Budget unbalanced: rewards business and wealthy, fails other Canadians
The Big Picture: more tax cuts for the rich: nothing for jobs and working Canadians.
The Conservative’s 2015 federal budget demonstrates they have nothing new to offer workers and the majority of Canadians. Once again it includes tax cuts for business and the wealthy, and nothing substantial to create decent jobs or to help Canadians struggling to make ends meet. In fact, it takes money from workers contributed through the surpluses in the Employment Insurance fund to pay for these tax breaks for the wealthy and corporations.
The Conservative’s economic policies and spending cuts are destroying jobs, squeezing workers’ wages, slowing down economic growth and making it harder for working families to get by.
The big ticket new items in the budget are:
- Tax cut for small business down to 9 per cent by 2019, costing $2.7 billion over the next four years and over $1.2 billion annually when fully-phased in. This doesn’t just benefit small businesses but also larger corporations up to a size of $10 million.
- Lower taxes for manufacturers by allowing faster depreciation of investments, worth over $300 million annually.
- Increasing the annual contribution limit for Tax-Free Savings Accounts (TFSAs) to $10,000, a multi-billion dollar tax break for the wealthiest Canadians, together with the regressive income splitting measures that were previously announced. In total these regressive tax breaks will cost the federal government over $13.8 billion over six years.
- Increased spending on defence and security, including $12 billion more for the Department of National Defence—although much of that is back-end loaded.
Additional funding for public transit, but it wouldn’t start for two years and would go through PPP Canada, forcing municipalities to engage in much more expensive Public-Private Partnerships (P3s).
There’s nothing significant to help workers or ordinary Canadians or to improve the public services that Canadians depend on.
There’s nothing to address the real priorities of working Canadians:
- Nothing to create good jobs, reduce inequality or boost the economy.
- Nothing to improve retirement security or public pensions, such as the CPP, or to improve Employment Insurance.
- Nothing to improve public health care.
- Nothing to increase the availability of affordable child care for families.
Nothing to increase tax fairness or reduce inequality.
For a government that prides itself on reducing taxes, there aren’t even any additional tax cuts that will directly benefit ordinary Canadian households in this budget.
All the tax savings that they claim households will receive are from tax cuts made in previous budgets—and their so-called ‘typical families’ are far from it. However the budget will be supported by a massive government spending to promote the budget and Conservative messages, with $7.5 million allocated for advertising in May alone. That’s one-tenth of the federal government’s entire advertising budget for 2013/14.
Will Canadians be fooled by a Conservative government using millions of the public’s money in advertising to claim this budget will largely benefit them and not just the wealthy and business interests? That all depends on the next election.
The bogus “Balanced Budget”: taking from workers to give tax cuts to the rich
The Conservatives claim they’ve balanced the budget with a $1.4 billion surplus this year—but the reality is it’s a completely bogus balance. They’ve only been able to achieve a surplus on paper by taking $1.8 billion out of the EI fund, another $900 million from cutting sick leave benefits in the federal public, and $2.1 billion by selling their shares in GM.
The EI surplus funds should have gone into improving the EI program, the $900 million in sick leave benefits will be unfairly appropriated from workers, and the government could have fetched almost a billion more from the GM shares if they’d held onto them for just another year instead of selling them at a discount to Goldman Sachs. As befits Joe Oliver, the former Bay Street banker now Finance Minister, this really is a Robin Hood budget in reverse, taking from workers to give tax cuts to the wealthy and corporations.
This budget also sets aside a much smaller contingency amount in their fiscal forecasts: only $1 billion for the next three years instead of the usual $3 billion. This means that the generous new tax cuts they’ve promised the wealthy and businesses put any surplus in jeopardy if the economy doesn’t perform as strongly as expected—which has happened all too frequently under the Conservative government.
Also disturbingly, the balanced budget legislation they plan to introduce will require that future federal governments freeze operating spending after a recession. This is a sure recipe for continuing stagnation. The government’s own figures show that public investment and spending creates far more jobs and provides a much stronger economic boost than tax cuts.
On the issues:
Many of the measures in this budget had been leaked before, but it is also filled with a lot of additional smaller measures. These are meant to appeal to particular groups, but they involve relatively small amounts of funding and in some cases renew funding for programs that were set to expire. These involve a lot of commitments for relatively smaller increases in funding in specific areas, but the funding for most of these won’t start until 2016/17 or 2017/18, well past the next federal election.
Working Canadians: jobs and the economy
The budget includes surprisingly little for working Canadians, or to help create jobs. The only measures it includes are:
- Extending the Employment Insurance Working While on Claim project for another two years.
- Extending compassionate care leave under the EI program to care for a gravely ill family member from six weeks to six months.
- Very limited funding to help with training and harmonization of apprenticeships.
- $65 million to business and industry associations to work with post-secondary institutions to better align their curricula with business needs.
- Renewal of funding for Aboriginal labour market programming.
- Ensuring that the Canada Labour Code applies to interns under federal jurisdiction.
Notice that the government intends to reduce Employment Insurance premiums in 2017/18, after the EI fund goes into surplus.
There is nothing significant in the budget to create jobs through significant infrastructure spending or improved public services, as CUPE, the NDP and others have called for.
Federal public sector unions have also condemned the government for announcing through the budget that they will eliminate existing sick leave provisions for federal public service workers, whether or not an agreement on this is reached at the bargaining table.
The government has also refused to improve the Employment Insurance system, which now only provides benefits for less than 40 per cent of the unemployed, by improving eligibility, benefits or services.
There’s nothing to help boost wages, such as restoring and increasing the federal minimum wage to $15/hour as the NDP has proposed, nothing to improve social security and little to help diversify the economy.
There is also nothing significant in the budget to improve training for workers by restoring the $500 million cut to literacy and basic skills programs funded through the Labour Market Agreements (LMAs). This money was instead put into the controversial and business-friendly Canada Job Grant. This budget also re-iterates that they intend to renegotiate the $1.95 billion Labour Market Development Agreements (LMDAs) with the provinces to also “re-orient them towards labour market demand”—in other words to make the funding more business-friendly.
Their agenda of relying on tax cuts and gambling on the resource sector to create good jobs and stimulate growth while squeezing wages and cutting public services has failed—and will continue to fail. There’s been little improvement in unemployment since the Conservatives gained a majority, job quality is now at its lowest level in more than a quarter century and the real wages of working Canadians are stagnant while their debt continues to escalate. Meanwhile CEO compensation has increased by 40 per cent since 2009 and corporate profits are up by more than 70 per cent. As a result, inequality is increasing and our economic prospects keep declining: our economic growth rate is now substantially lower than the U.S. while our unemployment rate is substantially higher.
By continuing to reduce public sending to finance more tax cuts for business and the wealthy, this budget continues with their failed economic policies and will instead increase inequality, destroy jobs and further slow down the economy.
Retirement security and pensions
The measures in this budget on retirement security will overwhelmingly benefit the wealthy with their private savings, while other changes they are considering will put the retirement savings of working Canadians at risk, with the introduction of ‘target benefit plans.’
- Reduces the minimum amounts seniors must withdraw from their RRIFs after they reach age 71.
- Increases the annual contribution limit for TFSAs to $10,000.
Considering changes to pension laws to allow federally regulated employers to establish target-benefit pension plans and to income tax laws to enable provinces to also establish target benefit plans.
While the change to RRIFs will help some seniors and is supported by seniors’ organizations, only half of all seniors have RRSPs or RRIFs, so this measure will largely benefit the few who are better off, while reducing tax revenues.
The real pension crisis is that 6 in 10 workers don’t have any workplace pension plan. Much better would be to improve the Canada Pension Plan (CPP) and Guaranteed Income Supplement (GIS) so all Canadians could depend on decent incomes in retirement. Labour has a fully-costed proposal to double CCP benefits, which is supported by provinces, pension experts, the NDP, and the Canadian public.
CUPE also called for the government to cancel its plan to increase the retirement age for Old Age Security (OAS) and the GIS to 67. These cuts will mean middle-class Canadians will lose about $13,000 in retirement income and nearly a quarter million future seniors per year could face poverty, all the while Conservatives provide huge tax cuts to the wealthy through TFSAs. The NDP has also committed to reversing this change and restoring the age of retirement to 65.
The Conservative government is intending to give the green light to federal jurisdiction employers to establish target benefit plans that will allow them to walk away from the pension promises they have already made. Workers and all those affected should also vigorously oppose this.
The budget also announced that Conservatives are considering changes to allow pension funds to own more than 30 per cent of the shares of a company. This is intended to facilitate further privatization of infrastructure investments through P3s and could increase the volatility of pension fund investments.
Child care and early learning
The budget does nothing to address Canada’s growing child care crisis. The budget does not create safe, quality child care spaces nor does it make child care affordable for families.
Instead of helping to build an affordable and universal public child care system, the budget continues with its policy of providing regressive tax breaks and expanding the so-called Universal Child Care Benefit. As childcare expert Martha Friendly says, “Until income splitting came along, I thought the Universal ‘Child Care’ Benefit was the worst piece of social policy I’d ever seen.”
Families are spending more on child care than on housing – up to $2000 a month. This means the tax credit being offered up by Conservatives will barely cover one month. And that will be for only handful of families; most won’t get a dime.
The federal revenue lost by this tax break for a few well-off families could be better used to help all Canadians struggling to find affordable and accessible quality child care.
The Family Tax Cut (aka income splitting) and large expansion of the Universal Child Care Benefit (with initial cheques to be sent out to families just before the election) is being heavily promoted. No matter what it’s called, income splitting is highly regressive: 85 per cent of households won’t benefit at all and the benefits are much larger for top incomes. It is also terrible social and economic policy as many, even the conservative CD Howe Institute, have emphasized: it will provide an incentive for women to stay home, increase inequality, reduce labour force participation and slow down the economy.
As the Parliamentary Budget Officer also pointed out, the Conservatives spending on income splitting and child care benefits will amount to almost $8 billion this year, but more than half is going to families without child care expenses, and there are no guarantees that any of it will actually create any child care spaces.
This money could be much more effectively used supporting a genuine affordable and accessible national early learning and childcare program, as the NDP has proposed. This would make life much more affordable for families, help promote greater equality for women and could likely pay for itself though increased labour force activity.
This budget has absolutely nothing in it to deal with the pressing health care issues Canadians face: improving wait times for health services, finding a long-term care bed for seniors and others, home and community support, or a national public prescription drug plan.
Despite long waiting lists, five million Canadians without a family doctor, and skyrocketing prescription drug prices, the 2015 federal budget confirms Conservatives are cutting more than $36 billion from health care over the next ten years. The federal share of health care spending is projected to drop dramatically from 20 per cent to 12 per cent. Instead of increasing funding for health care, they are increasing spending on warfare, with an additional increase of $12 billion in the budget of National Defence over ten years.
The budget does include small amounts targeted for those with autism spectrum disorder, a renewal of funding for the Mental Health Commission, for innovation in health care, and a Home Accessibility Tax Credit for seniors and persons with disabilities—but these are all very small amounts in comparison with the tens of billions they are taking out of health care.
Educational workers and students called for the federal government to increase funding for post-secondary education by redirecting the money spent through the RESP program and tax credit to increasing need-based student grants, to provide a transfer tied to reducing tuition fees.
The budget includes very limited assistance for education. The only measures include:
- $119 million over four years starting in 2016/7 to reduce the parental contribution under Canada Student Loans needs assessment.
- $116 million over four years starting in 2016/7 to eliminate in-study student income from the Canada Student Loans Program.
$184 million over 4 years starting in 2016/17 to expand eligibility for Canada Student Grants to students in short-duration programs.
The Canadian Federation of Students is critical of these measures, saying they will leave almost 200,000 more students deeper in debt upon graduation and that the changes to the grant program will only help about 20,000 students at public colleges.
The budget also includes an additional $46 million annually for NSERC, SSHRC and other granting councils, starting in 2016/17 and an additional $574 million over three years starting in 2017/18 for the Canadian Foundation for Innovation for capital investments at universities and research institutes. However, much of the additional funding will be directed to business and industry-driven research.
Funding for infrastructure and municipalities
The big-ticket announcement in this budget is it provides $750 million over two years starting in 2017/18 and $1 billion a year thereafter for a new Public Transit Fund. This could have been a positive move, but very disturbingly they plan to provide the funding directly through PPP Canada Inc., the federal government’s P3 agency. This means municipalities will be forced to engage in much more costly P3s and so they may effectively have to privatize financing and operations for these public transit projects. This will massively increase costs for municipalities and is a gift to the large private corporations and financiers that benefit from P3s.
The only other infrastructure measures announced in the budget is a plan for a fund for community infrastructure as part of the Canada 150 celebrations, but there are no dollars set aside for this yet. Other infrastructure funding outlined in the budget was previously announced and involves an acceleration of Building Canada Funding.
As mentioned above, the budget also announced a review of rules that restrict pension funds from owning more than 30 per cent of the voting shares of a company. This is intended to facilitate further privatization of infrastructure investments and could increase the volatility of pension fund investments.
Municipalities were looking for the federal government to assist them with funding to meet new federal wastewater regulations that will cost upwards of $18 billion over the next decade. However there is no funding to improve water quality for Canadians in this budget. This budget represents a missing opportunity for them to partner with municipalities on a basic service all Canadians have a right to expect.
The budget falls far short of what the Federation of Canadian Municipalities (FCM) called for, which included $300 million annually for a Clean Water Fund to help municipalities meet new federal wastewater regulation. There’s also very little to help with the affordable housing measures the FCM and affordable housing agencies had called for in this budget.
The budget maintains the federal government’s annual investments of $1.7 billion for social housing, but they aren’t being increased.
It may be no surprise, but there’s not one mention of climate change in the entire 500+ pages of the budget plan, while there are over a hundred mentions of oil.
And instead of reducing the subsidies to fossil fuels, as the International Monetary Fund and the G20 have strongly urged, this budget increases those subsidies by providing a new tax subsidy for facilities that produce Liquid Natural Gas (LNGs). The budget also extends the mineral exploration tax credit and provides tax subsidies for resource companies required to conduct environmental assessments to get approval for resource projects such as pipelines and provides more funding for agencies to help speed up those approvals.
There’s very limited funding for positive environmental measures. Outside of additional funding for cleaning up federal contaminated sites, these are limited to $75 million over three years to help implement the Species at Risk Act, $10 million a year for recreational fisheries and $2 million for the Pacific Salmon Foundation. Once more, this is far less than what environmental and conservation organizations had called for.
Environment Canada and Parks Canada have suffered some of the deepest budget cuts of all departments and agencies under the Conservative government
Indigenous peoples also lost big under this budget. The budget includes some minimal renewals of existing programs, with most at reduced levels of funding. The Assembly of First Nations says it is one of the weakest tabled by the Conservative government—which is saying something. At most, it maintains the status quo.
There is also nothing to address the crisis of over 1,000 missing and murdered Indigenous women and girls, which the Conservatives have refused to act on.
Defence and Security
The 2015 budget includes a commitment of almost $12 billion more for the Department of National Defence over ten years, starting in 2017/18. More immediately, it also includes $360 million this year for the Canadian Armed Forces mission in Syria and Iraq, $7 million to provide assistance to the Ukrainian Security Forces, and close to $500 million more over five years for a variety of other security and counter-terrorism operations.
For this government, there’s no shortage of money for defence, security and warfare, but health care, protecting the environment, social security and public services keep on getting cut.
Corporations, trade and privatization
Business and corporations are the other big winners in this budget. Together with the reduced small business tax rate (which actually benefits all corporations with assets up to $10 million) and accelerated depreciation rates for investments, the budget also includes a lot of additional direct funding for business.
In addition to the specific support outlined above for the oil and gas and mineral sector, there’s $100 million over five years for the auto sector, $65 million for business and industry associations to get post-secondary institutions to make their programs more business-friendly, a commitment to reduce EI premiums, funding for a wide range of programs to support business-friendly innovation and to promote trade.
The Conservatives have signed a record number of trade deals. However, there’s no real evidence they have provided a strong economic benefit to Canada, and even the OECD now acknowledges that trade deals have driven down wages and increased inequality in industrialized countries. More trade deals are planned that could even more intrusive and anti-democratic than the Comprehensive Economic and Trade Agreement (CETA), such as the Trans-Pacific Partnership (TPP). These are more corporate rights deals than ‘free trade’ deals and especially threaten the viability of public services.
The budget also accelerates the Conservative’s privatization agenda, helping to make their corporate friends profit from public services. The budget confirms the government’s commitment to ‘social finance’, which enable private corporations to operate and profit from public spending on social services. Additional funding for public transit will only be provided through PPP Canada, making certain that these projects will be more expensive P3s and operated by private corporations.
The irony was surely not intended, but the budget also says that the federal government “will take action by introducing a new government-wide integrity regime for its procurement and real property transactions to ensure that it does business with ethical suppliers in Canada and abroad.” This comes right after they just announced they will give the multi-billion dollar P3 contract to rebuild Montreal’s Champlain Bridge to a consortium including SNC Lavalin, a company that was recently charged with fraud in relationship to another P3, the multibillion McGill University Health Centre Hospital, and banned from contracts by the World Bank for ten years because of its extensive record of bribery, corruption and fraud. The Champlain Bridge project’s costs have already almost doubled as a P3.
The Conservative government is also aggressively pushing privatization overseas by exploiting Canada’s development assistance budget. They are increasingly using this funding, intended to assist in developing countries, to subsidize private companies, advance privatization of public services in the developing world and help “whitewash” the operations of Canadian mining and other companies operating abroad. This budget includes another $300 million for a Development Finance Initiative to further that agenda.
For a government that talks incessantly about cutting taxes, what’s surprising in this budget is that there aren’t even any tax breaks that will benefit Canadians with low and middle incomes.
The only tax changes on the personal side are the increase in the contribution limit for TFSAs to $10,000 which will overwhelmingly benefit the wealthy, the reduced withdrawal amounts for RRIFs, a new home accessibility tax credit for seniors and persons with disabilities and an increase in the capital gains exemption to $1 million for farms and fishing property.
There’s absolutely nothing for the vast majority of Canadians. Not only will the increase in the TFSA contribution limit overwhelmingly benefit the wealthy as the Parliamentary Budget Officer and many others have demonstrated, but the cost of this tax break for the wealthy will escalate and also erode provincial revenues as well. Current costs of about $860 million for the federal government in 2015 double within four years and then if the contribution limit is doubled and the program isn’t contained will amount to over $100 billion by 2080.
The Conservative’s multi-million dollar advertising campaign to promote this budget before an election claims that a typical family of four, with parents Henry and Cathy, will gain over $6,600 this year from lower taxes and increased benefits brought in by the Conservative government since 2006. This is nonsense. Their typical family includes a husband who makes $84,000 a year, a wife paid $36,000 and two young children, so what they would gain from income splitting is maximized. This is hardly a typical family and even if it were, the amount they would save from having an affordable universal public childcare program—as the NDP has proposed—would be more than double that.
Toby Sanger, CUPE Economist