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A new mandate for Flaherty's belt-tightening budget

Finance Minister Jim Flaherty gives the thumbs up as he tables his budget on June 6, 2011.


Stephen Harper is using his majority to plow ahead with the same budget that triggered an election this spring: a fiscal plan that adds slightly more than $1-billion to annual federal spending for seniors, businesses and research.

There are two big differences, however.

The biggest new item is a $2.2-billion cheque for Quebec: an election promise to underwrite the province's shift to a sales tax that more closely mirrors the GST. Unveiled during the campaign, the pledge delivered no political benefit for the Conservatives who lost more than half their seats in the province on May 2.

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The second new measure takes an axe to subsidies for political parties in Canada. The Tories will phase out the $2-per vote taxpayer subsidy for federal political parties introduced by Jean Chretien in 2003.

The 374-page budget document so closely matches the earlier March 22 budget that the Finance Department resorted to using a blue font to highlight sections that are new.

The Conservatives have to move fast in passing at least some elements of their budget.

They have promised $300-million in increased aid for low-income seniors will take effect July 1 - benefit worth up to $50 per person. This means the Tories must get parliamentary approval on implementing legislation before the month is out so the cheques for the extra Guaranteed Income Supplement cash can start flowing.

The Conservatives are comfortable with the repetitive nature of the budget because it underlines the Tory campaign message that their defeat in March interrupted important fiscal measures including the fiscal plan now being re-released and passed.

Another big difference is the Tories are moving up the timetable for balancing the federal government's budget.

Mr. Harper promised during the election campaign that his party would erase the deficit by 2015 - one year earlier than promised in the March 22 budget.

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They're pledging they'll squeeze $4-billion in extra savings from the books each year in order to mop up the red ink faster.

This promise adds a new sense of urgency to a government-wide cost-cutting exercise -- the Strategic and Operating Review -- that outlined, but didn't book, $4-billion a year in potential savings.

The new 2011 budget isn't booking, or counting on, these savings yet.

But the Tories are determined to find them.

Finance Minister Jim Flaherty promises a new committee of cabinet ministers will find those savings this year and they will be accounted for in the 2012 budget.

"We didn't book it because [it's]in my view not responsible to book savings until we can prudently say: 'Here is where the savings are,' so that it's demonstrably true that we can do them," he told reporters.

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The cuts will come from the roughly $80-billion Ottawa spends each year on the operating cost of government.

Mr. Flaherty said the Prime Minister's insistence that these savings must be found makes it a more ambitious effort than ongoing "strategic" reviews already taking place in government departments.

The Finance Minister said this will be the first time the federal government conducted a full review of its operations in over 15 years. He compared the effort to the cost paring undertaken by the private sector during the recession.

"In the private sector, this would be viewed as not very ambitious, but in the public sector, I realize that we have not had a concentrated effort on public sector productivity," Mr. Flaherty said.

"The private sector has certainly been forced by the great recession to deal with productivity issues. Is it challenging to do? It's challenging to do. Is it doable? [It's]absolutely doable."

Mr. Flaherty repeated his prediction that this effort will spell an end to some government programs. He said he expects the exercise will draw fire from those wedded to this spending.

"The challenge is to convince Canadians [of the merits of cuts] not to convince each individual that happens to be a stakeholder and someone who benefits from a particular government program," he said. "That's why it's so difficult in government quite frankly because every government program, no matter how small, has certain people who view it as 'their' program."

This year's budget deficit rises, largely as a result of the $2.2-billion election promise to Quebec. It creeps up to $32.3-billion in 2011-12 before falling abruptly to $18.4-billion in 2012-13.

Other measures, reintroduced with this budget, include:

» A temporary hiring credit worth up to $1,000 for small businesses that can be used to offset an increase in Employment Insurance premiums.

» $80-million in new funding over three years through the Industrial Research Assistance program to help small- and medium-sized businesses speed up adoption of new technologies.

» A new Children's Arts Tax Credit of up to $500 per child of eligible fees.

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