Canada is a country that works. To build on this performance, the new federal Budget takes an integrated approach to social and economic policy, while emphasizing financial integrity.
This includes important building blocks to promote the New Agenda for Achievement set out in the Speech from the Throne – an agenda aimed at:
Prudent fiscal planning has been the cornerstone of Canada’s economic track record in recent years. Budget 2004 maintains this proven performance, while taking new action to improve financial integrity.
The value of prudent planning was reinforced last year when Canada was hard hit by a series of shocks – the SARS outbreak, forest fires, a hurricane, and a case of "mad cow" disease. These factors, combined with the rapid rise in the value of our dollar, pushed economic growth down sharply.
However – with low interest rates and a stronger U.S. economy – private sector economists are forecasting growth of 2.7 per cent this year, and
3.3 per cent in 2005.
Just as important, thanks to the combination of prudence and our Contingency Reserve, the government is still able to provide $2 billion
in new funding to provinces for health care – and $1 billion in assistance
to the agricultural sector.
And despite these pressures, the Budget confirms that for the current fiscal year, the government will record its seventh consecutive surplus – the only
G-7 nation not to run a deficit.
This underscores why the Budget Plan maintains the yearly $3-billion Contingency Reserve, and rebuilds extra prudence for 2004-05 and 2005-06.
These "safety cushions" will help make sure the government again meets the target of balanced budgets or better in the coming fiscal year and beyond – maintaining Canada as the only G-7 country expected to stay in the black.
Moreover, if the Reserve is not needed to cover unexpected fiscal shocks,
it goes directly towards debt reduction.
This has helped the federal government reduce the national debt by $52 billion since balancing the budget in 1997-98. In turn, this has delivered savings of
$3 billion a year in interest charges – funds freed for priorities such as health care, learning and the environment.
Over the same period, the debt has fallen sharply as a share of GDP – our overall economy – from a peak of nearly 69 per cent, to 42 per cent this year.
This is no abstract achievement. It’s a bottom-line benefit for Canadians – because a stronger financial position helps keep interest rates low,
and reduces the burden of debt charges on federal revenues.
In fact, we’ve gone from a peak of spending over 37 cents of every
tax dollar on interest charges – eating up more than a third of our revenues
– to just under 20 cents this year.
A stronger financial position today positions us to better meet the needs of tomorrow. This is more important than ever given the looming fiscal challenge of a greying population – with fewer working-age people to fund social programs, but with more seniors placing greater demand on those programs.
That is why Budget 2004 aims to go further on debt reduction. It sets the goal to lower the debt-to-GDP ratio to 25 per cent in 10 years.
That will be an important milestone. But as recent problems have shown, prudent planning must also be partnered with responsible financial management – making sure Canadians get full value for their tax dollars.
This is why the government is putting in place a comprehensive plan to improve dollars-and-cents accountability. It will:
But keeping better track of where the money goes is still not enough. Responsible management also means making sure that the taxpayer’s dollar is being spent effectively on today’s priorities, not yesterday’s interests.
To do this, the new Cabinet Committee on Expenditure Review will examine every dimension of federal spending.
It will also focus on opportunities to lever major savings on such government-wide activities as procurement and property management.
The Committee will be tough and tenacious. It is expected to identify at least $3 billion in ongoing savings within four years – money that can be reallocated to Canadians’ priorities, as set out in the new policy agenda.
Heading that agenda is further action to help strengthen our public health
The 2003 Accord on Health Care Renewal increased federal funding
by $34.8 billion over five years. And in January, the Prime Minister confirmed that provinces would receive $2 billion in additional funding.
As a result, federal payments to provinces and territories for health and social programs will reach $28 billion a year (and that doesn’t include billions more in Equalization payments).
That’s equal to $1.8 billion in new cash each year,
or an average annual growth of eight per cent
– much higher than the expected growth rate for the economy (which provides the federal tax base).
But funding is not the only health challenge. Events like the SARS outbreak highlight the need for active responses to gaps in our public health system.
The Budget takes this action.
Of course, health funding is tied to our economic success. In the 21st century, the cornerstone for such achievement – and a better standard of living -- is life-long learning.
Since learning starts in infancy, the Budget increases federal funding to provinces by $150 million over two years for early learning and childcare. Combined with existing support, this will cover up to 70,000 spaces for kids from low-income families.
The Budget also adds a further $10 million over four years for First Nations children living on reserves (for a total investment of $45 million).
Next, the Budget offers measures to help low- and middle-income families save for college or university.
It introduces a $2,000 Canada Learning Bond, for every child born after 2003, in families entitled to the Child Benefit supplement – those with incomes under $35,000.
The Learning Bond starts with an initial $500 contribution to establish a Registered Education Savings Plan (RESP), followed by $100 yearly instalments until age 15.
These funds – in an RESP with a 3.5 per cent real rate of return – will grow to $3,000 by the time the child is 18 and can use them for post-secondary studies.
The Learning Bond will be available to more than 120,000 newborns this year, with an expected annual cost – at maturity – of $325 million.
The Budget also enhances the successful Canada Education Savings Grant, for children of low- and middle-income families.
Currently, for every $100 contributed to an RESP, the federal government provides a matching $20 grant -- up to a maximum of $400 a year.
Budget 2004 doubles this matching rate to 40 per cent for the first $500 invested in an RESP by families earning under $35,000.
And it increases the rate to 30 per cent for families between $35,000 and $70,000.
This measure could provide $80 million in annual benefits to more than 4.5 million children.
Further, to assist today’s students from low-income families, the Budget announces a new up-front grant for first-year studies.
This grant will be for one-half of the cost of tuition, up to a maximum of $3,000.
It’s estimated that more than 20,000 students will receive the new grant each year.
There is also the Canada Student Loans program, which helps almost half all full-time students. Budget 2004 includes changes to the program to reflect growing education costs.
Further learning-agenda action in the budget includes:
Health care and learning are crucial priorities. But in these and other key policy arenas, communities often represent the front line. That is why the Budget delivers on the government’s pledge to forge a new deal for communities.
It helps boost reliable, long-term funding by confirming the pledge to provide municipalities with full relief from the Goods and Services Tax (GST).
This relief will total $7 billion over 10 years.
As well, the government is committed to working with the provinces to provide municipalities a share of the federal gas tax – or some other mechanism to meet the same goal.
Turning to infrastructure, the 2004 Budget accelerates access to the $1 billion Municipal Rural Infrastructure Fund – allocating funding over the next five years, instead of the previous 10-year period.
Next, few things have greater impact on the quality of life in a community than the environment.
This Budget commits $3.5 billion over 10 years for the clean-up of contaminated lands for which the federal government is responsible.
And a further $500 million over 10 years will go to help restore other sites, such as the Sydney tar ponds.
As well, to promote better environmental stewardship for the future, the Budget invests $200 million in the Sustainable Development Technology foundation, and expands its mandate to address issues of clean water and soil.
The government is also committed to investing a further $800 million in later years in environmental technology development, as opportunities and priorities are identified.
Next, Budget 2004 acts to assist the "social economy" – organizations producing goods and services on a not-for-profit basis, with surpluses going to social or community goals.
The government will provide these enterprises with access to small business programs.
And the budget provides over $160 million in the next five years to help establish regional "patient capital" funds and promote other sources of lending to benefit the sector, and for capacity building and research.
The Budget also addresses further community-linked needs of both First Nations people and new immigrants.
Since balancing the Budget, the government has consistently increased support for research and innovation. This is the basic foundation for the new processes and products that can deliver 21st century growth and jobs for Canadians.
For example, including actions in this Budget, cumulative new funding for university- and hospital-based research alone will total almost $9 billion. This has helped make Canada the G-7 leader in the share of GDP going to publicly performed research.
To sustain this edge, the 2004 Budget provides $90 million a year in additional funding to be shared by the three academic granting councils – in medical research; the natural sciences and engineering; and for social sciences and humanities.
But to get the full benefit of our research investment, we have to focus on the equally challenging task of bringing new ideas and processes to market.
That is why the Budget provides funding of $50 million over five years to improve the capacity for the commercialization of their research at universities, hospitals and other facilities.
And a further $25 million will go to encourage the commercialization of research in the government’s own laboratories.
But the transition from idea to product often depends on the availability of venture capital. So the Budget also includes $270 million to provide venture capital for start-up technology companies, including promising agri-food companies.
This funding is expected to lever an additional $1 billion in private-sector venture capital investments.
Budget 2004 also supports business growth and investment, especially small business.
The 2004 Budget also acts to ensure that businesses are governed by a fair and effective tax system.
Clearly, the 2004 Budget takes solid action to promote our economic capacity and strengthen society and communities. But it also recognizes Canada’s obligations – at home and abroad – in a challenging world environment.
For our armed forces, the Budget:
And other Budget action includes:
As you can see, Budget 2004 takes realistic but far-reaching action to build a new agenda for Canadian achievement. It is a forward-looking roadmap for government that lives within its means – providing better value for the taxpayer’s dollar – while making the investments needed to help Canadians enhance their families’ well-being.