OTTAWA - Finance Minister Jim Flaherty's new budget offers few big-ticket items but serves up a few surprises, making a virtue out of thrift.

While the budget offers no new taxes and no major tax cuts, it introduces a brand new tax-free savings account, breaks for seniors, $400 million to hire 2,500 new police officers and $500 million for public transit infrastructure.

But perhaps more important than what is included in the budget is what's missing. There appears to be no 'poison pill' item that the Liberals will reject, and Stephane Dion suggested that his party would not vote against the document when it comes before the House of Commons for a vote on March 5.

MPs will debate the budget in the coming days with the opposition parties getting their chance to propose amendments before the final vote on Tuesday.

Budget bills are considered matters of confidence, meaning the government would fall and an election would be triggered if it failed to pass.

After the release of the budget, the New Democratic Party and Bloc Quebecois both said they would reject the plan. But without the Liberals voting against it, the budget is expected to pass.

The centrepiece of the document, and one of its few surprises, is a new tax-free savings account that will allow Canadians to invest $5,000 per year, with the freedom to make withdrawals at any time, for any purpose. The income earned in the account is tax free, including capital gains.

The fund is the first of its kind and appears aimed at winning votes among middle-class Canadians who have the ability to put money away.

"Some say we should not have provided tax relief for individuals, families, workers and seniors,'' Flaherty told the Commons in his budget speech.

"They call it 'blowing the surplus.' Well, Mr. Speaker, it takes a certain kind of Ottawa politician to view giving people their hard-earned money back as 'blowing the surplus.'''

The fiscal plan also:

  • Provides $300 million to help Atomic Energy of Canada to develop Candu nuclear technology and support safe operations at the Chalk River plant;
  • Provides $440 million for Research and Development;
  • Allows pensioners to income-split for the first time;
  • Provides $400 million for 2,500 new front-line police officers.

Far and away, the biggest spending commitment in the budget is the $10.2 billion that will go towards knocking the debt down to $457 billion.

The 400-plus page document is laced with references to what the federal government did in the last budget and the fall fiscal update -- when they spent $60 billion on tax relief -- and ways those promises and pledges will carry through the 2008-09 period.

Flaherty said the lack of big spending in this budget reflects the current economic climate.

He said the government is running surpluses and paying down debt and reducing taxes, and inflation and interest rates are low. But he added that "Canada is not an island" and factors such as the slowing U.S. economy mean prudence is necessary.

"Meeting these challenges is critical. Not just for our country, but for our families," Flaherty said.


The feds will also spend $500 million on public transit infrastructure, most of which will be spent in Montreal, Toronto and Vancouver -- cities where no Conservative MPs were elected and where the Tories are desperate to gain ground.

The projects which will receive the lion's share of the funding are the Evergreen Light Rapid Transit System in Vancouver, the re-establishment of a rail link between Peterborough, Ont. and Toronto's Union Station, and new equipment and upgrades to the Aeroports de Montreal.

Green initiatives

The budget also sinks $250 million over five years into "developing innovative, greener, more fuel-efficient vehicles."

On reducing greenhouse gases, the fiscal plan sets out $250 million for a carbon capture and storage demonstration project, and research on the potential for carbon storage in Nova Scotia.

But it puts an end to the rebate program for fuel-efficient vehicles that attracted so much attention in the 2007 budget.

The two-year program will not be extended beyond 2008.

Aaron Freeman, policy director for Environmental Defence, told the Conservatives seem to have no clear direction on the environment.

"Even their shiny bauble from last year is not going to be continued," he said, referring to the rebates.

"It's hard to know where this government is going on the environment. You had water and Great Lakes protection in the Throne Speech and yet there's nothing in this budget to back it up."

There is some positive news for the environment, however. Freeman said the announcement of $500 million in transit spending is a good thing, as is $113 million that will go towards protecting consumers from toxins in products.

Overall though, he said the Conservatives don't seem to be making the environment a priority.


The budget also has a number of tidbits designed to develop the "best-educated, most-skilled and most flexible workforce in the world," according to the document.

Students will benefit from the following measures under the budget:

  • A $350 million grant program in 2009-10, rising to $430 million by 2012-13, that will reach 245,000 college and undergrad students;
  • $123 million over four years starting in 2009-10 to update the Canada Student Loans Program;
  • Increases to the length of time Registered Education Savings Plans can remain open, from 25 to 35 years;
  • The creation of a new $25 million Canada Graduate Scholarship award for top doctoral students.


Seniors, especially those on fixed or low incomes, are expected to receive half of the benefits from the new tax-free savings account. They will be able to split their incomes for tax purposes for the first time.

"But we can do more to support our seniors. Today, we are increasing the Guaranteed Income Supplement exemption to $3,500, from the current maximum of $500. This will benefit low and modest-income seniors who choose to continue working," the budget states.