Ottawa | Reuters — Canada’s Conservative government, seeking re-election this year, delivered a federal budget Tuesday that promised a slim surplus despite the oil price crash, while offering goodies to seniors and small businesses and boosting security spending.
It will mark Canada’s first surplus in eight years, accomplished with the help of the sale of assets including General Motors shares. The government also cut some of the cushion set aside for economic shocks.
The budget is “written in black ink,” Finance Minister Joe Oliver told Parliament.
The Conservatives, seeking a fourth straight election win in October, have portrayed themselves as strong economic managers.
Polls show them lacking enough support to win another majority, needed if they want to be sure not to be brought down by the two main parties to their left, Justin Trudeau’s Liberals and Thomas Mulcair’s New Democrats.
The budget, which includes tax cuts, could bind opposition parties’ hands by leaving small surpluses, ranging from $1.4 billion for the fiscal year that started on April 1 to $2.6 billion for 2018-19. It estimates a $2 billion deficit for 2014-15.
In order to fund major election promises, their opponents may have to look at increasing taxes, reallocating spending or returning to deficit, leaving them open to attack from the Conservatives on these issues in the upcoming campaign.
To combat the 2008 financial crisis, the Conservatives ran massive deficits, ending a string of surpluses started by the Liberals. The Conservatives have gradually reduced those deficits.
But to help balance the books, Tuesday’s budget reduced a traditional $3 billion annual contingency for unexpected problems to $1 billion.
“From a financial market perspective, ideally you want a higher cushion than that, but I like the fact that they used it,” said Laurentian Bank Securities assistant chief economist Sebastien Lavoie.
A $2.2 billion boost from asset sales also helped push this year’s budget into surplus.
The budget entrenched major family tax cuts announced last year and included a new reduction in the small business tax rate to nine per cent in 2019 from 11 per cent.
It also reduced the amount of money seniors have to withdraw annually from their registered retirement income funds, lowering the tax they will have to pay.
Other measures likely to prove popular with seniors and investors include higher contribution limits for tax-free savings accounts.
Oliver pledged more money for the military and security agencies, including the Royal Canadian Mounted Police to help combat threats following the killing of two soldiers last year on Canadian soil. But much of the planned spending will be deferred to future years.
“When there’s a limit imposed by a spectacular fall in the price of oil, you can’t do everything. That’s the reality. You have to make choices,” Oliver said.
— Randall Palmer and Leah Schnurr are a bureau chief and reporter, respectively, for Reuters in Ottawa.