Archived - Focusing on Priorities
Archived information is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.
Slide show presentation transcript
Budget 2006 is about focusing on priorities - delivering real results for people, and laying a solid foundation for Canada's future.
It implements the new Government's five core commitments; restores discipline and accountability to spending; provides tax relief for all Canadians; and reduces public debt each year.
Underlying the Budget plan is a healthy economy - with forecasters expecting continued growth this year and next.
This ongoing growth is reflected in Canada's employment record. Over 100,000 new jobs were created in the first quarter of 2006, helping bring the unemployment rate to 6.3 per cent in March - the lowest since December 1974.
But there are some risks. These include:
- Commodity prices, especially in the energy sector;
- The possibility of a sudden 'correction' in U.S. housing prices;
- And the risk that our dollar may appreciate further under pressure from global current account imbalances, especially in the U.S.
That's why the Budget Plan is based on -- and delivers -- fiscal discipline.
And while this means the Government was not able to do everything it would have liked, its first Budget will make a real difference for Canadians.
It does this through providing a focused, responsible agenda to build a better Canada - starting by addressing the five priorities set out in the Speech from the Throne.
It begins by building on the reforms of the Federal Accountability Action Plan introduced last month.
This means focusing budget decisions over a two-year planning horizon - so that measures will be introduced only when they are affordable and ready to be implemented.
Budget 2006 restrains the rate of growth of spending, and commits to a new approach to overall expenditure management - to ensure that programs focus on results and deliver value for money. The President of the Treasury Board will identify $1 billion of savings in 2006-07 and 2007-08 and report in the Fall.
And the Budget plans on reducing the public debt by $3 billion each year. As a result, it advances by one year the goal of lowering the debt-to-GDP ratio to 25 per cent.
Budget 2006 also announces that the Government will look at possibly allocating a portion of any year-end surplus over $3 billion to the Canada Pension Plan and the Quebec Pension Plan - to improve fairness for younger Canadians.
And financial reporting will be improved - for example, on federally-funded foundations - consistent with recommendations by the Auditor-General.
This Budget also recognizes that Canadians pay too much tax. So it delivers more tax relief for people than the last four federal budgets combined - and puts more than twice as much resources into tax relief as into new spending.
And about 90 per cent of the tax savings will go to individual Canadians and their families.
The Budget 2006 tax plan delivers on the Government's commitment to cut the GST by one percentage point - to 6 per cent - effective this July 1.
This will benefit all Canadians by close to $9 billion over two years - even those who don't earn enough to pay personal income tax.
And even though the GST rate is being cut, the Budget keeps the GST Credit at current levels - to protect low- and modest-income Canadians.
But that's not all. The Budget also proposes a comprehensive plan to reduce personal income taxes for all taxpayers. This includes:
- Introducing a new Canada Employment Credit to help working Canadians. This year, effective July 1st, the credit will be available on employment income up to $500 - then doubling to $1,000 for 2007.
- Permanently reducing - to 15.5 per cent - the lowest personal income tax rate as of July 1st. This is the rate that applies on the first $36,000 of income.
- And legislating increases in the basic personal amount - the amount of income Canadians can earn tax-free.
These measures will help deliver about $20 billion in tax relief for people over the next two years. And, as a result, about 655,000 low-income Canadians will be removed from the tax rolls.
Next, creating an environment for more and better jobs and for strong economic growth depends on having a competitive tax system. So Budget 2006 delivers on tax relief promised - but not delivered in the past - by:
- Eliminating the federal capital tax as of January 2006;
- Eliminating the corporate surtax starting in 2008; and
- Reducing the general corporate tax rate to 19 per cent from 21 per cent by 2010.
These proposed cuts will allow Canada to regain the solid statutory tax rate advantage that we had prior to the 2004 tax changes in the United States.
Budget 2006 recognizes small business as the backbone of our economy. So it proposes to:
- Increase the amount of small business income eligible for the 12-per-cent tax rate to $400,000 for 2007.
- And to reduce this rate to 11.5 per cent in 2008, and to 11 per cent in 2009.
Canadians know that a more educated and skilled labour force is key to our economic future. That's why this Budget proposes significant support for training and education.
Starting immediately, there will be a new tax credit of up to $2,000 for employers who hire apprentices.
And in January 2007, a new Apprentice Incentive Grant will provide $1,000 per year to apprentices in the first two years of an eligible program.
Since many trades-people must provide their own tools to get work, the Budget proposes a new deduction of up to $500 for the cost of tools.
Further, to help about 1.9 million post-secondary students, a tax credit will be provided for the cost of textbooks.
And the Budget proposes to fully exempt from tax all scholarship, bursary or fellowship income - providing tax relief to more than 100,000 students.
Moving ahead, Canada's primary economic sectors are facing serious challenges at home and internationally.
The Government is keeping its commitment to provide an additional $500 million in support for the agriculture sector - and going even further. It is announcing an immediate $1-billion to assist farmers this year. Together, this means $1.5 billion in new funding this year for Canadian farmers.
And it commits $400 million over the next two years to the forestry sector, to help combat the pine beetle infestation, support worker adjustment and to strengthen the industry's long-term competitiveness.
The federal Budget also offers wide-ranging measures to help families with children - one of the new Government's priorities - and to make our communities better places to live and work.
This starts with a Universal Child Care Plan, which has two key components.
There is $3.7 billion in funding over two years for a Universal Child Care Benefit - which will give all families $100 per month for each child under age 6.
This will benefit some 1.5 million families with over 2 million children.
And it's important to note: This Benefit will not affect federal income-tested benefits - and several provinces have already said they too will not claw back the money.
As well, the Budget plan will invest $250 million each year, starting in 2007, in a new initiative to increase the number of childcare spaces by 25,000 each year - a total of 125,000 spaces over five years.
Further Budget investments in helping people include:
- Increasing the Child Disability Benefit and making it available to more families;
- Providing a tax credit on up to $500 in eligible fees for fitness programs for children under 16;
- Helping pensioners, by doubling to $2,000 the current maximum amount of eligible pension income that can be claimed tax free; and
- Assisting newcomers by reducing the Right of Permanent Residence Fee to $490 from $975, effective immediately.
This Budget also works to improve the environment we live in, including the infrastructure that links and supports our communities. For example:
- It proposes a new tax credit for people who purchase public transit passes, to ease traffic congestion and improve the environment.
- And it provides some $5.5 billion over the next four years for a new Highways and Border Infrastructure Fund, a Public Transit Capital Trust, and for established infrastructure programs such as the Pacific Gateway Initiative.
The Budget also encourages charitable donations by eliminating the capital gains tax on donations of listed securities to public charities.
And it helps to preserve natural areas by exempting donations of ecologically sensitive land from the capital gains tax.
Another of the five core priorities in the Speech from the Throne was to make our streets safe and our borders secure. Budget 2006 offers funding to:
- Add 1,000 more RCMP officers -- and additional federal prosecutors -- to focus on issues such as drugs and gun-smuggling;
- To arm border officers and eliminate 'work alone' posts; and
- To further improve Canada's pandemic preparedness.
And this Budget sets out a total investment of $5.3 billion over five years - starting with more than $1 billion over two years -- to strengthen the Canadian Forces.
Building a stronger, more cooperative federation must be a priority for every government. The federal Budget delivers, by working to restore fiscal balance in Canada.
This includes a commitment to work with the provinces and territories to develop a Patient Wait Times Guarantee for medically necessary services.
Budget 2006 also provides up to $3.3 billion in funding to help provinces and territories address short-term pressures in areas such as post-secondary education, Northern and off-reserve Aboriginal housing, and public transit.
And it delivers an extra $255-million, one-time adjustment in the Equalization and Territorial Financing Formula programs that will benefit recipient provinces and territories.
As well, Budget 2006 offers a framework on fiscal arrangements. This is outlined in a Budget companion document, "Restoring Fiscal Balance in Canada," that identifies five key principles all Canadians can support. These are:
- Accountability through clarity in the roles and responsibilities of the orders of government;
- Fiscal responsibility and transparency in budget planning;
- Predictable, long-term fiscal arrangements;
- Competitiveness and efficiency of the Canadian economic union; and
- Effective collaborative management of the federation.
As you can see, the new Government's first Budget takes real action to keep promises and address core priorities. And it does so with an emphasis on the forward-looking fiscal discipline that Canadians expect and deserve.
For the year just ended - 2005-06 - the current outlook is for a surplus of about $8 billion, which will go to reduce the federal debt.
Looking ahead, Budget 2006 fiscal planning is based on debt reduction of $3 billion each year.
And reflecting a more transparent approach to fiscal reporting, this Budget projects unallocated surpluses of $600 million this year, and $1.4 billion in 2007-08.
This reflects the Government's commitment - which lies at the heart of responsible government - to control how and where tax dollars are spent.
In recent years, federal program expenses have been growing at an unsustainable rate - spiking sharply in 2004-05.
Budget 2006 will reverse this trend by cancelling a number of initiatives announced by the previous government. As a result, spending will slow this year and next, to a pace below the rate of growth of the economy - bringing it to 13 per cent of the economy.
To sum up, Budget 2006 is about focusing on Canadians' priorities. It delivers real results for people, and does so in a fiscally responsible way. As a result, it sets the stage for future action - as the financial resources become available - to build an even better Canada for all Canadians.