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Home > Features > The 2003 Federal Budget: ‘Northern Tiger’ Spends Big |
Budget Spending Summary
A breakdown of where the money will go
A trend toward information seepage has emerged for federal budget announcements; much
of the budget’s content was leaked to media outlets in the build-up to Tuesday’s announcement.
But the budget’s substance goes against recent history, announcing an 11.5% increase
in spending (the second largest spending jump in four decades), breaking with five years
of cuts and marginal increases.
Five areas will receive the bulk of the budget’s spending commitments: health care,
foreign aid, the environment, childcare and welfare, and first nations programs. Here
is a rundown of the initiatives.
Health
There is little controversy about the so-called "big-ticket item" in this
year’s budget: health care. It was no surprise that a $17.3 billion increase in health
care spending over three years was announced, since most of the money was dedicated
at the First Ministers meeting earlier this month.
There is, however, some debate over how much of the government’s health care package
will materialize. The provinces argue that actual increases are only $10 billion over
three years, with the possibility of $2 billion top-ups, if surpluses are greater than
projected.
Overall, the federal Department of Finance reports an increase of $34.8 billion over
five years. This is how the health care spending breaks down:
- Over five years: $9.5 billion in transfers to provinces and territories.
- Over five years: $16.0 billion to Health Reform Fund for primary
health care, home care and catastrophic drug coverage.
- Over five years: $5.5 billion for health initiatives such as diagnostic/medical
equipment, health information technology, etc.
- Over five years: $1.3 billion for First Nations and Inuit health
programs.
- Now: 2.5 billion for Canada Health and Social transfer to relieve
existing pressures.
TOTAL = $34.8 billion
Child Care and Welfare
Child poverty rates have been an embarrassment for the federal government, with organizations
such as UNICEF and Campaign 2000 criticizing a disproportionate number of poor children
in such a wealthy country (for a more detailed analysis of poverty issues, see Maple
Leaf Web’s Poverty in Canada feature).
The 2003 budget introduces two significant measures to counter this issue:
- By 2007: there is $965 million added to the Child Tax Benefit
supplement, called the National Child Benefit. For a first child, the Canadian Child
Tax Benefit maximum benefit increases from $2,444/year to $3,243/year.
- Over five years: $935 million in transfers to provinces designated
exclusively for childcare and early learning programs. This initiative and its accountability
mechanisms are to be negotiated with the provinces and territories. The primary aim
of this money is to boost the number of spaces in regulated day care facilities.
- Over five years: $320 million will be added to affordable housing
programs.
- Over two years: $270 million to fight homelessness.
- Over ten years: $3 billion to support infrastructure initiatives
(including $1 billion for municipal governments).
Defence, Security and Foreign Aid
Since September 11th 2001, there has been increased lobbying for Defence budget increases.
There are some major funding increases for this area, but many argue it will only be
enough to keep the Canadian Forces afloat.
Defence and Security
- Now: $270 million for immediate Defence requirements including
new peace keeping commitments in Afghanistan.
- Over two years: $1.6 billion for Defence Budget (cited as $800
million/year increase in base defence budget).
- Over two years: $94.6 million for Coast Guard.
- Over three years: $75 million for the Security Contingency Reserve
to respond to unforeseen security needs (including border security).
Foreign Aid
- Over three years: $1.4 billion, an 8% increase, for poor countries
(at least 50% of this will go to Africa).
- By 2010: a commitment to double Canada’s international assistance.
Environment
- Over five years: $2 billion to help implement the Climate Change
Plan for Canada.
- Over two years: $340 million for federal contaminated sites and
pollution.
- Over two years: $74 million to establish ten new national parks
and five national marine conservation areas.
- Over five years: $600 million for water and waste water systems
on reserves.
First Nations
While references to First Nations spending programs are contained throughout the budget
- there is $600 million over five years to upgrade water quality on reserves (see Environment
above), as well as the $1.3 billion mentioned in the Health Care section - Manley announced
several initiatives as part of the ‘Strengthening Aboriginal Communities’ section of
the budget:
- Over two years: $72 million to improve educational outcomes for
Aboriginal people and ensure they are provided with training and employment opportunities
on major projects across Canada.
- Over two years: $20 million for Aboriginal Business Canada in
support of entrepreneurship and business development
- Over eleven years: $172.5 million to support Aboriginal languages
and culture, of which $18 million will be invested in the next two years;
- Over two years: $42 million to renew and expand the First Nations
Policing Program; and
- Over two years: $17 million to work with partners to explore new
ways to better meet the needs of Aboriginal people living in urban centres.
Accountability and Cutbacks
Another theme highlighted in the budget was spending accountability. This section was
produced in response to the cost overruns and accounting outrages of the past few years,
such as the gun registry or the Human Resources Development Canada scandals. To restore
government credibility as a financial manager, the budget promises:
Ongoing examination of all non-statutory programs on a five-year schedule to ensure
their relevance, effectiveness, and affordability.
- Now: this measure is calculated to add at least $1 billion to
government coffers almost immediately.
- Over two years: this $1 billion will fund new initiatives announced
in this budget and is scheduled to take effect over the next two years.
Essentially, that means a process of program review will begin immediately to find
that $1 billion. Overall, despite the new spending initiatives, program cutbacks will
also be coming.
Full Accrual Accounting
The 2003 budget ushered in a new form of government accounting called "full accrual
accounting." This method is designed to “provide a more comprehensive accounting
of its assets and liabilities, presenting a more transparent picture of the government’s
financial position” to enhance accountability.
This move is a response to the Auditor General of Canada’s damning report of the government’s
unclear accounting procedures.
Under the previous accounting standard—modified accrual accounting—net debt and the
accumulated deficit were identical. Under the new standard, net debt “now includes a
more comprehensive costing for financial liabilities, but excludes non-financial assets.”
The accumulated deficit includes both: it is the sum of all surpluses and deficits in
the past.
The accumulated deficit will be referred to – in the Annual Financial Report of the
Government of Canada and in budget documents – as the "federal debt."
Registered Retirement Savings Plan
With regard to taxes, the principle initiative is to increase the RRSP contribution
ceiling:
-
By 2006:
- $13,500 to $18,000.
- $14,500 for 2003;
- $15,500 for 2004;
- $16,500 for 2005;
- $18,000 for 2006 (and indexed in years beyond that)
The federal Department of Finance website provides a
summary of the 2003 budget, speeches, as well the actual budget documents.
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