2015 federal budget surplus will be $4.5B smaller than expected
Federal Finance Minister Joe Oliver delivers the Update of Economic and Fiscal Projections in Toronto on Wednesday, Nov. 12, 2014. THE CANADIAN PRESS/Frank Gunn
Andy Blatchford, The Canadian Press
Published Wednesday, November 12, 2014 12:44PM EST
Last Updated Wednesday, November 12, 2014 7:21PM EST
OTTAWA, Ont. -- Finance Minister Joe Oliver didn't exactly spoil Christmas, but he did make it clear Wednesday that the Conservative government's political rivals will have less money to fight over next year than they might have expected.
In a year when Canadians will go to the polls, the federal budget surplus will be just $1.9 billion, Oliver said -- $4.5 billion less than projected, thanks in large part to the government's costly new tax cuts and benefits for families with kids.
Nonetheless, the shortfall didn't stop the finance minister -- or the Liberals and New Democrats -- from sharpening their pitches to voters, who are currently scheduled to cast their ballots in October of 2015.
Oliver, who delivered the update at a luncheon event in Toronto, relied on familiar Conservative themes, casting the incumbent party as a cautious economic manager in a still-uncertain world where voters must avoid taking risks.
"For Canada, the recession is long gone, but it's ghost still lingers in the world economy," said Oliver, whose calculations include a contingency fund of $3 billion that will be used to pay down debt if not needed.
"We've been saying it for years and it remains valid: the global economy is fragile. Growth cannot be taken for granted."
He underscored government efforts that led to four consecutive years of trimming federal program spending, arguing that only the Conservatives' affordable, low-tax plan for jobs and growth will lead to prosperity.
That, of course, includes a new family-friendly tax and benefit package that will carve out an estimated $27 billion from public coffers over six years -- and keep Canada from balancing the books before the end of the current fiscal year.
The measures include a boost to child care benefits and a controversial income-splitting plan for families with children. The income-splitting promise was central to Conservative election hopes in 2011, although it was strictly contingent on a balanced budget.
The government's critics and political rivals have been denouncing the idea ever since, saying it would benefit only about 15 per cent of Canadian families, a small and relatively wealthy segment of the population.
The NDP will fight the income-splitting measure, which leader Tom Mulcair suggested had only been made possible by sustained government reductions to federal program spending, hurting public services as a result.
"It's more of a mirage," Mulcair said of the projected surplus. "It's based on cuts" -- cuts to vital services like railway inspections and services for veterans, he said.
Mulcair offered some campaign-like promises of his own Wednesday. An NDP government would not raise personal income taxes, but would rather increase corporate taxes cut back by the Tories, he said.
Oliver's update projects Canada will run a $2.9-billion shortfall this fiscal year, matching its projection in the federal February budget.
Liberal finance critic Scott Brison pointed to figures in the update that show the government's recent cost-cutting measures used up $3.2 billion this year.
"We're in deficit because of the Conservatives' recent, regressive tax-policy announcements," said Brison, whose party has promised to repeal income-splitting measure if it wins power next year.
"To put all Canadians into a fiscal deficit to benefit 15 per cent of Canadians with income splitting is maybe good Conservative politics, but it's bad Canadian economics."
The fall update also included a cautionary tale about Canadian crude oil, the price of which has been falling precipitously in recent months.
Cheaper crude could drain $500 million from Ottawa's bank account this year and $2.5 billion per year between 2015 to 2019, and cut Canada's nominal GDP by $3 billion in 2014 and $16 billion annually from 2015 to 2019, it warned.
"It is a prudent projection, adjusted for the recent decline in oil prices," Oliver said.
Nonetheless, the federal government is projecting five straight years of surpluses: $4.3 billion in 2016-17, $5.1 billion in 2017-18, $6.8 billion in 2018-19 and $13.1 billion in 2019-20.
In the short term, however, it remains unclear whether the government will have enough leftover cash to introduce additional cost-cutting measures for Canadians.
Prime Minister Stephen Harper has hinted that the government intends to follow through soon on another surplus-dependent pledge from 2011: increasing the annual limit on tax-free savings accounts to $10,000, from $5,500.
A promised adult fitness tax credit also remains outstanding, though it's not clear how the government might allocate any leftover surplus cash.
Randall Bartlett, an economist who has calculated the expected cost of some of the 2011 Tory election promises, believes the Conservatives might still have space in next year's budget surplus to follow through on both the tax-free savings account limit increase and the adult fitness tax credit.
Bartlett, who works for TD Economics, has estimated the measures combined would cost about $500 million in 2015-16.
"So, they'll have room for that, according to their projections," he said.