8 things to watch for in today's federal budget

Today's federal budget is expected to include billions in cuts, although Finance Minister Jim Flaherty says the spending changes will be modest. Here are eight elements to watch for in the 2012-13 budget.

Conservative government takes aim at spending

Today's budget is expected to hold billions in budget cuts, although Finance Minister Jim Flaherty says spending changes will be modest. (Sean Kilpatrick/Canadian Press)

While Prime Minister Stephen Harper has made a habit of avoiding pre-budget leaks, he and his cabinet have made a point of telegraphing what to expect. Their mantra — and what they believe is a key part of their success — is that they tell voters what they'll do and then they do it.

With an estimated deficit of $33.3 billion and a promise from the government to balance the budget by 2014, here are eight elements to watch for in today's budget.

1. Old Age Security

Harper lit a firestorm in a speech he gave in front of an audience of international business leaders in Davos, Switzerland, in January when he said the Canadian government would be looking at making Canada's retirement income system sustainable. His staff were prepared with Finance Department numbers showing a bulge in costs as baby boomers hit age 65. Finance Minister Jim Flaherty is expected to use the budget to outline changes to OAS, possibly by raising the eligibility to 67 instead of 65, but the actual change won't come until several years after this budget.

2. Research and development

Harper also said in Davos that Canada has to change the way it invests in research and development. The government says Canada is one of the world's most generous with R&D funding, spending almost $12 billion a year, but the private sector isn't delivering results to match that investment. Minister of State for Science and Technology Gary Goodyear says the National Research Council, which now gets $700 million a year, could see major changes. A report last fall by business leader Tom Jenkins also said the complicated SRED tax credit system needs to be streamlined to make it easier to apply for funding.

3. Defence 

CBC's live coverage of Budget 2012

Get details of today's federal budget first at CBCNews.ca, on CBC News Network, CBC-TV and CBC Radio or on your mobile device or iPhone and iPad via the CBC News App.

Look for CBCNews.ca's live budget page at 2 p.m. ET with a live blog and livestreaming video of Power & Politics' pre-budget special. At 4 p.m. ET, find full budget details plus streaming video of Finance Minister Jim Flaherty's speech in the House of Commons plus a livestream of CBC News special coverage with chief correspondent Peter Mansbridge.

Stay with CBCNews.ca for live chats during and after the budget speech and for more coverage on Power & Politics with Evan Solomon  from 5 p.m. to 7 p.m. ET.

Watch to see how much the defence budget is cut with the Conservatives having sold themselves as the party that cares about the military. The government has increased the department's annual budget by $6 billion over the six years since it took office in 2006, so it is a department seen as having room to cut. It's likely immediate cuts will be on the staffing side and to the number of full-time reservists. Plus, with most soldiers back from Afghanistan and the mission in Libya over, there will be fewer operational costs on the books.

4. Foreign affairs

The government has been shifting where it spends its money on diplomacy over the past six years, closing some embassies and opening new trade offices, so watch to see whether any missions will be closed. And the Canadian International Development Agency, which operates independently from Foreign Affairs but doesn't have separate enacting legislation, has been a target for a government trying to make aid more effective. There's a chance it will get wrapped into the Department of Foreign Affairs, but more likely spending will be cut from other budgets, like staff travel to projects they're overseeing in developing countries.

5. Public service

Treasury Board president Tony Clement, who's like the government's chief operating officer, says the Conservatives won't break any collective agreements with public service unions, and he's hoping a lot of the jobs the government cuts will be through attrition or moving around civil servants who want to stay in the bureaucracy. But Harper has said public service pensions aren't sustainable at their current levels, and public service workers will be expected to shoulder a greater burden of their retirement costs.


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6. Aboriginal funding

The Assembly of First Nations has said it needs $500 million in the budget to bring on-reserve schools up to the same standards as other Canadian schools. And after weeks-long controversy over the state of housing in Attawapiskat, followed by a gathering in Ottawa to "re-set" the relationship between the Crown and First Nations, expectations will be high.

7. Immigration

Immigration Minister Jason Kenney has been tailoring his announcements to the business community lately, extolling the changes he's made to the immigration system that make it easier to hire skilled foreign workers to fill labour gaps. This has little to do with the federal budget, but Kenney will be on-hand to sell it as good for the Canadian economy.

8. Health

The Conservatives have promised not to cut transfers to the provinces, including health funding. While the current funding agreement doesn’t expire until 2014, Flaherty shocked the provincial and territorial finance ministers when he gave them the take-it-or-leave-it details of the new agreement in December 2011: health funding will continue to increase by six per cent a year until 2017. Starting in 2017, funding will be tied to nominal GDP, although the federal government is guaranteeing a minimum increase of three per cent. Nominal GDP is the monetary value of all goods and services produced within the country annually, including inflation.