The federal Conservatives are planning to table a bare-bones budget in early February, a low-key launch that would set the stage for a far more significant budget the following year when the majority government asks voters for a new mandate.
For months, Finance Minister Jim Flaherty has been signalling that Canadians shouldn’t expect any lavish tax breaks or significant new spending in the 2014 budget – and instead continually points to the importance of eliminating the deficit, so a surplus is available the following year.
No final decision on budget timing has been made, but sources told The Globe and Mail that Finance officials are working toward an early budget that would most likely be delivered during the week of Feb. 10.
The House of Commons is on a break and MPs won’t return to Ottawa until Jan. 27.
There is still time for the government to push back the date, but an early February budget would underscore that it will not be a high-profile event. The attention of Canadians and the media in February will largely be focused on the Sochi Winter Olympics, which take place Feb. 7 to 23.
Conservatives hope a return to surplus will bolster the party’s economic reputation and provide room in time for a 2015 election for the party to deliver on unfulfilled tax-cut promises, which include income splitting for families with dependent children.
“This is still the waiting before the bigger budget in 2015,” said Avery Shenfeld, chief economist of CIBC World Markets. “I think it would be a surprise if there were a lot of initiatives that cost the government money prior to the budget delivered in early 2015.”
Mr. Shenfeld and other private sector economists say Ottawa’s fiscal fortunes have likely improved slightly since Mr. Flaherty delivered his Nov. 12 fiscal update. Concern at the time over the U.S. economy and political gridlock in Washington has since eased, meaning that some of the money Ottawa sets aside for “risk” may not be needed and could lead to an improved bottom line.
If there is any new spending at all, it will likely be contingent on growing the economy.
Last year’s budget announced a new Canada Job Grant that immediately ran into opposition from the provinces because Ottawa planned on paying for the grant by scaling back training transfers to the provinces. Ottawa wants to launch the grant in 2014, but provinces want more money before signing on to the plan. Given the importance federal Conservatives are placing on the grant, it is one area where they will face pressure to bend in the 2014 budget.
Of the eight budgets Finance Minister Jim Flaherty has tabled since the Harper government came to office in 2006, five have been released in March and one in the last week of February. Mr. Flaherty’s first budget in 2006 was tabled in May because it was an election year, while the 2009 budget was moved up to January to unveil a stimulus package in response to the recession.
Doug Porter, chief economist at BMO Capital Markets, said there would be some symbolism to an early budget.
“That would reinforce the point that it’s a very modest affair and that there will be very few new measures in it,” he said. “Basically they’re keeping their powder dry for 2015.”
In November, Mr. Flaherty was projecting a deficit of $17.9-billion in 2013-14, followed by a $5.5-billion deficit in 2014-15 and a $3.7-billion surplus in 2015-16.
In a recent interview, Mr. Flaherty hinted he expects to beat those targets.
“Yes, we’ll balance and it won’t be close. We’re in good shape,” he told CTV. Mr. Flaherty has previously discounted the possibility that the books will be balanced a year early in 2014-15, but economists say that scenario could still happen.
One factor Conservatives will need to consider in terms of pre-election politics and the budget cycle is how and when to announce a surplus. While budgets are usually tabled early in the calendar year, it is not until the fall that final deficit or surplus numbers are released for the fiscal year that ends March 31. Last year’s example showed there can be major differences between projections and final numbers. On Oct. 22, the government announced that the 2012-13 deficit had come in nearly $7-billion lower than projected in the budget tabled in March.
This lag between budget projections and final numbers means that whether a projected surplus in 2015-16 materializes won’t be known until the fall of 2016, after the scheduled 2015 election. That could be an incentive for the government to try to balance the books in 2014-15, which was the original target in the Conservative Party’s 2011 election platform.
FLAHERTY'S BUDGET RECORD
Jim Flaherty’s eight budgets have included tax cuts during good economic times and crisis stimulus spending during a prolonged downturn. As he prepares to table his ninth federal budget, below is a look back at the timing of his budgets and their titles, which highlight the government’s changing themes.
- May 2, 2006: Focusing on Priorities
- March 19, 2007: Aspire to a Stronger, Safer, Better Canada
- Feb. 26, 2008: Responsible Leadership
- Jan. 27, 2009: Canada’s Economic Action Plan
- March 4, 2010: Leading the Way on Jobs and Growth
- March 22, 2011: The Next Phase of Canada’s Economic Action Plan (re-introduced on June 6, 2011, after the May federal election)
- March 29, 2012: Jobs, Growth and Long-term Prosperity
- March 21, 2013: Jobs, Growth and Long-term Prosperity