low income Canadians at risk.