OTTAWA- The Conservatives unveiled a budget Tuesday that offered small measures for a variety of causes, including $2.3 billion in new spending, as the government seeks to cut down a deficit that now stands at $40.5 billion.

In his prepared speech, Finance Minister Jim Flaherty said the budget offered a choice between "stability and uncertainty" -- a shot across the bow for opposition parties. The Conservatives have said a spring election would endanger Canada's still-fragile economy.

There are no new taxes in the budget. It also does not roll back corporate tax cuts, ignoring a key demand from Liberal Leader Michael Ignatieff.

Flaherty said opposition calls for "massive tax increases" would "stall our recovery, kill hundreds of thousands of jobs and set families back."

"Leadership is about finding a balance between needs," Flaherty said. "It is about staying focused on our number-one priority -- securing our economic recovery, creating jobs and growth, now and in the years to come. We believe that the honourable members in the Opposition will recognize that our plan addresses practical concerns with responsible solutions."

Here are the highlights of the budget's tax-relief initiatives:

  • Family Caregiver Tax Credit: A 15 per cent non-refundable credit on $2,000 for caregivers who are spouses, common-law partners and children who are minors.
  • Children's Arts Tax Credit: A credit for up to $500 of eligible fees per child, starting this year.
  • Volunteer Firefighters Tax Credit: Tax relief for volunteer firefighters who have performed at least 200 hours of service.

Support for the budget hinged on NDP Leader Jack Layton, the only opposition leader to engage in pre-budget talks with Prime Minister Stephen Harper.

Layton had five policies he wanted the government to follow: pension reform, cutting the sales tax on home heating, relief for low-income seniors, significantly raising the number of doctors working in rural areas, and boosting the EcoEnergy Retrofit program.

The budget offers measures linked to only three of those policies:

  • Seniors who largely depend on Old Age Security and the Guaranteed Income Supplement will get annual benefits of up to $600 for singles, and $840 for couples, for a total cost to the government of $300 million per year.
  • An investment of $400 million over the next two years for the EcoEnergy Retrofit program, which provides incentives for Canadians to make their homes more energy efficient -- however, full details were not provided in the budget.
  • Forgiving student loans for doctors and nurses who agree to work in Canada's rural areas -- up to $8,000 per year to a maximum of $40,000 for doctors, and up to $4,000 per year for a maximum of $20,000 for nurses.

With no action on improving the Canada Pension Plan or cutting the sales tax on home heating, among other measures, the NDP indicated it will not support the budget, a decision that will likely trigger an election.

Many small measures

However, Don Drummond, economic adviser to TD Bank, said the budget contains many small measures "for virtually every cause out there."

"The sheer volume of measures surprised me, especially since the minister said he wasn't going to give a lot of goodies. They're typically very small measures, but they're left, right and centre," he told CTV.ca.

"You might call a budget an education budget, or an innovation budget, but you can't really brand this because it's so diffusive," he added. "It has the common focal of driving towards that balanced budget, but measures-wise, it's spread all over the place."

Just a few of those measures include giving a total of $10 million to celebrations for the 100th anniversaries of the Calgary Stampede and Grey Cup, $60 million to CBC and Radio-Canada for new programming in 2011-2012, and $37 million per year for three federal research granting councils.

But the budget still has a few major spending initiatives, including:

  • Funding $100 million over the next two years for research into clean energy
  • In addition to the EcoEnergy program, devoting $252 million towards regulation activities addressing climate change and air quality
  • Renewing the Chemicals Management Plan with $200 million over two years
  • Funding $150 million toward the construction of an all-season road linking Inuvik and Tuktoyaktuk, which would complete the Dempster Highway

It also offers millions of dollars for Canada's "digital economy," in a strategy for "accelerating adoption of information and communications technologies at small and medium-sized businesses, preparing students for careers in the digital economy, and building Canada's digital content through the Canada Media Fund."

As part of that strategy, it offers $100 million per year to the Canadian Media Fund, to spur growth of digital content "across multiple platforms." It also gives $80 million over three years to the Industrial Research Assistance Program, so small- and medium-sized businesses can quickly adopt key information technologies with the participation of colleges.

For students expecting to find new jobs in the emerging digital economy, the budget devotes $60 million over the next three years to boost enrolment in relevant programs.

Cutting down the deficit

The budget deficit for this year is expected to be $40.5 billion, down from a record-breaking $56 billion last year.

With Canada's economy recovering from a global recession, and economists estimating real gross domestic product growth of 2.9 per cent in 2011, the government hopes to reach a balanced budget by 2015.

"Clearly, a lot of that is back-end loaded, in a sense that we had some reasonable growth at the end of 2010 and the first quarter looks like it's going to come in quite reasonable," said Drummond.

But the government's plan to cut the deficit also depends on curbing its direct program spending -- and that could be difficult. It went up six per cent each year from 1998 until 2008, then went into the double digits.

The government hopes to keep its direct program spending frozen for the next two years, and then allow two per cent growth.

"Can they keep program spending growth down that low, for that long a period of time? It's never been done in Canada," said Drummond.