Finance Minister Joe Oliver used his 2014 fall economic update to challenge the opposition parties — and specifically Liberal Leader Justin Trudeau — over their plans for an already spent federal surplus.
Canada will see a razor-thin $1.9-billion surplus in 2015, Oliver said today, after the Conservatives committed billions to tax cuts announced weeks ago. And that narrow surplus is a number that the Conservatives are already using to argue that only they can keep the country's economy on track.
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In a message that's sure to be repeated through the next federal election, which is set for Oct. 19, 2015, Oliver said the global economy "remains fragile" and the country must "stay the course" to ensure prosperity.
The surplus had been projected to be $6.4 billion next year, but the Conservatives' new targeted tax cuts for Canadians with children and small businesses stripped $5 billion out of it.
Another $500 million in lower spending and higher-than-expected revenue from corporate taxes, GST income and employment insurance premiums was added to bring the surplus to $1.9 billion.
"This is a policy that anyone who claims to care about the middle class should support," Oliver told a Toronto business crowd.
"Yet Justin Trudeau has already announced he would repeal some of our family tax cuts and may repeal the others, tax cuts and benefits that will help Mom and Dad pay their mortgages, their car loans, and clothe their kids. Taking money out of the pockets of middle-class and lower-income Canadians does not sound like a winning platform to me. But hey, that's what he said."
Income splitting allows purchase of '2nd BMW'
Oliver has previewed Canada's return to budgetary surplus in the lead-up to his official update.
The Conservatives made several of their 2011 campaign promises contingent on a return to balanced books, and are now in a position to fulfill those pledges.
The newly added tax benefits, including income splitting for two-parent families with children under 18, and an expanded fitness tax credit, were introduced earlier this fall.
The Conservatives also introduced a small business job credit, which the parliamentary budget officer found would create only 800 jobs despite the $550-million cost.
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Spending the surplus before the budget is even tabled boxes in the opposition parties in the lead-up to the election: neither NDP Leader Tom Mulcair nor Trudeau will be able to propose new spending without facing questions about how much they'd raise taxes or which programs they'd cut to afford their own plans.
Mulcair vowed to fight the government's plan to introduce income splitting, arguing it benefits less than 15 per cent of Canadians.
"It makes no social sense to have a proposal that would help people pay for their second BMW instead of helping public transit in this country," Mulcair said.
Oliver promises cuts help low-income families
Oliver responded to the criticism aimed at the government's income-splitting plan over the past few weeks, namely that it helps mostly high-income families and only those with two parents living together. Between income splitting and the increase to the universal child care benefit, he said, low- and middle-income families benefit too.
"What does all this mean to the over four million Canadian families with kids? Well, every one of them will benefit.… Indeed, every family with children will benefit from these measures, to the tune of $1,140 on average next year," Oliver said.
"I am proud that a significant majority of the benefits will go to low- and middle-income Canadians: 25 per cent to families earning less than $30,000 a year, Oliver said."
Trudeau called the economic update "fundamentally unfair."
"The largest part of it continues to be on income splitting, where you have middle-class Canadians having worked very hard and sacrificed over many years to get us as a government back into a surplus state, and this government is choosing to spend that on 15 per cent of Canadians, among the wealthiest. It's not fair that 85 per cent get absolutely nothing," he said.
Could have had 2014 surplus
The Finance Department also downgraded the Canadian GDP predicted by private-sector economists earlier this fall.
Officials cut the 2014 projection by $3 billion, with a further $16 billion-a-year downgrade for 2015 and beyond, because of falling crude oil prices. The private-sector economists met with Oliver in September, a month before oil prices tumbled.
The Finance Department is now projecting the surplus to grow to $13.1 billion in 2019-20.
The government could have boasted a tiny $300-million surplus this year, despite a projected $2.9-billion deficit, but the new tax cuts will eat up the $3.2 billion in additional revenue and lower spending that would have put it in the black.
The Conservatives also built in a $3-billion contingency fund, which they plan to continue every year for the next five years.