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Budget Speech

Click here to watch Finance Minister Jim Flaherty deliver the 2010 Budget - March 4, 2010

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The first words out of Jim Flaherty’s mouth Thursday afternoon summed up what would follow: “As I rise in this house today, our nation is at a crossroads.”

With that phrase, the finance minister prepared Canadians to travel a path of near-term spending that eventually gives way to a bumpy road of restraint.

An additional $19 billion in stimulus money was confirmed for the upcoming fiscal year. The government will than move quickly to shut off the tap by reducing federal spending by $17.5 billion by 2014.

How? The budget promises legislation to freeze the salaries of the prime minister, cabinet ministers, MPs, and Senators. This mostly symbolic gesture will be strengthened over the next three years through operating budget freezes at government departments and a salary freeze in the public sector. And there will be program reviews in search of more savings that will likely shrink the size of the public service.

Flaherty’s budget slows defence spending by about $525 million in 2012 – and than $1 billion annually starting the following year. Foreign aid is capped annually at $5 billion over the next five years, which is expected to save $4.5 billion.

All told, the finance minister informed the House of Commons that his restraint measures might nearly halve the deficit to $27.6 billion by 2012, $17.5 billion by 2013, and $1.8 billion by 2015.

But despite the savings, the federal debt will soar from $517 billion this year to $622 billion by 2015.

The budget also confirms an end to the freeze in Employment Insurance premiums, which will start increasing next year. The government will also make EI sickness benefits more accessible for workers when a relative is killed in military service or as the result of crime.

As far as job creation is concerned, Flaherty hopes targeted spending on innovation will cure Canada’s productivity deficit. Several hundred million dollars are being pushed towards research projects, and $45 million is being set aside over the next five years to lure top-notch researchers from abroad.

The ailing manufacturing sector can look forward to the elimination of all remaining tariffs on imported machinery and goods that are processed into a different end product in Canada. There is $100 million to develop clean energy technologies in the forestry sector. Plus $300 million to cover commercial losses for Atomic Energy of Canada, Ltd. and fund development of a replacement reactor for Chalk River’s aging and failing version that has jeopardized the supply of medical isotopes.

The overall focus is to balance federal finances with restraint measures that will mostly begin in 2011. That won’t be enough to satisfy the three opposition parties, who plan to vote against the budget. Liberal leader Michael Ignatieff said that several of his MPs would avoid voting in order to avoid defeating the government, since Canadians don’t want an election.

-Peter Van Dusen and Andrew Thomson

Budget Highlights, courtesy of The Canadian Press:

promises $17.6 billion over five years in spending restraint in areas including foreign aid and defence.
comprehensive review of government programs to save $6.8 billion dollars over five years.
program spending increases by $11.4 billion to $249.2 billion in 2010-11, but falls by $7.8 billion the following year.
deficit falls from $53.8 billion for year ending April 1 to$49.2 billion in 2010-11; with a plan to cut it to $1.8 billion by 2014-15.
eliminates tariffs on manufacturing equipment by 2015.
continues corporate tax cuts started last year.
closes a tax loophole for executives who cash out stock options, estimated to save the government more than $1.6 billion over five years.
eliminates medical tax credit for cosmetic surgery unless recommended by a doctor, effective immediately.
freeze on EI premium rate (paid by workers and employers)continues until the end of 2010.
$3.2 billion in personal income tax relief, largely through raising of the basic personal tax exemption, announced in last year's budget.
$7.7 billion in promised stimulus money for infrastructure.
$4 billion for to continue extended EI benefits and training.
total debt for 2010-11 rises to $566.7 billion
total spending of $280.5 billion, up $12.8 billion over last year.

(The Canadian Press)

About the Budget

The finance minister unveils the government’s fiscal plan for the coming year and recaps Canada’s economic health in a late-afternoon address to the House of Commons.

The minister moves a ways and means motion in support of the budget before delivering the speech itself. Debate on the budget motion lasts up to four days before a vote is called.

Canada's first federal budget was delivered by Finance Minister John Rose over several hours on December 7, 1867. Revenue and expenses at the time totalled less than $20 million.

Why late in the afternoon? So that financial markets have already closed for the day. The budget’s content is kept secret (aside from a media lock-up) for the same reason.

"Budget" is derived from French and Latin words meaning leather bag or pouch (bougette). It was first used as a financial term in the 18^thcentury to describe the collection of economic documents held inside such a case. A 1733 pamphlet called The Budget Opened mocked Sir Robert Walpole, the British prime minister and chancellor of the exchequer, as a medical quack opening his bag to hand out wild economic prescriptions. Eventually the term "budget" became associated with a yearly financial statement.

Budget day has traditions of its own, though less resplendent than the pomp of a Speech from the Throne. British custom dictates that the chancellor/finance minister can break the rules and drink alcohol inside the House of Commons while delivering the budget speech. Everything from whisky and wine to brandy and sherry has been spotted alongside the customary red despatch box carrying the budget speech -- yet another Westminster routine.

Neither of these practices became commonplace in Ottawa. But there has been a unique Canadian contribution to the list of budgetary rituals: the finance minister donning a new pair of shoes before giving his speech. And only men's shoes so far, since no woman has held the position. According to the Library of Parliament, no one knows how or why this practice began. The first recorded instance of new footwear was Mitchell Sharp's 1966 budget. And there have been variations. John Crosbie wore mukluks. Paul Martin modelled work boots. Jim Flaherty instead bought Canadian-made skates for his son in 2007.

The longest British budget speech -- without a break -- was 4 hours and 45 minutes by William Gladstone in 1853. Benjamin Disraeli's 1867 speech was the shortest, at 45 minutes. No comparable list exists for Canadian budgets.

Sources: House of Commons Procedure and Practice (O’Brien and Bosc), UK Parliament

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