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Budget 2004 - Budget Plan
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Chapter 1
Introduction and Overview
Budget 2004—New Agenda for Achievement
Introduction
Canadians are united by a belief in equality of opportunity. It is a
principle that defines us as a nation, a cause that unites us as a community
and a goal that defines this government.
In the Speech from the Throne, the Government set out an ambitious agenda to
improve the standard of living and quality of life of all Canadians. Its three
themes are to strengthen Canada’s social foundations, build a dynamic 21st
century economy and restore Canada’s influence in the world.
Just as Canadians are united by the belief in equality of opportunity,
so too are the three themes of the Government’s agenda. For it is by
giving all Canadians the opportunity to succeed, to reach their potential,
and to build a better life for themselves, their families and their
communities that Canada will succeed and be a model for the world.
At the core of this budget is the recognition that to achieve our goal
of better lives for all Canadians, our social and economic policies must
be mutually reinforcing. Quite simply, there can be no strong economy without a
secure society, and no secure society without a strong economy to support it.
And underlying this must be the prudence of balanced budgets that comes with
living within our means.
Therefore, this budget is built on the foundation of creating opportunity
for individuals. It recognizes that opportunity has many dimensions and can be
defined in many ways.
The measures in this budget have been designed to meet the test of
what Canadians believe are our priorities as a nation. They focus on the
importance of health care, learning, communities, the economy and our place in
the world, each of which is crucial to the creation of opportunity for each and
every Canadian. Each is a step down the path towards a Canada of opportunity
and achievement.
This budget lays the foundation for that greater Canada, a nation
where individual opportunity translates into economic achievement
and social justice.
Highlights
Economic Developments and Prospects
- During 2003 economic activity in Canada slowed because of a series of
unforeseen shocks. As a result, real gross domestic product (GDP) expanded
only 1.7 per cent for the year, well below the 3.2 per cent
expected by private sector economists at the time of the 2003 budget.
- Nevertheless, strength in domestic demand through most of the year,
supported by low interest rates, helped offset the weakness in exports.
- Canada’s labour market strengthened in the latter part of 2003. Since
December 2002 the economy has created 271,900 new jobs, all full-time.
- Solid domestic fundamentals, low interest rates and a more favourable
global environment, particularly a stronger U.S. economy, are expected
to support more robust Canadian economic growth this year.
- Private sector economists expect the Canadian economy to grow by an
average of 2.7 per cent in 2004, significantly better than last year
but still well below the 3.5 per cent forecast at the time of the 2003
budget.
- Private sector economists expect a further pickup in growth to
3.3 per cent in 2005.
- There are two main risks to the Canadian economic outlook:
- The uncertainty surrounding the economic impact of the rapid rise
of the Canadian dollar.
- The sustainability of the U.S. economic recovery.
Sound Financial Management
- The seventh consecutive balanced budget is projected for 2003–04, the
first time since Confederation, and balanced budgets or better are
forecast for 2004–05 and 2005–06.
- The $3-billion Contingency Reserve is maintained, and $1 billion in
economic prudence restored, for 2004–05 and 2005–06.
- The federal debt-to-GDP ratio is expected to fall to 42 per cent in
2003–04, down from its peak of 68.4 per cent in 1995–96. The ratio
is forecast to decline to 38 per cent by 2005–06.
- To be in a better position to deal with pressures related to an aging
population, the Government has set a new objective of reducing the federal
debt-to-GDP ratio to 25 per cent within 10 years.
- In this budget program expenses are projected to grow an average of
4.4 per cent in 2004–05 and 2005–06, roughly in line with projected
growth in the economy.
- As part of instituting a new management approach in government, the budget
implements $1 billion in annual reallocation from existing spending in
2004–05 and beyond to meet Budget 2003 commitments.
- As well, the Cabinet Committee on Expenditure Review is examining
all programs to identify at least $3 billion annually in
savings within four years for reinvestment in the priorities of
Canadians while improving government management.
- Furthermore, a new plan for better spending management and oversight is
being introduced under the leadership of the President of the Treasury
Board, which includes re-establishing the Office of the Comptroller General
of Canada, strengthening departmental comptrollers and internal audits.
- The Government intends to sell its remaining shares in Petro-Canada
in 2004–05.
Moving Forward on the Priorities of Canadians
The Importance of Health
- Confirmation of an additional $2 billion for the provinces and
territories for health, bringing to $36.8 billion the funding provided
under the February 2003 First Ministers’ Accord on Health Care
Renewal.
- Establishment of a new Canada Public Health Agency as a focal point
for disease control and emergency response.
- Immediate funding of $665 million in this fiscal year and over the
next two years to improve Canada’s readiness to deal with public
health emergencies. This is in addition to the approximately
$400 million to be transferred from Health Canada to the new Canada
Public Health Agency.
- Improved tax fairness for Canadians with disabilities and caregivers.
- Increased funding of $30 million annually to support employment
assistance programming delivered by provinces and territories for Canadians
with disabilities.
The Importance of Learning
- Introduction of a new Canada Learning Bond, which will provide
up to $2,000 for children in low-income families born after 2003
for post-secondary education.
- Enhancement of the Canada Education Savings Grant matching rate
for low- and middle-income families.
- Introduction of a new grant of up to $3,000 for first-year, post-secondary
dependent students from low-income families.
- Introduction of an up-front annual grant of up to $2,000 for
post-secondary students with disabilities.
- Increase in the ceiling for Canada Student Loans to $210 a week
from $165.
- Increase in the income thresholds used for determining eligibility for
student loan interest relief.
- Increase in the maximum amount of debt reduction for students facing
financial difficulty to $26,000 from $20,000.
- Extension of the education tax credit to employees who pursue
career-related studies at their own expense.
- Investment of $125 million over five years for the Aboriginal Human
Resources Development Strategy.
- Doubling to $50 million support for the Urban Aboriginal Strategy.
The Importance of Knowledge and Commercialization
- Annual increase of $90 million to Canada’s three federal
granting councils.
- Increase of $20 million annually to help offset the indirect costs of
research by universities and research hospitals.
- An additional $60 million to Genome Canada to strengthen its
research.
- Additional funding to improve the capacity for commercialization at
universities, hospitals and other research facilities.
- New funding of $270 million set aside to enhance access to venture
capital financing for companies turning promising research into new products
and services.
- Acceleration by one year, from 2006 to 2005, of the increase in the small
business deduction limit to $300,000.
- Increase in the capital cost allowance rate for computer equipment to
45 per cent from 30 per cent, and in the rate for broadband,
Internet and other data network infrastructure equipment to 30 per cent
from 20 per cent.
The Importance of Communities
- $7 billion in GST/HST relief for municipalities of all sizes over the
next 10 years.
- Acceleration of the $1-billion Municipal Rural Infrastructure Fund,
with spending over the next 5 years instead of 10.
- A stronger voice for municipalities in the federal decisions that
affect them.
- New funding of $15 million a year in support of enhanced language
training to reduce labour market barriers faced by immigrants.
- Increased funding for the Urban Aboriginal Strategy.
- Funding of $4 billion over 10 years to clean up contaminated sites.
- New funding ($1 billion over 7 years) to support the development
and commercialization of new environmental technologies, reflecting the
sale of Petro-Canada.
- More effective tax rules for registered charities and ongoing support
for the Voluntary Sector Initiative.
- Increased support for community-based economic development and
the social economy.
The Importance of Canada’s Relationship to the World
- An additional $250 million to cover the costs of Canada’s
participation in peacekeeping missions in Afghanistan and the fight
against terrorism.
- An additional $50 million for Canada’s participation in the
peacekeeping force in Haiti.
- Additional capital funding in 2005–06 to advance priority
capital investments.
- Exemption from tax of the income earned by Canadian Forces personnel and
police on high-risk international missions.
- Commitment of a further $605 million to address security issues.
- A reduction in the Air Travellers Security Charge.
- An increase of $248 million, or 8 per cent, in international
assistance in 2005–06.
Table 1
Spending and Revenue Initiatives: 2004 Budget
|
|
2003–04 |
2004–05 |
2005–06 |
|
|
(millions of dollars) |
Importance of Health |
|
|
|
Canada Health and Social Transfer cash
supplement |
2,000 |
|
|
Strengthening Canada’s public health
system |
500 |
80 |
85 |
Inclusion of persons with disabilities |
|
50.5 |
57.9 |
Total |
2,500 |
131 |
143 |
Importance of Learning |
|
|
|
Caring for Canada’s children |
|
91 |
93 |
Helping families plan ahead for post-secondary education |
|
105 |
302 |
Encouraging lifelong learning |
25 |
40 |
|
Economic opportunities for Aboriginal
Canadians |
|
30 |
31 |
Total |
|
251 |
466 |
Importance of Knowledge and
Commercialization |
|
|
|
Building research foundations |
|
170 |
115 |
Commercialization of research |
|
20 |
20 |
Venture capital financing1 |
|
(255) |
(15) |
Investing in offshore development |
|
7 |
7 |
Small business and entrepreneurship |
|
1 |
24.5 |
Strengthening the Canadian tax advantage |
|
95 |
200 |
Total |
|
293 |
367 |
Importance of Communities |
|
|
|
New Deal for communities: first steps |
100 |
605 |
655 |
The community-based and non-profit sector |
|
15 |
15 |
Supporting the social economy |
|
35 |
43 |
Environment and sustainable development |
|
205 |
10 |
Other initiatives in support of communities |
|
52.5 |
53 |
Total |
100 |
913 |
776 |
Importance of Canada’s Relationship to the World |
|
|
|
Defence |
|
277 |
85 |
Security reserve |
|
115 |
115 |
International assistance2 |
|
|
248 |
Canada Corps |
|
5 |
10 |
Total |
|
397 |
458 |
Other |
|
|
|
Agriculture assistance |
1,000 |
|
|
Equalization and Territorial Formula Financing renewal |
|
195 |
202 |
Other |
|
37.5 |
100 |
Total |
1,000 |
233 |
302 |
Total: spending and revenue initiatives |
3,600 |
2,216 |
2,511 |
of which: |
|
|
|
Spending initiatives |
3,500 |
1,486 |
1,621 |
Revenue initiatives |
100 |
730 |
890 |
|
1 Federal support
will be in the form of an equity injection, i.e. the purchase of shares.
As a result, there will be no budgetary impact.
2 In the 2003 budget, the International Assistance Envelope
was increased by 8 per cent in both 2003–04 and 2004–05. |
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