Harper's infrastructure plan will trim surplus by $300M, down to $1.6B

OTTAWA -- The Harper government's already shrinking surplus suddenly got even smaller for the 2015 election year -- by $300 million.

Ottawa is now banking on a $1.6-billion surplus for 2015-16, down from its $1.9-billion estimate two weeks ago and only a quarter the size of the $6.4-billion prediction the government announced in last spring's budget.

The new, whittled-down projection factors in the $5.8-billion infrastructure announcement Prime Minister Stephen Harper made earlier this week, the Finance Department said Tuesday.

The vanishing act, meanwhile, means the Conservatives will leave fewer surplus scraps for political rivals to fight over as the country heads into the election.

The government first announced a drop in the surplus Nov. 12 when it delivered its fall fiscal and economic update. It attributed that decline to the unexpected slide in oil prices and Ottawa's new, multibillion-dollar tax and benefit package aimed at families with kids.

This latest balance-sheet adjustment was also connected to a multibillion-dollar government spending plan: a push to upgrade federal infrastructure across the country.

Prime Minister Stephen Harper, who unveiled the big-ticket plan himself on Monday, said the government intended to invest in projects that would create jobs and yield quick results. About $2.8 billion of the total was earmarked to improve historic sites, national parks and national marine conservation areas.

A spokeswoman for the Finance Department said the new spending will not lead the country back into deficit.

"The government remains on track to return to balanced budgets in 2015, with a surplus of $1.6 billion projected that year," Stephanie Rubec wrote Tuesday in an email, while refusing to talk about other potential spending measures in the pipeline.

"The department does not comment or speculate on possible policy actions or discuss what might be under consideration."

The updated budgetary figures released Tuesday project the infrastructure plan to trim surplus predictions by a total of $1.3 billion over the next five years: $300 million in 2015-16; $400 million in 2016-17; $200 million in 2017-18; $200 million in 2018-19 and $200 million in 2019-20.

But in terms of actual spending, the government expects to invest $1.3 billion on the infrastructure package in 2015-16 alone. After that, it will spend $1.7 billion in 2016-17; $800 million in 2017-18; $700 million in 2018-19 and $800 million in 2019-20.

Rubec said accounting standards enabled the government to do this because the cost of infrastructure investments is amortized over the life of the asset.

"As a result, a significant portion of the amount spent in coming years will be accrued beyond 2019-20," she said.

Harper's infrastructure announcement faced criticism for recycling old promises, but the government has countered by saying the majority of the cash represents new funds that had not been previously announced.

The only exceptions are a $500-million investment for schools on aboriginal reserves and $80.5 million for the restoration of the Canada Science and Technology Museum, Rubec said.

Asked why Ottawa chose not to partner with provinces and municipalities, she said the goal of the most-recent plan was to improve federal assets. She added it's in addition to support provided for provincial, territorial and municipal infrastructure, primarily through the $53 billion New Building Canada Plan.

The department was also asked whether the infrastructure plan was intended as a stimulus package to create jobs and kickstart a lacklustre economy.

"Canada is not in recession," said Rubec, who added the projects will raise productivity and long-term growth in Canada.

The incumbent Conservatives have consistently tried to cast themselves as careful custodians of public finances in a world filled with economic tumult.

When he introduced the fall update Nov. 12, Finance Minister Joe Oliver highlighted how Ottawa had pruned federal program spending for four straight years and he insisted that only the Tories' plans for jobs and growth would lead to prosperity.

Among the government measures is a new family-friendly tax and benefit proposal that would eliminate an estimated $27 billion from public coffers over six years. It also prevented Canada from balancing the books before the end of the current fiscal year.

Critics have zeroed in one particular element of the proposal: the controversial, $2-billion-a-year income-splitting plan for couples with children. They argue this would only benefit about 15 per cent of Canadian households.

The income-splitting promise was a main plank in the Conservative's 2011 election platform, although it was strictly contingent on a balanced budget.