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Politics Ottawa says budget adjustments will accommodate surge in EI claims

Minister of Employment and Social Development Pierre Poilievre reads from the federal budget during Question Period in the House of Commons in Ottawa, Thursday, April 23, 2015.

Adrian Wyld/The Canadian Press

The Conservative government insists this week's budget numbers will hold up in spite of a sudden spike in demand for employment insurance benefits, a development that could ultimately hamper Ottawa's promise of a razor-thin budget surplus.

Federal Employment Minister Pierre Poilievre said he expects adjustments included in Tuesday's budget will be enough to accommodate increased demand on the program.

"We budgeted very conservatively and one of the reasons why we introduced a later budget was to take into consideration the obvious repercussions that are unfolding as a result of lower oil prices," he said in an interview.

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Statistics Canada reported Thursday that claims for EI jumped by 6.7 per cent in February compared with January, a sign that pressure on the program is looming. The spike was particularly high in Alberta, where EI claims increased by 29.4 per cent, the largest spike in the province since the depths of the global financial crisis in February of 2009.

The Conservative government's 2015 budget is built on the assumption that a bad economic start to the year will gradually improve as the economy adjusts to the dramatic fall in oil prices.

But a prolonged increase in demand for EI could be a problem for the government's key political target of balancing the books.

The Parliamentary Budget Officer has expressed concern that Ottawa plans on collecting more in EI premiums over the next two years than it will spend on benefits, running a surplus that directly helps Ottawa's bottom line. The government's defence is that it will balance the fund over time by reducing premiums paid by workers and employers, but not until 2017.

The budget which forecast a 2015-16 surplus of $1.4-billion – did however make adjustments to its EI forecasts to account for the slowing economy.

The November economic update forecast EI spending on benefits at $18.2-billion, while collecting $23.3-billion in EI premium revenues for 2015-16. The government is now planning to spend $18.4-billion on EI this year while collecting $23.1-billion in premiums. Similar adjustments were also made for 2016-17.

Mr. Poilievre, who was appointed Employment Minister in February, inherited a wide-ranging portfolio that includes skills training, the temporary foreign worker program and EI. He said his top labour-market priority is to work with the provinces to improve credential recognition for current and future immigrants. He hopes to make the issue a priority for this summer's meeting of federal and provincial labour ministers so that more professional credentials are recognized in the same way across the country.

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Whether Ottawa actually balanced the books for 2015-16 won't be known until the Public Accounts are released in the fall of 2016, which will be about a year after this October's federal election.

Toronto-Dominion Bank senior economist Randall Bartlett noted that the budget counted on unemployment rates that may prove optimistic.

The budget assumes unemployment will average 6.7 per cent in 2015 and improve to 6.6 per cent in 2016, based on an average of private-sector forecasts. The forecast from TD projected unemployment will average 6.8 per cent through both years.

"Is it a potential risk for them? Sure," Mr. Bartlett said. "If labour market outcomes come in a lot weaker than what they were expecting, then that could definitely cause some problems for them."

Prime Minister Stephen Harper was in Winnipeg on Thursday and Finance Minister Joe Oliver was in Kitchener, Ont., to promote the budget's tax cuts for small business and support for manufacturing.

Mr. Harper said his government would not increase "payroll taxes," in reference to opposition calls for an expanded Canada Pension Plan.

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"We give people tax breaks, not tax hikes, so they can save," he said.

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