Highlights of Federal Budget 2007

The following has been extracted from the budget recently released by the federal government. Highlights include economic context for the budget, public safety initiatives, social initiatives and other proposals that may relieve some of the budget pressure municipalities are experiencing.

Economic Developments and Prospects

• Canada’s employment performance is the best it has been in 30 years, consumer confidence remains high and business financial positions are healthy.

• Canadian real gross domestic product (GDP) growth slowed modestly in recent quarters as a result of weaker U.S. demand, the past appreciation of the Canadian dollar and a cooling of the Canadian housing market.

• Private sector forecasters expect growth to improve during the course of 2007, with real GDP growth of 2.3 per cent in 2007 and 2.9 per cent in 2008. These forecasts are consistent with the U.S. economy achieving an expected soft landing in the wake of the recent correction to the U.S. housing market.

• The Canadian economy faces a number of risks over the budget-planning horizon.

• The principal domestic risk is that recent weakness in productivity growth reflects lower underlying productivity growth rather than cyclical factors, which would have negative implications for Canada’s future growth potential.

• The downside risk to U.S. residential construction activity appears to have lessened since the November 2006 Economic and Fiscal Update, although there remains a risk that the weak U.S. housing market could negatively affect U.S. consumer demand. As well, world oil prices remain volatile and subject to geopolitical risks. Higher oil prices would push up the Canadian dollar, making Canadian exports less competitive.

• $324 million to the Canadian Coast Guard for the procurement, operation and maintenance of an additional six new large vessels—four midshore patrol vessels and two offshore fishery science vessels.

• Improving water and wastewater infrastructure, including treatment facilities, sewage collection and water distribution, through the Government’s long-term infrastructure plan outlined in Chapter 5 of The Budget Plan.

• A commitment to working with the provinces on tougher, more stringent regulations and controls to address municipal wastewater effluents.

Public Security

One of the things visitors to Canada often comment upon is how safe and secure they feel in Canada, and the Government is taking action to help keep it that way. Budget 2007 takes important steps to help prevent crime and to ensure that the security, intelligence and corrections systems are strong through initiatives such as:

• A new National Anti-Drug Strategy with $64 million over two years to crack down on gangs, combat illicit drug production such as grow-ops and methamphetamine labs, prevent illicit drug use and treat illicit drug dependency.

• Providing an additional $6 million per year to the Royal Canadian Mounted Police (RCMP) to protect children from sexual exploitation and trafficking.

• Taking action to crack down on white-collar crime by appointing a senior expert advisor to the RCMP to help develop and guide the implementation of a plan to improve the effectiveness of the Integrated Market Enforcement Teams.

• Improving front-end screening of first-time firearms licence applicants with $14 million over two years.

• Investing $80 million over two years to make the Canadian Security Intelligence Service’s operations more effective.

• Providing the Correctional Service of Canada with $102 million over two years to begin updating its infrastructure, equipment and programming, pending the results of a panel review.

• Providing $1 million over two years to the Canadian arm of the International Association of Fire Fighters to help implement a hazardous materials training program.

• Providing $10 million over the next two years to support the Canadian Police Research Centre’s work in science and technology in policing and public safety.

Social Programs

• Supporting measures to help:

• Children by investing an additional $6 million per year to combat sexual exploitation and trafficking.

• Seniors by expanding the New Horizons for Seniors program by $10 million per year to combat elder abuse and fraud, and to expand capital assistance for community buildings, equipment and furnishings.

• Women by providing $10 million per year to Status of Women Canada towards real action in key areas such as combatting violence against women and girls.

• Aboriginal Canadians by taking action to provide training and job opportunities for Aboriginal Canadians, helping First Nations members own their own homes, improving the quality of drinking water and enhancing the Aboriginal Justice Strategy.

• Establishing the Canadian Mental Health Commission, with $10 million over the next two years and $15 million per year starting in 2009–10. This commission will lead the development of a national mental health strategy.

Infrastructure

Budget 2007 makes a historic investment of more than $16 billion over seven years in infrastructure—bringing federal support under a new long-term plan for infrastructure to a total of $33 billion, including the funding provided in Budget 2006. This historic investment will be dedicated to things that matter such as roads and highways, public transit, bridges, sewer and water systems, and green energy. The plan provides greater predictability, flexibility and accountability, and makes an important contribution towards the economy, the environment and our energy needs. Initiatives include:

• Transferring $2 billion per year to municipalities from 2010–11 to 2013–14 by extending the Gas Tax Fund transfer—for a total of $8 billion. This money will be used for municipal priorities including roads, public transportation and water.

• Allocating $6 billion in new funding to the new Building Canada Fund, investments in gateways and border crossings, and the national fund for public-private partnerships, which will leverage private capital to maximize the impact of the Government’s investments.

• Providing each province and territory with an additional $25 million per year, for a total investment of $2.3 billion over the next seven years, to support investments in national priorities throughout the country. These investments include trade-related infrastructure like gateways, roads, highways and other transportation facilities.

• Strengthening capital market enforcement with better resources to tackle cases of fraud and stronger collaboration with provincial authorities. Appointing a senior expert advisor to the Royal Canadian Mounted Police to help develop and guide the implementation of a plan to improve the effectiveness of the Integrated Market Enforcement Teams.

• Encouraging older workers to stay in the labour market by permitting phased retirement. This would allow an employer to simultaneously pay a partial pension to an employee and provide further pension benefit accruals to the employee.

• Increasing the age limit from 69 to 71 for converting a registered retirement savings plan (RRSP) to strengthen incentives for older Canadians to work and save.

Restoring Fiscal Balance for a Stronger Federation

Budget 2007 takes historic action to restore fiscal balance in Canada. A restored fiscal balance will ensure the provinces and territories have the means to build and provide things that matter to Canadians. When the provinces and territories invest in health care, post-secondary education, modern infrastructure, child care and social services, all of Canada is stronger.

The Government is investing an additional $39 billion over the next seven years. This puts all major fiscal arrangements on a long-term, principles-based track to 2013–14. Major initiatives to restore fiscal balance in Canada include:

• Renewed and strengthened Equalization and Territorial Formula Financing programs that provide $2.1 billion more in the next two years from the federal government to eligible provinces and the three territories.

• A commitment to a fiscal capacity cap to ensure that Equalization payments do not unfairly bring a receiving province’s total fiscal capacity to a level higher than that of any non-receiving province.

• Fairness through a commitment to equal per capita cash support for the Canada Social Transfer and the Canada Health Transfer, as they are renewed.

• An $800-million increase in annual support for post-secondary education for a total annual transfer of $3.2 billion to the provinces and territories by 2008–09. This represents a 40-per-cent increase in total transfer support for post-secondary education.

• An investment of $250 million per year starting in 2007–08 to provinces and territories for the creation of new child care spaces.

• New and long-term funding of $500 million per year starting in 2008–09 for labour market training to help Canadians get the training they need through new long-term arrangements.

• More than $16 billion over seven years—including an extension of the Gas Tax Fund for municipalities—to fund infrastructure projects that matter to Canadians like roads and highways, public transit, bridges, sewer and water systems, and green energy.