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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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