Cuts to operating budgets will be in the $5-billion region (lower than the $7-billion reported Wednesday) from total program spending of $250-billion.
The size of the federal bureaucracy will likely be reduced by about 25,000 from a total of 283,000, but this will be done over a period of three years — and with half of those cuts eliminated through attrition.
This is a far cry from Paul Martin’s 1995 Liberal budget, which called for a three-year savings of $29-billion and the loss of 45,000 positions from the public service.
In some ways, 2012 will be a prosperity budget — reallocating money from a position of relative strength to face long-term challenges such as an aging population, slumping business research and development and poor native education performance.
The political trick for the opposition is to persuade Canadians that the Harper government is making ideologically driven cuts that will turn their cozy, familiar world into a cold, unfriendly place.
New leader Thomas Mulcair is off to a strong start on this front. At his first NDP caucus meeting, he said Prime Minister Stephen Harper has a choice between pandering to rich friends or defending the middle class. He called on the Conservative government to “invest in jobs” and “protect the essential services that Canadians count on.”
In Question Period, his finance critic, Peter Julian, urged the government to take action on the bankruptcy of Aveos Fleet Performance, which has thrown 2,600 people out of work, mostly in Quebec. “Why does it not act to save those jobs? Why does it not stand up for Canadian workers and do its job so that Aveos workers can go back to doing theirs?” he said.
Meanwhile, Bob Rae, the interim Liberal leader, was giving Parliament a history lesson, referring back to Prohibition and informing the House it hadn’t worked. (His question appeared to be about Canada’s commitment to joining the U.S. and Mexico in cracking down on the illegal and violent drug trade.)
The NDP strategy of acting as the mouthpiece for the besieged middle classes — perennially stressed about job security, debts and rising costs — may reap rewards in years to come. But that time is not likely to be now. Economic winds are starting to blow in Mr. Harper’s favour again. Craig Wright, chief economist at Royal Bank, put out a budget preview this week that suggested the deficit for the year may come in more than $10-billion lower than the $31-billion estimated in the November fiscal update, thanks to higher revenues and lower expenditures than expected. He said a return to balanced budgets might be possible as early as 2014-15 — two years ahead of schedule.
This will take the pressure off the Prime Minister in the short-term and allow him to look beyond his current mandate at some of the challenges that have been all but ignored in the constant campaign of the minority government era.
• On Old Age Security, as the National Post first reported in December, the government is considering raising the age at which benefits can be accessed to 67 from 65. The move would likely be introduced a decade from now, and even then phased in over a number of years, meaning it will not affect anyone at, or close to, retirement age. The impetus is an aging population that will mean the number of Canadians over the age of 65 will increase from 4.7-million to 9.3-million over the next 20 years, consequently increasing the cost of the OAS program from $36-billion to $108-billion.
• On MP and public-sector pensions, the government has signalled it is keen to bring generous taxpayer-funded pensions into line with the private sector. MPs are likely to see the terms of their gold-plated pensions eroded, as a sign that they are not exempt from the cuts hitting the broader public sector. One option could be to raise the minimum age of retirement (currently 55); another could be to lengthen the time it takes to qualify for a pension (currently six years).
• On public-sector pensions, the feeling is that the system where the average age of retirement is 58 (compared with 62 in the general labour force) and where the average pension amounts to $25,000 a year, is unsustainable (the federal pension plan is between $150-$227-billion in deficit, depending on whose numbers you believe). Reforms could include moving to a system where pensions are based on average career earnings, rather than the current practice of the highest three to five years’ income.
• On business R&D, Mr. Harper said in Davos, Switzerland, that Canada’s results for investment in science and technology have been less than optimal. Gary Goodyear, the Minister of State for Science and Technology, said recently that a revamp of the 96-year-old National Research Council will be the cornerstone of the government’s new plan, transforming it to provide a “concierge” service to coordinate access to the bewildering number of federal assistance programs. The Conservatives will also streamline the Scientific Research Experimental Development tax credit that distributes $3.5-billion a year to businesses, even if it does not reduce the overall pool of cash available.
• On native education, both a recent Senate study and the report from the national panel appointed to look at the abysmal graduation rates on reserves concluded the federal government has to close the funding gap with provincial schools. The signs are that Mr. Harper agrees and this may be one of the few areas to benefit from new spending in the budget.
Original Article
Source: national post
Author: John Ivison
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