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Finance Minister Jim Flaherty released his government’s Economic and Fiscal Update and Advantage Canada economic plan last week.  While most increasingly overworked Canadians would probably fall asleep before finishing its 165 pages of numbers, rhetoric and misleading promises, it sends a clear message that should serve as an important wake-up call for anybody who cares about the future of our country.

Before he became Conservative leader and Prime Minister, Harper told a secret meeting of a right wing U.S. group that ‘America, and particularly your conservative movement, is a light and an inspiration to people in this country and across the world’ and that Canadians “wouldn’t even recognize the kind of country that I want to lead”.

Despite a lack of detail in many areas, these documents provide some glimpses about Harper’s plan to remake Canada.   

Corporate lobby groups were overjoyed by the Conservatives’ economic plan, describing it as “sweet music to our ears”, hitting “every one of our priorities” and having “all the elements of things we need”.

The CLC, CUPE and other progressive organizations strongly condemned the plan, but received little coverage in the mainstream business press.  Read on and you might find out why.

The Economic and Fiscal Update is mostly an economic and fiscal update and forecast, but it provides some signs of the government’s direction.  Despite their professed commitment to greater transparency, the Conservatives have decided to only provide two year forecasts in their budgets, so this update is the only public source of longer five year forecasts.  

What it shows clearly is that the federal government cannot afford the Conservative tax promises, reduce the debt, and increase public investment in the important programs that are a priority for most Canadians: health care, post-secondary education, child care, reducing inequality and preserving the environment.

But this is what the Conservatives want.  Despite all their rhetoric, they want to reduce public spending in these essential areas and to reduce the role of the federal government.  This will provide more opportunities for their corporate friends to profit from privatizing health care, private child care, private education and public private partnerships for municipal infrastructure and services.

In the end, the public pays more for all these services.  And public service workers pay with their jobs – and lower wages.

Harper and Flaherty are trying to sell their agenda by promising tax cuts to appeal to middle-income Canadians.  This document shows that while they may promise lots, middle income Canadians will benefit little.  Virtually all the new tax cuts they have planned are for corporations and those making over $100,000.  They are still promising a further GST cut, but most Canadians benefited little from the first one, while many businesses hiked up their prices.  They will proceed with a Working Income Tax Benefit for very low-income workers, but that was already planned by the previous government.

Most of all, any further significant tax cuts will involve even deeper spending cuts than they already have planned – and then we will all pay deeply.  

Hardworking Canadians would benefit much more from a decent wage increase than from tax cuts, but the Conservatives are working even harder to suppress workers’ wages.  They are exploding use of the Temporary Foreign Worker Program so that employers can exploit foreign workers and drive down wages in Canada.  Temporary foreign workers have few rights in Canada, are easily exploited and have been paid less than the minimum wage in some instances.  At the same time, they are severely restricting the entry of human rights refugees to Canada and cutting back on training and literacy programs for Canadians.

Advantage Canada is the Conservative’s clearest statement yet of their economic plans for Canada.  

The origins of the plan are evident right from its cover.  The title is recycled from Klein’s Alberta Advantage approach.  The ideological framework and policy are drawn mostly from Mike Harris and Preston Manning’s recently published Fraser Institute economic manifesto, Building Prosperity in a Canada Strong and Free.

The Advantage Canada plan combines a number of very explicit commitments for business with vague commitments for education, labour force development and social issues and a few populist gimmicks designed to grab headlines and mislead the public.

Running through their plan is a radical remake of the role of the federal government and of Canada.  There is a lack of real solutions to issues that most Canadians care about, such as health care, poverty, homelessness, climate change, and the needs of communities that are suffering from economic downturns.   

They pledge more support and looser regulations for banks, telecommunications and the oil and gas industries but nothing specifically for the hard hit forestry or manufacturing sector.  At most, this offers more of the trickle down economics that has failed at improving the quality of life of most Canadians.  

Even more, this document clearly signals that the Harper government firmly believes that many of these concerns should not be the business of the federal government.  It repeats over and over that they will limit the use of the federal spending power and focus new spending on areas of federal responsibility.  This statement should come with a huge asterisk.  

What they really mean is that they will limit the use of the federal spending power when it comes to social programs or other programs that would benefit people, such as creating a national child care program, reducing homelessness, or reducing the cost of drugs through a national pharmacare program.  Not only will they limit any future federal spending in this area, but they are going to further cut existing federal programs in these areas.

Canada already has one of the most decentralized federations in the world. National governments in virtually all other countries in the world have much greater general spending powers than our federal government does.  Canada’s federation has been able to evolve and modernize because the federal government has taken a leadership role in many areas in the past using the federal spending power to get provincial agreement to establish new national programs.
If the federal government had not taken this leadership role in the past, Canadians would not have national Employment Insurance, Medicare, or Old Age Security and Pension programs.  These are three of the four cornerstones of individual economic security in Canada.

It’s a completely different story when it comes to helping corporations.  Harper’s government has no hesitation in using federal spending powers to force, cajoling and bribe provincial and municipal governments to reduce corporate taxes (shifting more on the burden onto consumers), reduce labour regulations and use public-private partnerships to privatize services.

The Harper agenda is clearly to cut public services, to reduce the power of the federal government – and of our other democratically-elected governments – and to increase the power that corporations have over our lives.  

Hardworking Canadians will pay more with a higher cost of living, lower security, greater inequality and lower wages.

Don’t forget that Flaherty was a key member of the Mike Harris government that downloaded billions in costs to municipalities and cut public spending on the environment, health care and social services.  Ontario residents may have got a cheap tax cut, but they are still paying for it now with the highest municipal taxes in the world, high health care premiums, social inequality and underinvestment in infrastructure and community services.

While American voters have recently rejected the Republican ideology of free market rules, tax cuts, increasing inequality and privatization, this plan wholehearted adopts them.  

Contrary to Conservative plans that tax cuts will build a stronger economy, empirical international evidence shows that the most productive and competitive countries in the world maintain a high quality of life for their citizens with a strong public sector, good social services and increasing investments in public services.  The Conservatives used to talk about increasing productivity and competitiveness, since these studies have come in, they have changed their language but and talk about “efficiency” instead, which means whatever they want it to mean.

The Conservatives have also announced that they are consulting with Canadians on their economic plan until December 18th.  But they only want to hear from Canadians if they agree with them: consultations are limited to a discussion of how to implement their plan and Finance Canada includes a warning in bold that only submissions directly related to their plan will be considered.

While Flaherty, Harper and the Finance Department may not listen to you in their “public consultations”, they will have to listen at the ballot box.  We need to start preparing now to counter the right-wing agenda laid out in this plan.  This plan should serve as a wake-up call for all Canadians who care about the future of our country.  


Summary on issues of relevance to CUPE Members

This provides a very brief summary on key issues of relevance to CUPE members.

Surplus:  While the government expects $50 billion in surpluses over the next six years, their proposed tax cuts and debt payments will leave less than $3 billion a year to fund all new initiatives.  The federal government could afford to fund many of CUPE’s priorities – child care, health care, municipal infrastructure, post-secondary education – but not along with more tax cuts and further reductions of the debt.

Program Spending and the Role of the Federal Government:
The Conservatives are intent on reducing the size and scope of the federal government.  Program spending is targeted to increase by only 4% a year, below the rate of economic growth and below the 6% average increase of the past five years.  Growth could be even less if they bring in even further tax cuts. 

The Conservatives are bringing in a narrowly focused expenditure management system to review all program spending and ensure it meets their priorities and their view of the role of the federal government.  This means no new spending on areas of provincial responsibility, and further cuts to or at the most, transfers of, federal programs in these areas to the provinces.

Taxes: The EFU included a lot of commitments about further tax cuts for corporations, but there is little new for ordinary Canadians, even though Canada already has among the lowest tax burdens and overall costs for business.  The gimmicky “Tax back guarantee” won’t amount to much, if anything: all the suggestions involved tax cuts for those making $100,000 or more or with capital gains.  The GST tax cut is planned for January 2011 and would cost $6.4 billion a year, but consumers in Ontario, P.E.I. and the west could get dinged with higher provincial sales taxes if the Conservatives succeed at forcing provinces to harmonize with the GST.

Transfers to provinces:  The Conservatives once again commit to “restoring the fiscal balance”.  Strong indications are that this will focus on the Equalization program and it will probably be in line with the proposals made by the federal Expert Panel on this issue.  However, no additional funds are committed in this document and they also say that no equalization-receiving province ends up with a fiscal capacity higher than a non-equalization receiving province.  This will mean that Newfoundland could receive lower transfers, depending on the formula chosen.  There is also a commitment to introduce long-term predictable funding for infrastructure and post-secondary education and training, but this may not involve additional funds.

Municipal Transfers: The EFU shows that the Conservatives plan to extend by two years, but not increase, the $2 billion in gas tax transfers to municipalities.  Municipalities have a $5 billion shortfall in federal and provincial transfers as a share of their revenues compared to ten years ago.  They are facing increased downloading and cost pressures and have made a strong pitch for an increased and growing share of federal and provincial revenues, but have got no response on this.

Infrastructure Funding and P3s:  The Conservatives are aggressively pushing public-private partnerships on provinces, municipalities and territories by attaching conditions to their infrastructure funding and setting up a federal office to promote P3s.  They plan to package infrastructure funding (including for highways, public transit, wastewater and small scale projects) into a program envelope and require that P3 options be considered for all larger projects.  The Federation of Canadian Municipalities has already expressed their concerns about this condition. 

Post-Secondary Education:  This area will probably figure prominently in the 2007 Budget.  There is another commitment to provide stable and predictable funding for post-secondary education, but no indication is given whether there will be more or less funding.  Another commitment is to “modernize Canada’s system of student financial assistance”, with integration and simplification of the administration and delivery of student aid with the provinces and to make supports more transparent and predictable. This likely means ending the Millennium Scholarship Program, more RESP-style savings incentives for education, and perhaps some sort of voucher system.  Expect more funding for research equipment for universities, a redirection of scholarship and research funding support to engineering, sciences and business, and a push to commercialize more university research.

Health:  Very little attention is paid to health care, except as a growing cost.  Cuts – or increases – to major transfers are unlikely, although more cuts may be coming to the federal government’s health promotion programs.

Telecommunication:  The Conservatives have indicated that they review competition policies and taking further steps to regulate in the telecommunication sector “that relies on market forces to the maximum extent feasible”.

Environment and Energy:
  This document re-iterates proposals under their Clean Air Act, which focused on air pollution and did little to address greenhouse gas emissions.  It also signals their intention to bring in more stringent controls over municipal waste water effluents.  The environmental assessment act will be streamlined.  The federal government will work with industry, provinces and stakeholders to “establish a performance-based efficient environmental regulatory regime”, with  “the pursuit of market-based approaches” and the “deployment of new environmental and energy technologies”.  These grand sounding words probably just mean that the regulations will provide greater flexibility for industry.

Child Care and Early Learning:  No mention of child care.  The Conservatives’ promise to create child care spaces is on the road to failure, with most businesses unwilling to create spaces even with up front federal subsidies.

Social Services:  There was no mention of social services except in relation to cost pressures and the fiscal balance.  A Working Income Tax Benefit will be introduced in Budget 2007, which may involve cooperation with the provinces and may affect social assistance benefits.

Labour Market Programs and Skills Training:  Much federal labour market programming is likely to be “modernized and rationalized”: either cut or transferred to the provinces.  The exceptions may be a few programs for Aboriginal Canadians, older workers, persons with disabilities, and immigrant settlement.  Cuts to literacy and labour market programming have already been announced.  They may also substitute support to community programs with direct vouchers.

Labour Issues:  There is a heavy emphasis on increasing labour mobility, making labour markets more flexible and making it easier for business to hire foreign workers.  They are now promising funding to provinces to accelerate their efforts to reduce “barriers to labour mobility”, including extra-provincial recognition of credentials. 

The Conservatives recently opened the “Temporary Foreign Worker Program” up wide for B.C. and Alberta, so that businesses can bring it low-paid temporary foreign workers without having to demonstrate that there is a labour shortage for a wide range of occupations.  These workers have limited rights and are easily exploited.  This could be expanded to other provinces.  There is a nod to exploring options to make it easier for temporary foreign workers to stay in Canada.

There is little sense of strong support for the recent report on the review of Federal Labour Standards, but there is a commitment that the government will seek the views of business and labour before deciding on a course of action.

The only mention of actually using market incentives – such as higher wages or after-tax wages – to address labour shortages is in relation to what is termed “highly skilled workers”, defined as those making $120,000 or more.

Economic Union and Internal Trade:  The Conservatives also place a heavy emphasis on “strengthening the economic union” by making it more competitive and efficient.  There are a lot of facets of this, including reducing the scope of the federal government, rationalizing and streamlining programs and regulations with provinces, harmonizing taxes, and reducing “barriers to trade and mobility.  The document includes strong praise for the Alberta-B.C Trade, Investment and Labour Market Agreement (TILMA), which imposes NAFTA-style restrictions on the development of new regulations.

International Trade:
  International, regional and bilateral trade, investment and science and technology agreements and treaties will also be aggressively pursued.  This will extend to regulatory convergence and harmonization and a new Global Commerce Strategy.  Foreign investment controls under the Investment Canada will be generally loosened, except to protect takeovers “to protect the national interest” – e.g., takeovers of resource and energy companies by Chinese state-owned companies.

Economic Support for Sectors and Communities:  There is no federal support announced for businesses or communities affected by the downturn in manufacturing or the forest industry.  Further corporate tax cuts may be introduced, but these are unlikely to be geared to these sectors.  The only sectors that receive special mention are financial, telecommunication and energy sectors, which already benefits from high federal subsidies.  More federal support will go to the energy sector in the form of R&D support and the government has also hinted that it may use investment controls to block foreign takeovers to protect national interests (e.g. energy).  The financial sector is likely to benefit from looser and common regulations.

Women and other Equity Groups:  Women don’t appear once in the document.  Harper has already cut funding to women’s programs and attached a gag order to funds: restricted funding recipients from engaging in advocacy.  They may build on workforce programming for Aboriginal Canadians, older workers and persons with disabilities, as well as foreign credential recognition and immigrant settlement.  Other than this, no attention is paid to the needs of equity groups.  Other existing programs are likely to be cut or transferred to the provinces.

Low-wage workers:  A definite commitment is made to implement a Working Income Tax Benefit in Budget 2007 to reduce the high marginal taxes paid by very low income workers moving from welfare to paid work.  This benefit was first promised a year ago and then again in the 2006 Budget.  There’s no mention of increasing the federal minimum wage, which is now worth 30% less than it was 30 years ago.

Pensions:  Pensions are mentioned in a number of different contexts in this document.  There is a worrisome linking of CPP/QPP surpluses to the promise to eliminate Canada’s net debt by 2021.  While this may be more a change in definition to try and mislead the media and public, they have offered no details on this promise.  Canadian workers will want a commitment from the Finance Minister that they will no dip into their pensions to fund further Conservative tax cuts or other promises, just as the Liberals did with the EI Fund.

In addition to the pension income splitting promise, there are also hints that RPP limits may be further raised (which will primarily benefit those making over $100,000).  The section on P3s shows that they will be soliciting pension fund involvement in P3s.

Health & Safety:  The Conservatives are going to engage in a concerted attempt to reduce and streamline regulations in a wide range of areas through:
•    a new legislative framework to guide and direct departments and agencies to measure the compliance burden of regulations and reduce or eliminating regulations
•    regulatory coordination and elimination of “redundant testing” with the U.S. and Mexico through the Security and Prosperity Initiative
•    delegation of federal enforcement to provinces or federal enforcement of provincial regulations
•    adoption of standards from other countries or international standards
•    “a more streamlined environmental assessment process”

At the same time, there will be stronger controls over both municipal wastewater effluents and regulations under the Clean Air Act over smog air emissions by industry.

The document includes strong praise for the TILMA Agreement, which imposes NAFTA-style restrictions on the development of new regulations and suggests that large benefits could come from eliminating regulatory differences between provinces.  Much of this will be packaged as increasing “regulatory efficiency”, reducing the paperwork burden on small business, and modernizing and promoting “smart regulation” instead of deregulation.