When the Hon. Joe Oliver was appointed Minister of Finance by Prime Minister Harper on March 29, 2014 West Texas Intermediate (WTI) was trading at just over $101 per barrel. What a difference a year makes! At the time of writing, WTI was priced at slightly under $52 per barrel. This precipitous drop in global oil prices was certainly not factored into the federal government’s original plan as it began preparing its 2015 Economic Action Plan (EAP) last year. The unexpected delay in tabling the Budget until today is testament to that. But, the true test of governing is how a government responds to circumstances completely out of its control, such as the impact of fluctuating commodity markets on its revenues. To that end, Minister Oliver kept the Harper government’s longstanding promise to balance the federal books this spring. In truth, this did not come as a surprise to anyone, even to the most casual of observers, despite the unexpected hit to the government’s revenue base caused by the oil price shock. There was no way on earth that the government would do anything BUT deliver a balanced budget in this, an election year. It is not unreasonable to surmise that Prime Minister Harper would rather walk five miles in tight shoes than miss this politically imperative target.
EAP 2015 essentially reflects the Conservative Party of Canada’s time-tested strategy for winning elections. The Conservatives have won three successive federal elections by following the same strategic game plan:
This “narrowcasting” approach to winning elections and governing leads to fiscal measures from earlier budgets such as the Children’s Fitness Tax Credit, the Children’s Arts Tax Credit, enhancing EI benefits to parents of murdered or missing children, the Tradesperson’s Tools Deduction, and the Family Tax Cut (see below for more details). There is a common thread to these earlier budget measures – they put money directly into the pockets of Canadians. This too is a key part of the Conservative Government’s re-election strategy: eliminate government programs that appeal more to non-supporters and endeavour instead to put money in people’s pockets. Today’s Budget also reflects this approach:
Readers are reminded that the federal government announced several tax measures last fall that did not wait to be included in today’s EAP. The government wanted to ensure the benefits of these initiatives would be available to taxpayers as they meet the deadline for filing their 2014 personal income tax returns by the end of April. These pre-budget measures included:
This flurry of family-friendly tax initiatives from the fall Economic Update left one wondering if anything would be left over for this year’s Budget. As the new EAP 2015 measures summarized above demonstrate, it turns out that the federal cupboards were not completely bare, although several initiatives announced today will not kick in until next year or thereafter.
Several items from today’s Budget will be of interest to Canada’s energy and natural resources sector:
Moreover, EAP 2015 reiterated the commitment made by Prime Minister Harper in February 2015 to provide Accelerated Capital Cost Allowance treatment for assets used in facilities that liquefy natural gas. It bears noting that the first two items highlighted above are designed to address concerns over public engagement on major resource projects.
Canada’s manufacturing sector received special attention in today’s Budget. Among the key initiatives aimed at this sector are:
EAP 2015 includes additional investments in Canada’s military as well as items of interest to firms engaged in selling goods and services to the Government of Canada:
The defence escalator will be welcome news for many in the Canadian Armed Forces although there will no doubt be grumbling from some quarters that it is not sufficient to meet the military’s ongoing operational needs. The funding for Defence Analytics, while small, is critically important.
The federal government announced an investment of $204M to support enhancements to federally-owned and operated airports as well as improvements to VIA Rail Canada’s rail infrastructure. With regard to infrastructure, EAP 2015 announced the establishment of a Public Transit Fund. This new Fund will provide $750M over 2 years, starting in 2017-18, and $1B per year thereafter to help finance transit projects across Canada. Financial support will be allocated based on merit to projects that will be delivered through alternative financing and funding mechanisms involving the private sector, including P3s.
Of particular importance to Canada’s banking sector is the government’s commitment in EAP 2015 to strengthen financial consumer protection in the Bank Act. This move is necessary to reinforce the federal jurisdiction over banking that was called into question by the Supreme Court of Canada decision in September 2014 in the Marcotte case. The SSC found that Quebec’s consumer protection legislation is applicable to banks. In addition, the federal government used EAP 2015 to confirm that it will release its national strategy this year aimed at strengthening Canadians’ financial literacy.
An important initiative aimed at Canada’s charitable giving community was announced today. At present, donations of private shares and real estate to registered charities and other qualified donees can give rise to taxable capital gains. To help Canadians provide more gifts, EAP2015 proposes to exempt individual and corporate donors from tax on the sale of private shares or real estate to an arm’s length party if the proceeds are donated within 30 days. If a portion of the proceeds is donated, the exemption from capital gains tax would apply to that portion. This measure will apply to donations in respect of dispositions occurring after 2016.
The government’s Chemical Management Plan is being renewed with the provision of $491.8M over five years, starting in 2016-17. This additional investment will enable the federal government to complete its assessment of the remaining 1,700 legacy toxic substances to be examined.
The reaction of NDP leader Thomas Mulcair and Liberal leader Justin Trudeau to today’s Budget reiterates core messaging each has been delivering over the past year – not enough is being done by the Harper government to assist middle class Canadians and those who aspire to join the middle class. Mr. Mulcair paid considerable attention in his post-Budget remarks to the Family Tax Cut , which was announced last fall. He asserted that this tax initiative would provide assistance to only 15 percent of Canadian families, and primarily to wealthier Canadians. He also decried the Harper government’s failure to invest in childcare, pointing to his Party’s election platform which calls for significant investments in childcare. Liberal leader Justin Trudeau continued his “wealthy versus the middle class” narrative, pointing out that doubling the TFSA will help wealthier Canadians. He also repeated his condemnation of the Family Tax Cut which he delivered last fall, sounding similar to Mr. Mulcair in this regard. Moreover, the Liberal leader reinforced key messaging that a Liberal government would make significant new investments in public infrastructure. Interestingly, members of the Liberal caucus with economic credentials have been fanning out across the country in recent days to deliver speeches focusing on the Harper government’s economic track record. This has also been featured recently in Question Period. Clearly, the Liberals are feeling confident that they can steal away from the Conservative government the mantle of sound economic manager the Liberals proudly wore during the Chrétien-Martin years.
While the federal government has been deliberately focusing its political and policy messaging over the first quarter of 2015 on public safety, security and the fight against jihadist terrorism, the tabling of EAP 2015 today puts public finances and management of the Canadian economy back at centre stage of the political debate. A firm, steady and reliable hand on the economic tiller is generally thought of as the Conservative Government’s core strength, a key part of its brand as a political entity. Oddly and somewhat unexpectedly, an election campaign shining the light on the government’s economic track record may be exactly where the major opposition parties want it to be. Managing the economy, government ethics (the Senator Duffy trial as Exhibit 1), and public safety and security will almost certainly form the “three-legged stool” of issues upon which the 2015 election campaign will be fought. The outcome of this October’s election raises an interesting question: Who will be delivering Budget 2016? We will find out in six months.
The following releases are from the GoC:Budget 2015 Website
APRIL 21, 2015 (OTTAWA) – Canadians have been waiting for a Budget from Ottawa that’s focused on their priorities and the needs of the middle class – not just the wealthiest among us. After ten years of Conservative deficits and mismanagement, Canada’s middle class families are working harder and falling further behind.
APRIL 21, 2015 (OTTAWA) – Stephen Harper’s tenth budget gives the most to Canadians who need it the least. It is time for a better plan that invests in jobs and growth for the middle class and those working hard to join it, said Liberals today.
APRIL 21, 2015 (OTTAWA) – Finance Minister Joe Oliver’s first and last budget represents a hodge-podge of election promises, rather than a coherent, prudent plan for Canada’s future economic and social health.