It was billed as a budget dedicated to Central Canada and its manufacturing base. And the Quebec government couldn’t be happier, although this has nothing to do with the revival of the province’s traditional industries – and everything to do with politics.
By reclaiming a sizable chunk of the job training money from the provinces, by weaning labour funds from their tax break, and by pressing on with a national securities regulator, Finance Minister Jim Flaherty is taking Quebec head on. And for a PQ government that feeds on confrontation with Ottawa, this is a dream come true.
Predictably, Quebec Finance Minister Nicolas Marceau was quick to lash out at his federal counterpart. “We are witnessing a frontal attack against Quebec. It is an exercise of economic sabotage,” he declared.
And there were few vote-buying proposals in Mr. Flaherty’s eighth budget to counter him. Since the conservative Finance Minister is intent on balancing the books by 2015, even if softening commodity prices are depressing fiscal revenues, Ottawa had little money to sweeten its budget. It essentially prolonged existing economic measures, such as the tax relief it offers to manufacturers that are buying new equipment.
Quebec’s most cherished industry, aerospace, got the Technology Demonstration Program it had asked for. But by the time this program reaches full throttle, in 2017, almost a third of its $55-million-a-year funding will come from the existing strategic aerospace and defence initiative.
The forestry industry, the lifeblood of many communities in Quebec and British Columbia, also received some aid. Ottawa renewed the research and development money dedicated to innovative forestry products, but the two-year program worth $92-million is lighter than the one it replaces.
Minister Flaherty allocated $125-million to build a causeway between Nuns’ Island and the island of Montreal while the government replaces Champlain Bridge, the busiest crossing in Canada. But there is still no commitment to building an infrastructure that would capture the imagination of Canadians and become an architectural landmark for the city, as many Montreal leaders have been advocating in recent months.
Contrast these small gains with the full-frontal attack that Ottawa launched against the provinces by reclaiming 60 per cent of the $500-million cheque for the training of low-skilled workers – a cheque that Ottawa now sends to the provinces with almost no questions asked. When the current agreement expires a year from now, Mr. Flaherty wants to withhold $300-million of that money. The funds would only be made available if the provinces and businesses both match Ottawa’s contribution of up to $5,000 per trainee.
This is a curve ball for a Quebec government that has even resorted to cutting funds to Premier Pauline Marois’s cherished day-care system in order to deliver on its promise to eliminate the province’s deficit by the 2013-2014 fiscal year. Quebec has neither the money to pay for this nor the willingness to relinquish its authority on job training.
The national securities regulator is also bound to create sparks between Ottawa and Quebec. Keeping the current system of provincial securities regulators is one of the very few issues on which all political parties in Quebec agree. And there had been the faint hope that Ottawa’s biting defeat in the Supreme Court in December of 2011 would finally put the long-lasting dispute to a rest. But that was discounting Mr. Flaherty’s bullheadedness. Ottawa wants to create a national securities regulator with the provinces, and is ready to go ahead even if Quebec is not on board. Should negotiations fail or take too long, Mr. Flaherty plans to create a watchdog, over and above the provincial regulators, to prevent financial shocks from bringing down the economy. Work has already started on what Finance officials call Plan B.
While Mr. Marceau will wage a war against this, the majority of Quebeckers have no clue who regulates securities, and couldn’t care less.
They will notice, however, when Ottawa scraps the tax credit offered to investors who buy shares of labour-sponsored venture capital funds. Ottawa intends to eliminate the 15-per-cent federal tax credit on investments up to $5,000 by 2017. As a result, the Fonds de solidarité FTQ and the Fondaction de la CSN won’t be as attractive. Even if the older Fonds FTQ is already richly funded, eliminating this popular tax credit will make waves.
It is not as if the two powerful Quebec unions that sponsor those funds ever supported the Conservatives. But by alienating Quebeckers further on a range of issues, Ottawa appears to have irreversibly turned its back on the province.
With a file from Rhéal Séguin.