Federal Finance Minister Joe Oliver tabled the Conservative government’s eleventh budget on April 21, 2015. The Federal Budget was originally expected to be released in February or March, however, due to growth uncertainties and a significant decline in global oil prices, Minister Oliver announced its delay in January of this year.
Entitled Strong Leadership: A Balanced-Budget, Low-Tax Plan for Jobs, Growth and Security, the government fulfilled its long-term pledge to balance its books after the peak of the global financial crisis and seven years of deficit. The posted CA$1.4 billion surplus figure is, however, trivial when taken in the context of an overall CA$288.9 billion budget for F2015. The government was able to achieve its pledge largely by dipping into its contingency fund, reducing its spending, and selling government assets, including the sale of its stake in General Motors Company and the auction of wireless spectrum.
Given the government’s limited capacity to maneuver while keeping to its pledge, Budget 2015 featured few surprises. Some initiatives targeting families and seniors—such as increased contribution room in the Tax-Free Savings Account (TFSA)—had been previously announced, while new funds for defence, policing, and national security were largely expected. It should be noted that many large allocations, such as those set aside for infrastructure, are back-loaded. That is to say: scheduled to be spent in several years, well after the upcoming federal election. Some highlights of Budget 2015 include:
Infrastructure and transit
The most newsworthy item for infrastructure investment is the new Public Transit Fund aimed at building new public transit infrastructure to reduce congestion and fight gridlock in Canadian cities. This Fund will allocate CA$250 million in 2017-18 and grow to CA$1 billion per year in 2019-20.
Defence, national security, and policing
Over the next five years, intelligence agencies and law enforcement will receive a combined CA$439 million to bolster investigative resources, counterterrorism efforts, as well as enhance cybersecurity. Another CA$60.4 million over three years has been set aside for improving security on Parliament Hill. The Department of National Defence will receive a significant increase in its budget allocation; military spending will increase by CA$1.1 billion over three years, starting in 2017-18.
The government has committed to reducing the small business tax rate to 9% by 2019. This would generate an estimated CA$2.7 billion in tax savings for small businesses between now and 2019–20.
Families and seniors
As promised, the government will increase the TFSA annual contribution limit from the current CA$5,500 to CA$10,000. The government has also announced it will reduce the minimum withdrawal requirements for Registered Retirement Income Funds. Budget 2015 confirms the controversial policy of income splitting, which will allow parents to split their income for tax purposes. An increase in monthly payments to the Universal Child Care Benefit is also planned.
Innovation and manufacturing
The government will invest CA$1.5 billion over five years to advance its renewed science, technology and innovation strategy, largely in the form of grants to colleges and universities. It will also offer manufacturers a 10-year accelerated capital cost allowance to encourage productivity-enhancing investment in machinery and equipment.
Overall, Budget 2015 offers few new initiatives or programs. Further, most larger-scale announcements are deferred to the post-election cycle. This back-loading reflects the economic uncertainty of the times and showcases the fragility of the federal surplus figure. In other words, the situation could change drastically very quickly. Clearly, Budget 2015 is primarily a political document. It is a “no new news” plan that leaves the Conservative government on course to face the Canadian electorate in less than six months with several promises fulfilled while a framework for targeted campaign promises in the areas of: small business, national defence, and tax relief for families and seniors is starting to take shape. This framework offers the Conservatives a number of benefits.
Strategically, the Conservatives know that a slow-growth and an uncertain economic environment will make it difficult for the NDP and Liberals to announce new funding initiatives or promised programs without reneging on some popular Budget 2015 commitments. The Conservatives will have also forced the opposition parties to reveal whether or not any new promises will result in future deficits in prospective terms. Slim or not, the CA$1.4 billion surplus figure is essential in framing the campaign and debates in the next general election.