The Conservative government is proposing an eye-popping array of new spending programs and commitments that will add $31 billion to annual spending by next year compared to the $209 billion budget it inherited from the Liberals last year.
In the 2007-08 budget tabled in Parliament March 19, finance minister Jim Flaherty said spending will increase $10 billion by March 31, 2008, and at least another seven billion the following year.
Spending in the fiscal year ending March 31, 2007, increased more than six percent or $14 billion.
Opposition politicians immediately said they sniff pre-election spending in the air.
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The government, in its budget documents, insisted it is not on an unwarranted spending spree.
“From 2004-05 to 2008-09, the rate of growth of program expenses will average 4.1 percent, below the rate of growth of nominal GDP (gross domestic product) over this period, which is forecast to average five percent,” said the government explanation in background budget documents.
When in opposition, the Conservatives and their predecessor parties usually used unfavourable comparisons to show the Liberal government spending increases to the rate of inflation. By that standard, Conservatives project spending increases at double the rate of inflation over the next two years.
The Conservatives found an array of ways to spend more money.
The centrepiece was a proposal to correct what they call the fiscal imbalance between the federal ability to raise revenues and the provinces’ requirements for program spending.
The Conservatives propose to increase transfers to the provinces by $39.4 billion over the next seven years, more than $7 billion of that in the next two years and the lion’s share to Quebec.
It will come in increased equalization payments, environmental and infrastructure funding, social program transfers and the shipment of a portion of gas tax revenues to provinces.
“The actions taken in budget 2007 will restore fiscal balance through long-term, fair and predictable transfers,” Flaherty told the House of Commons March 19.
“The long, tiring, unproductive era of bickering between the provincial and federal governments is over.”
Here are the key spending promises:
- $2 billion over seven years to biofuel producers.
- $16 billion over seven years for infrastructure investment. A finance department official authorized to speak only for background said there is no specific allotment for rural spending, but rural municipalities will be eligible to apply for money under the program.
- A new child tax credit for children under 18 that will provide on average $430 per year in tax savings for low-income families with children to a maximum $310 per child and more than $500 for a family with income less than $75,000. Officials said that although there is no rural-urban breakdown in expected spending, rural and farm families will benefit.
It is expected the tax break, effective Jan. 1, 2007, will reduce taxes $1.5 billion in each of the next two years.
The government also announced that it is applying more than $9 billion in 2006-07 surplus funds to the national debt. It promised that savings in interest rates payments because of debt repayment will automatically be returned to Canadians through lower income taxes in years to come.
Flaherty also said that various investments in environmental programs in the budget amount to $4.5 billion in green spending, including the commitment to biofuel.
Part of the strategy is to charge a so-called green levy on people who drive less fuel efficient vehicles, encouraging them to switch to more efficient ones.
