Budget cuts won't leave provinces short, Flaherty says

Changes to Old Age Security won't leave the provinces short of cash, Finance Minister Jim Flaherty told CBC News today as cabinet ministers aimed to sell the federal budget to Canadians.

Pennies number in billions, finance minister tells CBC News

Finance Minister Jim Flaherty delivers his first post-budget speech in Toronto 18:31

The federal government will make sure changes to Old Age Security won't leave the provinces short of cash, Finance Minister Jim Flaherty told CBC News today.

Speaking to CBC's Heather Hiscox, Flaherty said the government will compensate the provinces for social assistance needed to cover a change to the age at which Canadians qualify for OAS. The budget presented Thursday lays out a gradual increase to the age of eligibility, from 65 to 67, starting in 2023.

"If going out to 2025, 2026, there's more social assistance pressure on the provinces at that time, when the change is made, 65 to 67, then we will  compensate them for that," Flaherty said.

Cutting over 3 years

The idea of spreading cuts to annual spending over a three-year period can be a tricky concept when you are talking about billions of dollars.

Think instead about a household budget. Let's say Fatima spends $1,000 a year. So, she has an annual budget of $1,000.

She decides that she is spending too much, and she wants to get her spending down to $900 a year. But she wants to do it gradually, so she starts by cutting $20 in the first year. In the second year, she plans to cut spending by a further $30 ($50 less than before she starting cutting), and in the third year she plans to cut her spending by a further $50.

By the end of the third year, she has cut her spending by $100 a year.

"But realize, this is a social program. This is not a pension program. This has nothing to do with the Canada Pension Plan. This is for relatively poor people at that stage in their lives, and there will be no consequences for them."

Conservative cabinet ministers fanned out across Canada on Friday to sell the budget directly to local business communities, missing the first day of debate on the budget in Parliament. In the House of Commons, NDP finance critic Peter Julian kicked off the debate by promising to read emails and other messages from Canadians. As the first speaker from the Official Opposition, Julian has unlimited time for his speech.

Pennies pitched for charity

Flaherty says the government made a difficult decision when most governments are afraid of making difficult decisions.

"It's easier, you know, to say we'll do nothing and we'll leave it to another government [on] another day to do this," he said.

"But we're doing this because we're looking ahead and we're saying this is what Canadians can afford over the longer term, it will make sure we have balanced budgets.... Not only tomorrow morning, but looking out to 2020 and beyond."

A budget measure to stop producing the penny, which costs more to make than its monetary value, caught the attention of many Canadians. Flaherty says he keeps his pennies at home in a jar and he's going to give them to a charity. 

"You know, there are billions of pennies out there, there's a lot of money out there, and they're a nuisance to most of us, of course, and they're on our dressers at home and our kitchens and countertops and so on. So let's get together and give them to charity," he said.

Flaherty criticizes Ontario

Flaherty, speaking in Toronto Friday, criticized the Ontario government for its recent budget and its track record since Liberal Dalton McGuinty took over the premier's office. Flaherty was the province's finance minister from February 2001 until April 2002, and his wife, Christine Elliott, is a Progressive-Conservative member of the Ontario opposition.

"Quite frankly, Ontario's spending mismanagement is a problem for the entire country because of the size of the economy in the province of Ontario," he said.

"They certainly have no one to blame but themselves. We are transferring record sums — $19.2 billion this year to the province of Ontario, which is a 77 per cent increase from the time we became government in 2006."