Smoke and Mirrors: What Budget 2012 Really Delivered

Canadian pennyPundits have written this budget off as modest, and even better than expected after all the hype over predicted austerity measures. Finance Minister Flaherty himself emphasized that cuts to spending are much smaller than the reductions in the mid-1990s.

In truth, Canadians are about to lose a lot more than pennies in a budget that delivers substantial and politically symbolic cuts. In combination with unilateral changes to federal-provincial transfers, actions taken in the budget are designed to further erode the presence of the federal government in the lives of Canadians—a strategy that translates into the laying off thousands of public servants and elimination of key public programs.

Program and Staffing Cuts

As expected, the Budget cuts departmental budgets, by $1.8 billion this year, rising to $3.5 billion next year, and to over $5.2 billion per year from 2014-15. The departments facing steepest cuts include Agriculture, Environment, Finance, Natural Resources, and Public Safety. The CBC’s annual funding is being cut by $115 million over the next three years. Other agencies like the National Council on Welfare are being eliminated altogether.

While several modest new spending initiatives were announced in support of “jobs and growth”, the cuts when fully implemented in 2015 will outweigh new investments by a factor of seven to one. Total federal government spending on programs is set to fall to 12.9% of GDP in 2015-16 compared to 14.1% in 2011-12, while revenues will be almost unchanged as a share of the economy as the past decade of tax cuts continues to drain federal revenues.

Taken together, direct federal government employment will fall by 19,200 over the next three years. The Canadian Labour Congress has further determined that that each $1 billion of cuts to spending represents about 10,000 lost jobs, roughly divided between direct federal government jobs and private and not-for-profit sector jobs supported by federal government purchases of goods and services. When this round of cutbacks is fully implemented, an estimated 50,000 jobs will have been lost.

Old Age Security / Guaranteed Income Supplement

The budget further announces an increase in the age of eligibility for OAS and GIS from age 65 to 67, phased in between 2023 and 2029. This means that Canadians born after 1962 will have to wait until age 67 to get apply for OAS or GIS benefits.

The government argues that this critical change to seniors’ benefits is necessary to tackle the looming and unsustainable costs of the program as the population ages. Yet, OAS/GIS program costs as a share of GDP are forecast to increase from 2.36% in 2011, to a still modest peak of 3.14% in 2030, after which year the cost will fall.

Increasing the age of retirement only hurts low- and modest-income Canadians who depend on seniors’ benefits to pay the rent and put bread on the table. Well-heeled professionals may well choose to work on well beyond age 65 – taking advantage of a new provision that will allow workers to postpone taking up the benefit to age 70. But the situation is much different for the cleaners in their office buildings.

According to John Stapleton, “by moving the age of eligibility for OAS to 67, the Conservative government will place a whole new age cohort into risk of poverty.” He estimates that almost 50,000 social assistance recipients, most of them persons with disabilities, will be forced to live in poverty for up to two more years before they are able to apply for seniors’ benefits.


CPJ’s brief to the Finance Committee last autumn asked for a shift in government priorities towards environmental integrity. This was nowhere on the agenda of Budget 2012. In fact, the Budget made no mention of climate change – an omission explicable only as a lack of commitment to action and an extension of the government’s efforts to frame environmental groups as “radicals” that threaten Canada’s national interests.

The government did announce that the National Roundtable on the Economy and the Environment is to be closed. This institution recently produced a report, requested by Parliament, which evaluated Ottawa’s progress on reaching promised greenhouse gas reductions targets – and found them falling woefully short.

Environmental assessment processes are now going to be “streamlined” - which for Environmental NGOs translates as “gutted.” The new mantra is “one project, one review.” In another context, negotiated with civil society ahead of time, enhanced processes might not seem so bad. But the government particularly fears delays to the Northern Gateway Pipeline, and wants some variant of the project to proceed forthwith.

Other charities will undoubtedly be swept up into a government review of “political activity”—an issue CPJ will review in the near future.

Refugees and Immigration

Besides a short reference to carrying out more efficient measures for refugee selection and settlement, the major announcement in the refugee and immigration file was a commitment to provide easier access to temporary foreign workers for chosen employers. Although seemingly contradictory policy at a time of high unemployment this move will be favourably received by certain businesses in regions where wages and working conditions remain unattractive to Canadians.

Aboriginal People

And now for some good news: Budget 2012 contains modest investments to assist Canada’s Aboriginal people address the systemic poverty, deplorable on-reserve living conditions, and unequal educational opportunities they face. The budget announces new investments of $275 million over three years for primary and secondary education, of which $100 million has been earmarked to pay for literacy programs and $175 million allocated to build and renovate schools on reserves. A first Nations Education Act would also be introduced to set standards for on-reserve education.

The budget also contains measures to improve water quality on reserves along with other smaller initiatives to provide Aboriginal people with job training and skills development and more equitable on-reserve income assistance.

While these measures only scratch the surface of what’s needed in Canada’s Aboriginal communities, it’s a start. CPJ will continue to hold the government accountable to its responsibility to adequately address the challenges faced by Aboriginal people.

Employment Insurance

To a great extent, this budget focuses on resource development. Related to this focus are changes to Employment Insurance that will compel workers to move from areas struggling with high unemployment to booming western Canada.

The government is introducing legislation “to strengthen and clarify what is required of claimants who are receiving regular EI benefits and are looking for work” – which take into account local labour market conditions and an individual’s past history with the EI program.

Budget 2012 also announces a cap on EI premium rate increases (at 5 cents each year) until the EI Operating Account is balanced, provides an additional $21 million over two years to enhance the content and timeliness of the job and labour market information, $74 million over two years for a new Working While on Claim pilot project, and $387 million over two years “to align the calculation of EI benefit amounts with local labour market conditions.”

International Development Assistance

The International Assistance Envelope (IAE), which encompasses the Canadian International Development Agency (CIDA), Foreign Affairs and International Trade Canada, International Development Research Centre, Royal Canadian Mounted Police and Natural Resources Canada, will suffer by 2014-15 a cut of $377 million dollars, representing a slash of 9.7% in aid funding. Of these, $319.2 million cuts will come from CIDA. This represents the third biggest cut announced, losing only to the National Defence Portfolio and the Public Safety Portfolio, which will bear the brunt of, respectively, $1,119.8 billion and $687.9 million.

In Summary

With unemployment and underemployment still at very high levels and inequality on the rise, the federal government could and should have laid the basis for a sustained and broadly shared economic recovery. Citizens for Public Justice made the case in our Pre-Budget Brief to the Finance Committee for key public investments in affordable housing, programs for First Nations people and low income families, and the environment. Budget 2012 fell far short on these key benchmarks. In addition to already mentioned shortfalls, the need for housing and childcare were entirely overlooked.

In reality, the emphasis on low taxes and program cuts evidenced in this budget is less about good fiscal policy than it is about eroding the ability of government to create a caring society. Budget 2012 drives home the idea that individuals are on their own and should not expect assistance from the government. It counters the call for a sustainable recovery for all Canadians and counters the government’s central role to protect the common good.

CPJ will continue to urge the government to pursue an agenda that considers the needs of all Canadians. Stay tuned for further analysis of some of the key issues represented in this year’s federal budget.


Submitted by Leo KurtenbachV... on
I am astounded at the mean-mindedness of the Harper caucus in cutting back on charities like Kairos, Mennonite and particularly CCODP. It is so disheartening to note that they would prefer to spend money on fighter jets and naval destroyers!--It certainly appears that Peace is not on their political agenda.

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