OTTAWA — Having all but ruled out new spending, the trick for Jim Flaherty in Thursday’s budget is to maintain the impression of “action” in his fifth instalment of the Economic Action Plan series that was created as a response to a global economic meltdown.
The finance minister has made returning the country’s financial books to the black by the next election in 2015 a compulsory goal. That would mean eliminating the current $26-billion deficit in less than three years.
To accomplish the feat, sources say Flaherty will unveil almost no new spending in Thursday’s document and no major tax measures, but there will be plenty of new and renewed programs and promises of problem fixes designed to make Canada’s economy more efficient and competitive.
Flaherty outlined his priorities this week in a letter to the Conservative caucus, listing three areas for action — skills training, fixing the country’s crumbling infrastructure and beefing up the manufacturing and processing industries that generate about 1.8 million of the country’s best-paying jobs.
“We’re going to talk about manufacturing in the budget tomorrow and some specific measures that we are going to take particularly to help manufacturing enterprises in Canada, including Ontario’s,” he said Wednesday at a Roots clothing store in Toronto where he engaged in the traditional pre-budget photo-op of trying on a new pair of shoes.
Flaherty has given a broad outline of what he intends to do on the skills training front, saying he wants Ottawa to have a greater say in how $2.5 billion a year is spent in order to have a better match between jobs that Canadians are being trained for and those actually available.
In a report Wednesday, Statistics Canada calculated there were 221,000 job vacancies in December, while about 1.3 million Canadians remained unemployed.
With federal-provincial labour market agreements coming up for renewal this year, industry insiders say Flaherty is looking to use some of the money in the skills fund to directly pay firms on a matching basis to train workers or to have firms direct funds to specific skills training institutions.
Funds will go into luring more aboriginal Canadians, the disabled, youth and seniors into the labour force.
Flaherty is said to also be looking at creating an innovation investment fund, reshuffling about $400 million Ottawa is saving from remodelling the Scientific Research and Experimental Development tax credit program into encouraging product development.
Manufacturers will almost certainly have their expiring tax credit for purchases of machinery and equipment renewed at more than $1 billion a year and Ottawa may seek to leverage its procurement muscle, particularly in the defence sector, to encourage the development of new technology in Canada.
Flaherty said he intends to “do more” on infrastructure. With stimulus construction projects now complete and the $8.8-billion Building Canada Fund about to expire, the minister is expected to announce an extension of the program in the budget.
Lastly, the budget is likely to devote some resources to help exporters make inroads into fast-growing emerging markets like China and Brazil.
The flurry of initiatives is the product of years of thinking about how to get the most out of what is a shrinking government pot for spending from inside the government through commissioned reports on R&D, aerospace and defence procurement.
There is no compelling economic reason Flaherty must eschew all new spending for the sake of the deficit. If it took a year or two longer to achieve balance, the financial markets would barely blink because Canada remains a fiscal boy scout compared to the U.S. and many European countries.
The Conservative government wants to offer Canadians two plums in the 2015 campaign — income splitting for tax purposes and doubling the popular tax savings funds. But those pledges, made in 2011, were contingent on eliminating the deficit.
> The finance minister’s budget speech begins Thursday at about 1 p.m. Pacific; go to timescolonist.com for coverage. CPAC, the public affairs TV channel, will broadcast the speech. The Finance Department is streaming the speech on its website.
