EDITORIAL : THE NATIONAL POST, CANADA

            

 

The last big-spending budget

When Finance Minister Jim Flaherty introduced the Conservative government's original 2011 budget on March 22, the Tories were leading a minority House rife with rumbling about a possible election. While Prime Minister Stephen Harper denied wanting to go to the polls, Mr. Flaherty's offering suggested otherwise. Modest in its deficit-cutting ambitions, it clearly targeted key Tory voting groups: families, seniors, homeowners and rural Canadians. The Finance Minister refused all possible compromise, a gesture that, coupled with the opposition's appetite for a vote, set the stage for the dropping of the writ four days later.

That budget is back, with a few changes. The first amendment is welcome, and long overdue: phasing out public per-vote subsidies to political parties. This will not only save taxpayers $27million per year, but will end a perverse situation whereby Canadian taxpayers have provided financial support for the separatist Bloc Québécois, which would have otherwise still continue to collect $1.8-million per year despite having only four MPs in the House of Commons. As we have written in this space before, political parties are not government agencies; since they purport to reflect the will of the voters with their platforms, they should be required to get their money from those same voters.

Another change is less justifiable: $2.2-billion for harmonization of the Quebec sales tax in 1991. While other provinces, including B.C., Ontario and New Brunswick, also struck deals with Ottawa, unlike Quebec they gave up control over their sales tax programs to the federal government. Meanwhile, Quebec continued to benefit from generous federal equalization payments. As Niels Veldhuis, senior economist at the Fraser Institute, puts it: "We're ... providing compensation for something they did in their own interests. A transfer doesn't act as an incentive if it's done 20 years later."

To the extent this $2.2-billion was forked over to dampen Quebec nationalism (the usual reason cited to justify such "asymmetric" treatment), it was entirely unnecessary. As the election result showed, separatism is unpopular these days; even the PQ have descended into bickering this week. To the extent there is still a Quebec nationalist spirit worth channeling in Ottawa, the NDP has gone to embarrassing lengths to channel it. The Tories should leave them to it.

The new version of the 2011 budget also adjusts the federal government's deficit projections. In fiscal 2010-11, Ottawa now is expected to run a deficit of $36.2billion, $4.3-billion less than previously estimated. But its deficit in 2011-12 will clock in at $32.3billion, $2.7-billion more than predicted. One of the main contributors to that increase is, of course, the aforementioned HST deal with Quebec.

Finally, while the budget forecasts do not incorporate the government's election promise to balance the books in 2014-2015, as opposed to 2015-2016, Mr. Flaherty has promised the government will do so through a Strategic and Operating Review by which it proposes to find $11-billion in savings over three years. According to Mr. Flaherty, this will require cutting 5% in program spending, a fairly modest reduction. The budget does not provide any details of where the cuts will be made, and we are skeptical such cuts will ever come. Every incoming government makes vague promises about trimming waste -and few are those that actually do any trimming.

Considering this government's record, scaling back spending will not come naturally. When Mr. Harper took office in 2006, the government enjoyed a $13.8-billion surplus. Two years later, the red ink started to flow, with federal debt as a percentage of GDP rising from 29% in 2008 to 35% in 2010. Some of this was due to revenue shortfalls caused by the 2008 financial crisis and its aftermath. But most of it was the result of massive, politically motivated spending increases.

The election is over, and the largesse now has to end. While the Tories must respect their promises to voters, which include home-renovation credits, bigger benefits for seniors and tax credits for some caregivers and parents, they should no longer think of creative ways to spend taxpayers' money. They should now focus on austerity, taking a page from the Liberals' playbook during the 1990s. Budget 2011, originally crafted within the confines of minority governance, won't be the test of this government's resolve, but Budget 2012 will be.