Etobicoke-Lakeshore 2014 Budget Brief Bernard Trottier, MP February 22, 2014 Economic Action Plan 2014 Economic Action Plan 2014: Three Key Themes 1. Working Towards a Balanced Budget 2. Promoting Jobs and Economic Growth 3. Supporting Families and Communities 2 Economic Action Plan 2014: Balanced Budget Theme 1: Working Towards a Balanced Budget • Before global recession hit, our Conservative Government paid down $37 billion in debt – bringing Canada’s debt to its lowest level in 25 years. • Fiscal responsibility and aggressive debt reduction placed Canada in best possible position to weather the global recession. • When global recession hit, we made deliberate decision to run temporary deficits to protect our economy and jobs. • While other countries continue to struggle with debt that is spiralling out of control, Canada remains in most enviable fiscal position among all G-7 countries. • Canada’s net debt-to-GDP ratio is 36.5%, lowest level among G-7 countries – with Germany being the second lowest at 56.3%, and the G7 average at 90.2%. 3 Economic Action Plan 2014: Balanced Budget The Government remains on track to return to balanced budgets in 2015 Budgetary Balance After Measures Sources: Public Accounts of Canada; Department of Finance 4 Economic Action Plan 2014: Balanced Budget Federal debt as a share of GDP is expected to decline next year and to fall to 25 per cent of GDP by 2021 Canadian Federal Government Debt as a Percentage of GDP Sources: Public Accounts of Canada; Statistics Canada; Department of Finance. 5 Economic Action Plan 2014: Balanced Budget Government is taking fiscally responsible action to achieve deficit reduction • Budget 2014 builds on previous efforts to reduce spending by announcing an additional $9.1 billion in ongoing savings, including: • Making public sector wages and benefits affordable for taxpayers, by ensuring compensation is fair and in-line with other public and private sector employers. • Improving the fairness of the tax system, by closing tax loopholes and strengthening tax enforcement to ensure low taxes for all taxpayers – not only a select few. • In addition, our Government is also: • Controlling the size and cost of government, by freezing departmental budgets to ensure efficiency in government operations and administration. • Reviewing government assets, to ensure assets that can better create wealth and jobs for Canadians if were owned by the private sector are divested. Our Government has reduced government departmental spending for three straight years – a trend that has not been observed in decades. 6 Economic Action Plan 2014: Balanced Budget The Government's restraint measures since Budget 2010 ensure a return to balanced budgets Impact of Savings Measures Since Budget 2010 on Budgetary Balance 7 Source: Department of Finance. Economic Action Plan 2014: Balanced Budget Spending reduction measures have been focused on controlling direct program spending Components of Federal Program Spending Sources: Public Accounts of Canada; Department of Finance. 8 Economic Action Plan 2014: Balanced Budget Program expenses-to-GDP ratio to fall below its pre-recession level Program Expenses-to-GDP Ratio Sources: Department of Finance; Statistics Canada. 9 Economic Action Plan 2014: Balanced Budget Transfers to provinces and territories have increased consistently during our Government’s mandate Federal Transfers to Provinces and Territories, 2006-2015 10 Sources: Department of Finance. Economic Action Plan 2014: Balanced Budget Budget will be balanced while not cutting transfers to provinces • Overall, since 2010, actions we’ve taken to make government more effective and efficient are saving taxpayers roughly $19 billion a year. • Unlike the previous Liberal government, we will NOT cut major transfers to persons (i.e. seniors, pensions, children, etc.) or other levels of government (i.e. health, education, social services, etc.). • In fact, major federal transfers to provinces and territories for health care and social services will reach a record high of almost $65 billion in 2014–15 – an increase of over 50% since 2006 11 Economic Action Plan 2014: Balanced Budget Making Public Sector Wages and Benefits Affordable for Taxpayers • Continue to work with public sector bargaining agents in upcoming negotiations to ensure that the public service is affordable, modern and high-performing in all 27 collective agreements • Already announced changes to employee pensions and are eliminating severance benefits available to employees upon voluntary departure • Modernizing disability and sick leave management system: introducing short-term disability plan, removing banked sick days payout upon retirement • Transitioning from currently paying 75% of benefit costs to equal cost sharing for retired federal employees, and increasing number of years of service required to be eligible to participate in the plan from 2 to 6 • Estimated that phasing in equal cost sharing for retired employees and increasing the minimum years of service required for eligibility would result in fiscal savings of roughly $7.4 billion over 6 years under accrual accounting 12 Economic Action Plan 2014: Balanced Budget Improving the Fairness of the Tax System • A well-functioning tax system is essential to keep Canada positioned as an attractive place to work, invest and do business • EAP 2014 proposes a number of measures that reflect our ongoing commitment to improve integrity of the tax system, including actions to address international aggressive tax avoidance by multinational enterprises (e.g. insurance swaps, back-to-back loans through intermediaries, bogus foreign affiliates) • EAP 2014 announces public consultations on income tax framework for non-profit organizations (NPOs) to ensure that tax exemptions for NPOs are appropriately targeted and not subject to abuse by organizations that claim the exemption but are not operating in the manner intended • In total, measures in EAP 2014 to improve tax integrity will provide savings of $44 million in 2014–15, rising to $454 million in 2018–19, for a total of $1.8 billion over 2013–14 and the following five years. 13 Economic Action Plan 2014: Balanced Budget Controlling the Size and Cost of Government • In November 2013 Update of Economic and Fiscal Projections, Government reintroduced a 2-year freeze on departmental operating budgets, beginning in 2014–15 • Operating budget freeze is expected to generate savings of roughly $550 million in 2014–15 and $1.1 billion in 2015–16 • Operational efficiencies are expected by: • Streamlining departmental information technology applications • Simplifying processes and reducing administrative costs of Government’s procurement system, while reducing administrative burden on suppliers • Modernizing federal office space management • Rationalizing Government’s vehicle fleet • Eliminate wasteful spending on late fees and interest charges for delinquent payments to suppliers, on which approximately $5 million was spent in 2012–13 14 Economic Action Plan 2014: Balanced Budget Reviewing Government Assets • Divestitures of Ridley Terminals Inc. and portions of the Dominion Coal Blocks • Plans to exit from holdings in General Motors in an expeditious manner, while maximizing value for Canadian taxpayers • Economic Action Plan 2014 continues to include a potential gain from the sale of assets in the forecast for other revenues of $500 million in 2014–15 and $1.5 billion in 2015–16 Through its review of federal corporate assets, the Government intends to sell assets that have the potential to generate more wealth and jobs for Canadians if they were owned by the private sector 15 Economic Action Plan 2014: Balanced Budget Canada’s net debt is expected to remain the lowest, by far, of any G-7 country International Monetary Fund Forecast for Total Government Net Debt-to-GDP Ratio, 2018 Note: Total government net debt-to-GDP ratio is ratio of total liabilities net of financial assets of the central, state and local levels of government, as well as those in social security funds, to GDP. For Canada, total government includes federal, provincial/territorial and local government sectors, as well as CPP and QPP. For international comparability, adjustments are made to unfunded public pension liabilities. Source: International Monetary Fund, Fiscal Monitor, October 2013 16 Economic Action Plan 2014: Balanced Budget Benefits of Balanced Budgets • Canada is only G-7 country to have a rock solid AAA rating with a stable outlook from all the major credit rating agencies – Moody’s, Fitch, and Standard & Poor’s • Frees up taxpayer dollars that might otherwise be spent on interest costs • Instills confidence in consumers and investors, whose dollars spur economic growth and job creation • Strengthens Canada’s ability to respond to longer-term challenges, such as population aging, and unexpected global economic shocks • Ensure fairness and equity for generations to come by avoiding future tax increases or reductions in services 17 Economic Action Plan 2014: Jobs & Growth Theme 2: Promoting Jobs and Economic Growth EAP 2014 remains focused on what matters to Canadians: jobs and growth. We will do this by: • Connecting Canadians with available jobs, by helping them to acquire skills that will get them hired or help them get better jobs • Fostering job creation, innovation and trade, by keeping taxes low and continuing to provide Canadian businesses and investors with the market access they need to succeed in the global economy • Ensuring responsible resource development, by supporting the mining, forestry and agriculture sectors • Conserving Canada’s natural heritage, by investing in national parks and conservation initiatives and expanding tax support for clean energy • Investing in infrastructure, by continuing record investment in roads, bridges, ports, and transit via the new Building Canada plan and other measures 18 Economic Action Plan 2014: Jobs & Growth Canada has outperformed all other G-7 economies in job creation over the recovery Improvement in Employment Over the Recovery % Increase in Employment Note: Monthly data for Canada (July 2009 to Jan 2014), USA (Feb 2010 to Jan 2014), Germany (July 2009 to Dec 2013), Japan (Dec 2012 to Dec 2013) and Italy (at its lowest as of Dec 2013). Quarterly data for France (2009Q3 to 2013Q4) and the UK (2010Q1 to 2013Q3) Sources: Haver Analytics; Department of Finance calculations 19 Economic Action Plan 2014: Jobs & Growth Job creation during the recovery has been in high-wage, full-time, private-sector employment Change in Employment Over the Recovery, July 2009 to January 2014 Notes: Calculations are based on Statistics Canada data for 105 industries. High-wage industries are defined as those with average hourly wages above the aggregate average. Totals may not add due to rounding. Sources: Statistics Canada; Department of Finance calculations. 20 Economic Action Plan 2014: Jobs & Growth Private sector economists expect both real and nominal GDP growth to pick up this year and next Canadian GDP Growth Outlook Source: Department of Finance December 2013 survey of private sector economists 21 Economic Action Plan 2014: Jobs & Growth Canada has performed better than most other G-7 economies during the global recession and the recovery Change in Real GDP Since Pre-Recession Peak Note: Pre-recession peak was 2007Q3 for Italy; 2007Q4 for USA; 2008Q1 for UK, France, Germany and Japan; and 2008Q3 for Canada. Last data point is 2013Q3 for all countries except USA and UK, for which it is 2013Q4. Sources: Haver Analytics; Department of Finance calculations. 22 Economic Action Plan 2014: Jobs & Growth Difficulty in Hiring Over the Recovery Has Become Significant in Certain Occupations Job Vacancy Rate Sources: Number of online job postings: WANTED Analytics. Employment: Statistics Canada (Labour Force Survey); Department of Finance calculations. 23 Economic Action Plan 2014: Jobs & Growth Connecting Canadians with Available Jobs: Highlights • Launching the Canada Job Grant: so that Canadians can get the skills training they need to get in-demand jobs • Creating the Canada Apprentice Loan: which will provide apprentices in Red Seal trades access to over $100 million in interestfree loans each year • Launching a Job Matching Service: this new service will match Canadians looking for work with employers looking to hire them • More paid internships for young Canadians: investing $55 million to create paid internships for recent graduates in both small and mediumsized business and high-demand fields • Helping older workers get back to work: investing $75 million in the Targeted Initiative for Older Workers program to support older workers who want to participate in the job market 24 Economic Action Plan 2014: Jobs & Growth Fostering Job Creation, Innovation and Trade: Highlights • Landmark investments in research & innovation: • $1.5 billion over the next decade for post-secondary research through the Canada First Research Excellence Fund • $500 million to support a competitive auto sector through the Automotive Innovation Fund • $46 million in new funding to the granting councils to support research and scientific discoveries across Canada • Cutting red tape for small business: eliminating the requirement for 800,000 payroll remittances by 50,000 small and medium-sized businesses • Modernizing Canada’s intellectual property framework to better align it with international practices • Promoting Canadian-made products: Developing a “Made-inCanada” campaign to promote high-quality Canadian products here and around the world, while also working to reduce internal barriers to trade 25 Economic Action Plan 2014: Jobs & Growth Canada leads the G-7 with the lowest overall tax rate on new business investment Marginal Effective Tax Rate1 on New Business Investment, 2014 1Marginal effective tax rate (METR) on new business investment takes into account federal, provincial and territorial statutory corporate income tax rates, deductions and credits available in the corporate tax system and other taxes paid by corporations. 2 OECD average excludes Canada. Source: Department of Finance. 26 Economic Action Plan 2014: Jobs & Growth Sustained growth is pushing corporate tax revenues higher Federal Corporate Income Tax Revenue and the General Corporate Income Tax Rate 27 Sources: Public Accounts of Canada; Department of Finance projection for 2013–14 to 2018–19 Economic Action Plan 2014: Jobs & Growth Substantial Tax Reductions for Small Businesses Federal Corporate Income Tax Paid by a Small CanadianControlled Private Corporation with $500,000 of Taxable Income 28 Sources: Public Accounts of Canada; Department of Finance projection for 2013–14 to 2018–19 Economic Action Plan 2014: Jobs & Growth Fostering Small Business • Reduced small business tax rate from 12 percent to 11 percent • Eliminated the corporate surtax for all corporations in 2008, which was particularly beneficial to small business corporations as the surtax represented a larger proportion of their overall payable tax • In EAP 2014, maintaining the freeze on Employment Insurance (EI) premiums • Lifetime Capital Gains Exemption (LCGE) on qualified small business shares was increased to $750,000 from $500,000 in 2007. In EAP 2014, increasing LCGE limit to $800,000 for 2014, and new limit is now indexed to inflation • No change to CPP contribution rate this year. Expanding CPP would require an increase in contributions, which would impose a burden on employers and employees. E.g., doubling CPP rate would result in estimated increase in annual CPP contributions of up to $2,600 per worker, shared equally by employers and employees. Self-employed individuals would need to contribute the entire amount 29 Economic Action Plan 2014: Jobs & Growth Ensuring Responsible Resource Development: Highlights • Canada's natural resources sector represents 18% of the economy, over half of our exports, and supports 1.8 million jobs • EAP 2014 proposed new measures to support natural resources sector, including: • Supporting mineral exploration, by extending the 15-per-cent Mineral Exploration Tax Credit for flow-through share investors • Ensuring comprehensive and timely reviews of pipelines, such as the TransCanada’s Energy East Project, by investing $28 million in the National Energy Board for such reviews • Helping Canada’s North realize its economic potential, by providing $40 million to the Strategic Investments in Northern Economic Development program • Supporting the forestry industry, by investing over $90 million in the Forest Industry Transformation program to advance leadingedge technologies to enhance the competitiveness of Canada’s wood products and pulp-paper sectors. 30 Economic Action Plan 2014: Jobs & Growth Conserving Canada’s Natural Heritage: Highlights Environmental protection goes hand-in-hand with economic growth. That’s why EAP 2014 proposes measures to: • Expand tax relief for green energy generation, to include watercurrent energy equipment and equipment used to treat gases from waste • Protect Canada’s national parks, by providing over $390 million to make improvements to highways, bridges and dams located in our national parks and historic canals • Support conservation, by investing an additional $15 million in the Recreational Fisheries Conservation Partnerships Program • Improve and expand Canada’s recreational trails, by investing $10 million to improve trails across the country • Encourage donations of ecologically sensitive land, by making taxrelief for such donations more generous and flexible • Support family-oriented conservation, by providing $3 million to allow the Earth Rangers Foundation to expand its ongoing work 31 Economic Action Plan 2014: Jobs & Growth Investing in Infrastructure: Highlights • In 2007, we launched the $33 billion Building Canada plan, supporting over 12,000 infrastructure projects across Canada • During the stimulus phase, we supported an additional 30,000 infrastructure projects that created immediate jobs • We doubled the Gas Tax Fund to $2 billion per year, made it permanent and indexing it at 2 per cent per year, beginning in 2014–15 • Invested $1.8 billion in affordable housing since 2006, and another $1 billion for renovations and energy retrofits for up to 200,000 affordable housing units • EAP 2014 maintains the commitment made in the 2013 Building Canada plan, a $53 billion investment in predictable infrastructure funding for the next ten years – the largest and longest federal investment in job creating infrastructure in Canadian history • EAP 2014 proposes new $305 million investment in broadband internet in rural and northern communities and $200 million to establish a National Disaster Mitigation Program 32 Economic Action Plan 2014: Families and Communities Theme 3: Supporting Families and Communities • EAP 2014 builds on previous actions by our Government to support families and communities, improving the quality of life for hard-working Canadian families • Supports Canadians by encouraging a consumer-friendly marketplace and better protecting financial consumers • EAP 2014 supports Canadian families by keeping taxes low, encouraging inclusive communities, and providing further tax recognition of the costs of adopting a child and health-related expenses 33 Economic Action Plan 2014: Families and Communities Building a Consumer-Friendly Marketplace: Highlights • Invest $390 million over five years to strengthen Canada’s food safety system • Encourage competition and lower prices by introducing legislation to cap wholesale domestic wireless roaming rates • Introduce legislation to prohibit unjustified cross-border price discrimination to reduce the gap between consumer prices in Canada and the US • Launch a review of the Canadian deposit insurance framework to ensure continued protection for the savings of Canadians • Eliminate the practice of pay-to-pay billing 34 Economic Action Plan 2014: Families and Communities Investing in Families: Highlights • $44.9 million over five years to expand the focus of the National AntiDrug Strategy from illicit drugs to also address prescription drug abuse in Canada • Enhance access to EI sickness benefits for claimants who receive Parents of Critically Ill Children and Compassionate Care benefits • Increase the maximum amount of the Adoption Expense Tax Credit to help make adoption more affordable for Canadian families • Restore the effectiveness of the excise duty on tobacco products in support of the Government’s commitment to reducing tobacco consumption • Expanding health-related tax relief under the Goods and Services Tax/Harmonized Sales Tax (GST/HST) and income tax systems to better reflect the health care needs of Canadians 35 Canadian Families Keep More of Their Hard-Earned Dollars as a Result of the Government’s Actions to Reduce the Tax Burden Economic Action Plan 2014: Families and Communities Total Federal Tax Relief for a Family of Four, 2014 36 Source: Department of Finance Economic Action Plan 2014: Families and Communities Government’s Actions to Reduce the Tax Burden Are Leaving More Hard-Earned Dollars in the Pockets of Seniors Total Federal Tax Relief for a Senior Couple With Pension Income, 2014 37 Source: Department of Finance Economic Action Plan 2014: Families and Communities Investing in Communities: Highlights • $105 million per year in support of culture-related programs, $9 million per year for the Canada Book Fund and $8.8 million per year for the Canada Music Fund • $10.8 million over four years to support the efforts of Special Olympics Canada • $25 million over five years to continue efforts to reduce violence against Aboriginal women and girls • $323.4 million over two years to continue the First Nations Water and Wastewater Action Plan • $8.1 million to create a DNA-based Missing Persons Index to match DNA from missing persons and unidentified remains to the National DNA Data Bank • Proposing changes to the Public Service Employment Act and the Public Service Employment Regulations to enhance employment opportunities in the federal public service for veterans 38 Economic Action Plan 2014: Families and Communities Economic Action Plan 2014: Conclusions • I encourage you to visit www.budget.gc.ca to look over the Budget in detail to learn more about how it will make our economy stronger and benefit Canadians • We will eliminate the deficit in 2015; we will remain focused on the economy; and we will make job creation our overarching priority • We remain committed to keeping tax low • We will not spend recklessly to pile on endless debt for our children and grandchildren to worry about • Remaining focused on these goals is the best way to ensure that Canada’s future is a prosperous one, with a healthy, competitive economy, sustainable for generations to come 39 Thank you!