2012 FEDERAL BUDGET - $5.2 BILLION SPENDING SLASH
From Old Age Security reform to pensions for public servants and MPs, the Conservative government’s 2012 budget is billed as an effort to make hard choices now so that federal programs and benefits are sustainable over the long term.
At $5.2-billion, the size of the budget’s planned annual spending cuts are slightly larger than the $4-billion Ottawa planned last year, but less than the $8-billion figure the government floated earlier this year.
It is a level of cuts that will neither calm union fears nor satisfy deficit hawks.
Sweeping in scope, the budget includes expected changes to boost jobs through immigration, innovation and skills training. It also finally answers the question of who will be affected by changes to curb the cost of Old Age Security.
All Canadians who are 54 and older by this weekend will not be affected by the change to OAS, a benefit worth more than $6,000 a year.
That means most of Canada’s baby boomers will be collecting OAS by the time eligibility age for the retirement benefit is raised to 67.
The government says the changes are needed so the program – and Ottawa’s bottom line – are not overwhelmed by the large baby-boom generation of Canadians born between 1946 and 1964. Yet all but the tail end of this cohort will be protected from the higher eligibility age, which will be phased in between 2023 and 2029.
“Canadians are living longer and healthier. There are fewer workers to take their place when they retire. Canada has changed. Old Age Security must change with it,” Finance Minister Jim Flaherty told the House of Commons Thursday. “In this budget our government is looking ahead not only over the next few years but also over the next generation.”
The long-rumoured change is already raising concerns about generational fairness, as well as the impact it will have on Canada’s poor.
It also applies to the Guaranteed Income Supplement, a benefit geared to low-income Canadians that is administered as an add-on to OAS. Ottawa is promising to compensate provinces for the fact that this change will impose two years of additional welfare costs for Canada’s poor, though welfare is generally less generous than the combination of federal OAS and GIS.
The budget is called “Jobs, Growth and long-term Prosperity,” yet it outlines plans to cut 19,200 positions in the federal public service – including 600 executive jobs. These cuts can be expected to set in play a year of internal upheaval, primarily in Ottawa-Gatineau.
While a few programs and bodies will be shut down entirely – including the National Round Table on the Environment and the Economy, the Katimavik youth experience program and Assisted Human Reproduction Canada – the budget is largely vague on where savings will be found.
Further detail on specific cuts will likely emerge from departments in the coming weeks.
The budget’s release carried little of the intense political drama of previous years when the Harper government had a minority of seats in the House of Commons and needed opposition support on the fiscal plan to avoid being forced into elections.
Nevertheless, new Opposition Leader Thomas Mulcair – who was chosen as NDP Leader over the weekend – wasted little time in blasting Mr. Flaherty's fiscal plan.
“The Conservatives were elected on a promise to create jobs, instead they're slashing health care, they're slashing pensions,” he said. “In the long term, the continuation of these Conservative policies will leave the greatest economic, ecological and social debt in our history, in the backpacks of future generations.”
Interim Liberal Leader Bob Rae was equally critical, calling the budget “very harmful to the nature of the federation because so many and much of the costs are being dumped on the provinces.”