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Budget Documents Saturday, Feb. 4, 2006


Two budgets, different worlds
Ottawa faced with new reality compared with last federal plan

By TERRY WEBER
Globe and Mail Update

When Finance Minister Paul Martin delivered Canada's last formal budget, the world was a different place.

The economy was racing along and the prospect of war and recession seemed - if not impossible - at least highly unlikely.

Then Sept. 11 hit.

Department of Finance documents for the February 28, 2000 Budget

With the hijacking of four commercial airliners in the United States, priorities around the world shifted dramatically.

Those changes are likely to surface in the next federal budget, to be unveiled in Ottawa in early December. Issues like national security and the sinking economy - interest rate cuts have continued unabated throughout the year in an effort to stimulate growth - are likely to grab the spotlight.

But, when the last budget was unveiled on Feb. 28, 2000, tax cuts and spending on health care, education and research initiatives - aimed at stemming the country's so-called brain drain - took centre stage.

In terms of new spending, Ottawa earmarked $13.3-billion in new money, spreading it over areas including health care, education, research and longer parental leaves.

The provinces were given immediate access to $2.5-billion in increased transfer payments for health care and post-secondary education.

The budget also put an emphasis on research funding, putting forward $900-million over five years to fund 2,000 new research chairs across Canada in a bid to attract and keep the country's top talent. The Canadian Foundation for Innovation also got an extra $900-million.

For new parents, the budget lengthened the allowable time for parental leave under unemployment insurance legislation, extending it from six months to a year. Ottawa also made it easier for parents to get the leave by lowering the number of hours worked in a year to collect the benefit.

In the area of border security - a hot button issue since the September terrorist attacks in the United States - the federal government allocated $87-million over three years to Canada Revenue to modernize its processes at the border.

Some funding was also restored to the Department of National Defence, the RCMP, the Coast Guard and Citizenship and Immigration. At the time, defence officials said the extra money would allow them to head off the possibility of having to layoff soldiers.

The defence department got a cumulative total of $1.7-billion in new money in the last budget, with the funds running through to 2003. The defence budget would total about $9.6-billion in 2002-2003, according to the budget. That compares with $12-billion when the Liberals first took office.

Similarly, the Department of the Solicitor-General got a cumulative $811-million in new spending over three years, with most being earmarked for the RCMP.

In total, Ottawa also said it would cut about $58.3-billion in personal and corporate taxes and employment insurance relief over five years.

By 2004, the federal government proposed eliminating a 5-per-cent surtax on higher income Canadians; lowering the middle tax bracket rate by three points to 23 per cent and boosting the tax-free zone to $8,000 from $7,131.

By 2005, personal taxes were to be reduced by an average of 15 per cent for all taxpayers, according to the last budget. Full indexation of the personal income-tax system was also restored retroactive to Jan. 1, 2000.

For corporate Canada, the budget called for the general corporate income tax rate to fall to 21 per cent from 28 per cent over five years, with the first cut coming on Jan. 1, 2001.

The government said the cuts will mean that the combined federal-provincial corporate tax rate - including both income and capital taxes - would drop to an average of 40 per cent by 2004 from 47 per cent.


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