The Harper government is warning that tough decisions lie ahead as its attention shifts to phasing out the stimulus and tackling the billions in red ink created by its two-year spending spree.
Staffing budgets for public servants will be tightened and grant money for non-profits nationwide is expected to become scarce. It is the type of spending circled Wednesday by Finance Minister Jim Flaherty as the source of future savings.
Having ruled out tax hikes or cuts in transfers to individuals or provinces, the government will look to balance the books by scaling back the 3.3-per-cent annual growth in the $100-billion spent each year on federal programs.
Mr. Flaherty is also counting on economic activity and easing demand for federal social programs to trim the multibillion-dollar annual deficits.
In a speech unveiling his government's latest stimulus report card, Mr. Flaherty pressured the provinces to carve up the last of the recessionary cash, giving them a “use it or lose it” deadline of Jan. 29, 2010, to make spending commitments. By the end of the next fiscal year, most of the $62-billion in stimulus spending will wind down and there will be no new big-ticket items announced in the 2010 budget.
“We made the difficult choices Canadians expect of us,” Mr. Flaherty said in Winnipeg. “And we will continue to do so when uncertainty becomes recovery, so that this crisis response doesn't become a long-term burden for our children and our grandchildren.”
Prime Minister Stephen Harper scooped his Finance Minister's announcement hours earlier in a government plane over Siberia. Mr. Harper's staff gave reporters travelling with him advance copies of the report so that they could file stories at about 5 a.m. Eastern time when they landed in China. The media strategy ensured the day's first reports were based solely on the government's message, given that the reporters were literally disconnected from the outside world – and opposition critics.
Once the plane landed and the reports were filed, those critics quickly dismissed the government's rosy estimate that 97 per cent of the stimulus spending – or Economic Action Plan – is committed.
“They are using weasel words,” said Liberal finance critic John McCallum, who said there's a big difference between money being “committed” and money actually being spent on projects.
Kevin Gaudet of the Canadian Taxpayers' Federation said he's highly skeptical the government will make the tough spending cuts required to balance the budget.
“It's just hard to swallow the whole concept that you can be all things to all people,” said Mr. Gaudet, who predicted Mr. Flaherty will have retired before the hard decisions the minister refers to are actually taken.
The federal government's report provides random examples of approved projects, but Ottawa has yet to publish a complete list of all items that have received stimulus money.
The Canadian economy has only just emerged from a nine-month recession that knocked more than 3 per cent off the nation's gross domestic product and increased unemployment across the country.
“Our plan is working, our economy is recovering,” Mr. Harper told reporters in Beijing Wednesday evening. “However, the recovery does remain fragile.”
The update did confirm one tax measure, though the Conservatives refuse to acknowledge it as such. As a stimulus measure, Employment Insurance premiums are frozen at rates below what's needed to offset payouts. Beginning in 2011, the report states that rates will be raised to offset EI expenses over time.
Economist Dale Orr said this amounts to a “whopping” hike in payroll taxes. As for spending restraint, Mr. Orr said the category identified by the minister includes regional development programs, foreign aid and government staffing.
“He's saying in between the lines, if you're a federal public servant, don't expect any raises,” Mr. Orr said. “Be happy if you keep your job.”
With a report from John Ibbitson in Beijing
