BY STEVEN CHASE AND JANE TABER
THURSDAY, JULY 14, 2005 UPDATED AT 3:26 AM EDT
FROM THURSDAY'S GLOBE AND MAIL
Ottawa - The federal Finance Department is warning other ministers' offices that the fiscal cupboard is bare, and they will have to tailor requests for money to fit what's being billed as a productivity budget for next year.
Finance officials met with political staff from federal ministers' offices June 30 to get the ball rolling on planning for the 2006-2007 budget. "The briefing session was basically a large cold shower," a senior federal official said.
The meeting capped a Parliamentary session that saw the minority Liberal government announce spending plans of more than $50-billion, and come under fire from corporate Canada for a lack of leadership on the economy.
Ministers were also warned to be ready for an earlier-than-usual budget, if necessary, since a federal election is expected in early 2006.
Liberal staffers were cautioned not to expect personal income tax cuts in the next budget year because cash is tight.
They heard that this fiscal year's surplus is forecast to be only about $400-million, after $2-billion for federal debt pay-down and allocations for the $4.6-billion spending deal that secured NDP budget support in Parliament.
They were told at the briefing that "productivity is the key" in the next budget, and were informed that Canada has fallen 15 per cent behind the United States in terms of productivity per worker.
The message was: "We're going to deal with [competitiveness] but we're not getting off into any sort of airy-fairy stuff" in the next budget, a senior federal official outside the finance department said.
Officials said the public theme for the next budget will likely be "growth and prosperity," a broader, more user-friendly term that resonates better than "productivity."
Ministers' staff were told that Finance Minister Ralph Goodale still plans for a budget in the regular February-March period but they should be "be ready for an early one if need be."
Prime Minister Paul Martin may want to bring down a budget earlier than usual in anticipation of a federal election expected in early 2006. He has vowed to call an election 30 days after the release of the final report on the Gomery Inquiry into the sponsorship scandal. That report is expected Dec. 15.
Canada's weak productivity performance - there was no growth in 2004 - is a matter of increasing anxiety for policy-makers.
Recently, the federal Liberal government has come under heavy pressure from the Canadian Council of Chief Executives, the Senate Banking, Trade and Commerce committee and others to boost Canada's lagging productivity.
In an interview earlier this week, Mr. Goodale said he plans for a regularly scheduled budget, but "only circumstance and time will tell" if it gets moved up. He said he could envision a budget taking place after an expected January or February federal election.
He said he's targeting productivity as part of a drive to protect Canada's standard of living. "It is clearly an important focus from my point of view. I want to express the end result a bit more broadly ..... than just sort of the narrow economist's definition of productivity."
Corporate Canada tends to blame the tax structure for some of the poor productivity growth.
Mr. Goodale said he believes tax levels are among the ingredients for success, but does not subscribe to the notion that "abraca-tax cut is the total solution to everything."
He said "in due course we will need to deal with the tax question" but said Canada must also be "particularly alert" to three other forms of investment: education and skills training, infrastructure and science and technology research and development. "Those three - human capital, physical capital and innovation - are the real crucial drivers of a more successful economy and higher incomes and a better standards of living for the future."
The government still plans to re-instate corporate income tax cuts promised in the 2005 budget bill but cut from the legislation in order to secure NDP support in Parliament. The legislation could be tabled as early as the fall. the cuts will eliminate the corporate surtax for companies with assets of more than $50-million and lower the general corporate income tax bracket to 19 per cent from 21 per cent.
© Copyright 2005 Bell Globemedia Publishing Inc. All Rights Reserved.
