Federal budget cuts 19,000 jobs, boosts energy projects
Published Thursday, March 29, 2012 10:25PM EDT
Last Updated Saturday, May 19, 2012 7:52AM EDT
OTTAWA - The federal public service will be slashed by more than 19,000 jobs over the next three years as the Conservatives use their majority status to move towards a leaner, more efficient government and strive to create jobs and eliminate the deficit.
Finance Minister Jim Flaherty's Federal Budget 2012, released Thursday, proposes $5.2 billion in cuts to departmental spending and includes plans to eliminate the penny, extend the age of eligibility for Old Age Security by two years, and change the retirement age by five years for federal public employees.
"The choices we have made are substantial, they are responsible and, in our view, they are certainly necessary," Flaherty told reporters inside the lockup in Ottawa.
Flaherty made it clear the budget is largely about job creation and unlocking opportunities to sell energy resources to foreign markets -- the track the Conservatives see as the way forward for the economy.
On that front, the budget announced a "one project, one review, " system that would streamline and speed-up approvals for projects such as the Northern Gateway pipeline, which would run from Alberta to the West Coast to feed Canadian oil to the Asian market.
"The booming economies of the Asia-Pacific region are a huge and increasing source of demand, but Canada is not the only country to which they can turn. If we fail to act now, this historic window of opportunity will close," Flaherty said in prepared remarks.
While deep cuts had been rumoured, Flaherty said the government has opted for a more modest path toward balancing the budget.
"I think that fortunately, Canada is in a good situation, relatively speaking," he told CTV's Power Play, moments after delivering the budget in Parliament.
"We don't have to force it, and be draconian and dramatic," he said.
Still, he said that the government is trying to strike a balance, because economies like Greece are still fragile and more financial shocks could be on the horizon.
"I think we have to be prudent, be careful, stay in a moderate place so that we can react if we have to."
The day before Flaherty released the budget -- on the same day he purchased a $139 pair of new shoes to reflect its tone -- he said the plan would include "modest reductions, there will obviously be some consequences to that."
Those consequences come mostly to the "back end" of government departments and won't result in cuts to services, government transfers to the provinces or to individual Canadians in areas such as healthcare, the document states.
In total, about 12,000 government jobs will be eliminated over a three-year period, with another 7,200 jobs eliminated through attrition over the same timeframe, according to the 497-page budget document.
Flaherty downplayed the bloodletting, saying the job reductions and spending cuts are not nearly as drastic as reductions seen elsewhere.
"The spending reductions themselves are moderate, they are hardly in the league of Great Britain, which has had something like four per cent of GDP, hardly in the league of what Paul Martin and Jean Chretien did in the 1990s, but they do put us on the right track to balance the budget in the medium term," Flaherty said.
The budget sets out a timeline to balance the books, projecting a $21-billion deficit for this year that will turn into a $3.4-billion surplus by 2016.
The document itself suggested the short-term pain will result in long-term gain.
"It is expected that the proposed reduction in employment, which represents only 0.1 per cent of all jobs in Canada, will be marginal compared to the expected job growth in the wider economy," stated the document.
Fred O'Riordan, an economist with Ernst and Young, told CTVNews.ca the job cuts sound worse than they are. He said many will be achieved through attrition and transfers, and noted that the Conservatives have pledged to honour collective bargaining agreements already in place that cushion the blow for laid-off workers.
"You won't see the National Capital Region go into a general depression in the housing market or the retail sales market or anything like that," he said.
"Economically speaking I don't think the impact is going to be all that difficult."
Cuts and cost reductions
Following are other some additional cuts and cost reductions set out in the budget:
- The Public Appointments Commission will be eliminated;
- Some official residences abroad will be sold, for an expected savings of $80 million;
- The National Round Table on the Environment and Economy will be eliminated;
- The Katimavik program, which allows young people to experience life in different communities, will be eliminated;
- Human Assisted Reproduction Canada will be eliminated;
- $378 million will be cut from foreign aid spending.
And there were budget cuts across all departments, ranging from a 1.1 per cent reduction for Veterans Affairs to a 16.8 per cent cut at Flaherty's Department of Finance. Most fell in the range of between five and 10 per cent and will be accomplished through measures such as streamlining services between similar departments, reducing vehicle fleets and cutting travel budgets.
The Department of National Defence felt the deepest cut in terms of dollars and cents, with a $326-million reduction, though at only 7.4 per cent of the department's entire budget, the reduction was less severe than others.
However, the Canadian Coast Guard will receive $5.2 billion over the next 11 years to strengthen its capabilities.
The budget also revealed one of the few storylines that was kept entirely under wraps until reporters were allowed into the budget lockup -- the elimination of the penny by fall 2012.
Doing so will save the Royal Canadian Mint $11-million per year in production costs for the penny, which costs 1.6 cents per coin, to manufacture.
The Mint is also switching to a less-expensive metal composition for all the coins it produces, for further savings.
Changes to OAS
Though the government had hinted at its planned changes to Old Age Security (OAS) ahead of time, the change to the age of eligibility, from 65 to 67, was confirmed in the fiscal blueprint.
The changes will see the age of eligibility for OAS and the Guaranteed Income Supplement change phased in beginning April 2023, with full implementation by 2029. Anyone who is 54 or older, as of March 31, 2012, will not be affected.
"We're also making a very important change next year so that persons turning 65 may choose to delay receiving the benefits for up to five years which will give them a chance to receive higher benefits if they choose to continue working," Flaherty said.
He explained that the changes reflect Canada's changing demographics as people live longer, and work longer than in the past.
In a move apparently intended to show the Conservatives are serious about cutting the fat in the public sector, they are also bumping the retirement age for federal public sector employees by five years, from 60 to 65.
And unlike the gentle phase-in period for OAS changes, the new retirement age will be in effect for new employees who join the service next year, though the announcement only merited one paragraph in the document and no other details were provided.
In a move that will likely please Canadians who head to Buffalo, Washington or other U.S. cities to shop, the budget proposes a plan to bring Canada's cross-border tax exemptions in line with those in the U.S., starting in June of this year.
Under the proposal, Canadians who travel to the U.S. for 24 hours or more will be able to bring back $200 worth of goods without paying tax or duty at the border. The current limit is $50.
For those Canadians who travel to the U.S. for 48 hours or more, the limit would increase from $400 to $800.
The change will cost the government $13 million in lost duty by 2012-13 and $17 million in 2013-14, according to estimates.