WAKEFIELD, Que. – Finance Minister Jim Flaherty says Canadians shouldn’t anticipate any new direction from him in the upcoming throne speech in October, but should expect him to be true to his word that he’ll balance the budget in 2015 “without doubt.”
While the Harper government is getting ready to reset the agenda in the run-up to the 2015 election campaign in October, Flaherty told reporters Wednesday his focus remains eliminating the deficit in 2015, adding that he’ll do what it takes to achieve that goal.
And if it is achieved, the minister said the government could introduce partial income splitting during that year, fulfilling a promise Prime Minister Stephen Harper made during the 2011 election campaign.
“I would hope to, but we’ll have to see,” he said. “We’ll have to see how the economy in Europe does, how the economy in Asia does, how the economy in the United States does, what kind of growth we have in Canada, whether we’re over two per cent or less than two per cent. As you know we fulfil our campaign commitments and we’re committed to them.”
The Conservatives made expanding income splitting beyond pensioners a key campaign promise in 2011, along with doubling the original $5,000-a-year limit on contributions to tax free savings accounts. (The contribution level for 2013 was raised to $5,500.)
But both came with a catch: It would only happen once the books are balanced.
Income splitting, if adopted, would allow two-member households with minor children to share up to $50,000 of their income in order to lessen the tax burden on the top earner. The government estimated it could reduce the tax bite on almost two million families who qualify by $1,300 annually on average, while costing Ottawa’s treasury $2.5 billion.
The comments suggest the Conservatives would like to be able to move on the tax-saving measure in the spring 2015 budget preceding the expected fall election, but might hold off full implementation if it risks putting the budget back into the red.
The proposal is controversial, however, as well as likely popular with middle-class families.
A C.D. Howe Institute report on the proposal argued that 85 per cent of households, particularly single parents, would gain nothing. As well, it estimated 40 per cent of total benefits would go to families with income above $125,000, who could gain up to $6,400 from Ottawa, with more savings potentially coming from the provincial tax bill.
Flaherty was reappointed as finance minister in July after his office made it clear he intended to stay on until the deficit, expected to run at above $18 billion this year, is eliminated. There had been speculation that Harper was considering a change in the top cabinet portfolio if Flaherty, who has been in poor health due to a rare skin condition, was not prepared to run again.
The minister has made getting the government’s books in order an almost personal cause celebre in the past few years, much as the Liberals’ Paul Martin did in the 1990s.
On Wednesday, prior to entering a day of policy discussions with invited business leaders and academics at the rustic Wakefield Mill Inn outside of Ottawa, Flaherty again made clear his obsession with the deficit.
“My staff a couple of Christmases ago gave me a stamp … which simply says ‘No’. I intend to use it a lot in the next few months,” he said of any suggestions the throne speech in October will result in significant new spending measures.
“We are going to stay the course; we are going to balance the budget without doubt in 2015.”
Asked if that might entail further cutbacks, he said it was unlikely at this stage but that “we will do what it takes.”
Flaherty did say he will find sufficient funds to help in the cleanup and recovery from twin disasters in June — the Lac-Megantic train derailment and the Alberta floods — saying there was enough room in the budget for the unexpected expense.
On the housing front, Flaherty said he is monitoring the situation but does not plan any further interventions.
After slowing considerably in response to the government’s crackdown on lending practices and mortgage rules last July, Canada’s housing market has of late shown signs of reaccelarating, although many economists still believe the boom years have ended.
Flaherty pronounced the current market nationally as “balanced,” with the possible exception of the condominium sub-markets in Toronto and Vancouver.
“There are some bumps along the road in Toronto and Vancouver in particular there in the condo markets, but overall I’m satisfied that the measures we’ve taken over the past several years have adequately calmed the markets,” he said.