Economic policy of the Harper government
Encyclopedia
Since its election
to power on January 23, 2006, the Conservative Party of Canada
led by Prime Minister
Stephen Harper
adopted several positions and policies in regards to the economic issues of Canada including various tax cuts, exemptions and credits as well as discussing the issue of fiscal imbalance among provinces and measures to cope with more troubled sectors of the Canadian economy.
.
from 7% to 6% for the first budget and to lower it to 5% by 2011. There were some concerns from activists, that the cut would only benefit the rich. Some retailers have raised their prices to compensate.
Finally, there were also possibilities that some provincial governments take advantage and raise their provincial taxes. During the 2006 election campaign, the Martin
government proposed income tax cuts for lower-middle income earners. The Liberals
have claimed that the GST cut would effectively result in a tax increase for those in the lower-middle income bracket
. The Conservatives argued that the GST cuts would benefit all Canadians, including low-income earners and those outside the workforce who do not pay income tax.
The first GST cut went into effect on July 1, 2006, and no provinces have raised provincial sales tax as of yet. The second cut was later announced in the 2007 Throne Speech and officially confirmed on October 30, 2007 during an economic statement update on the country finances.
and New Democratic
parties and mostly positive reception from the Bloc. The Liberals and NDP voiced disapproval over the Conservatives following through on their election of their design.
, the budget passed third reading without dissent on June 6, 2006 when the members of the Opposition accidentally Economist Yves Fortin has challenged the reasons for the change in tax regime announced by Flaherty and disputes the Harper government assertion that the Trust structure has led to lose of tax revenue because of trust conversions in his research paper. Income Trusts and Tax Leakage: Is there a problem?
Analyst Gordon Tait has also raised concerns about the lack of consultation and misconceptions surrounding the change in tax policy on Trusts in The Inconvenient Truth About Trusts
A December 11, 2006 Income Trust Report by PricewaterhouseCoopers
reviewed the surveys and studies conducted in 2004 and 2005, the economic benefits and impact of income trust
s in Canada. The report concludes that Income Trusts do have a place in Canadian capital markets and the 'Tax Fairness Plan' is unfair to Canadian Investors who hold Trusts in a tax-deferred Registered Retirement Savings Plan
or a Registered Retirement Income Fund
In a year-end interview with the Canadian Press
, Harper mentioned that this was "the toughest decision for the government". The Canadian Press voted the Harper Government and Jim Flaherty 'Business Newsmaker of 2006' for the announcement to tax Income Trusts on Halloween.
Analyst Cameron Renkas refutes the Department of Finance assertion that the United States and Australia have taken action to shut down flow-through structures. In his research paper Digging Deeper he gives a perspective on how the United States taxes publicly traded flow-through entities
and Master limited partnerships
, the US equivalent of Canadian Income Trusts.
In a January 12, 2007 paper Yves Fortin outlines his concerns regarding the claim of tax leakage. Finance Minister Jim Flaherty stated in his October 31, 2006 policy statement "If left unchecked, these corporate decisions would result in billions of dollars in less tax revenue for the federal government to invest in the priorities of Canadians, including more personal income tax relief" http://www.caif.ca/content/TaxLossRecipe.Fortin.pdf but Minister Flaherty has not documented his allegation nor has he cited any research to back up his claim. Mr. Fortin's paper A Recipe For Tax Loss gives several examples on how the tax on income trusts could lead to a loss in government tax revenue, not a gain.
Analyst Dirk Lever wrote on January 15, 2007 "We cannot understand why any Canadians would support double taxation of retirement benefits - it affects all of us eventually". Mr. Lever has also cited several flaws in the Conservative government's policy in his research paper Deep Dive into Tax Issues: Canadian Pensioners Taxed Twice on Canadian Corporate Dividends. In the report Mr. Lever asks:
Special hearings by the Finance Committee commenced January 30, 2007. John McCallum
, the Liberal Finance critic has called on Minister Flaherty to explain the reasoning behind the change in Income Trust Tax policy. In a February 8, 2007 news release John McCallum is quoted "Essentially they released close to a thousand pages of public documents, not one of which brings Canadians any closer to understanding what type of information or calculations led the Minister break his election promise and tax income trusts, either the Minister is in contempt of the committee’s motion or he had absolutely no data from his own department before shutting down the sector and destroying tens of thousands of Canadians’ life savings. The first possibility is disturbing, the second is deplorable." The Conservatives have the support of the Jack Layton
and the NDP on this issue.
In a July 9, 2007 interview on Business News Network
, former Conservative Alberta Premier Ralph Klein criticized PM Stephen Harper
and Finance Minister Jim Flaherty
for their mishandling of the Income Trust issue and for not keeping their word on Income Trust taxation.http://www.youtube.com/watch?v=ocqD1BbpcTo According to the Canadian Association of Income Trust Investors the change in tax rules cost investors $35 billion dollars in market value. http://stockcharts.com/charts/performance/perf.html?$WTIC,$RTEN,$SPTEN,$RTCM,$TSX Stephen Harper specifically promised "not to raid Senior's nest eggs" during the 2006 Federal Election. http://www.youtube.com/watch?v=U9mibZYpVPY
The budget passed 174 to 109 in the House of Commons in first reading. It would later pass the second and third readings in June.
had applauded the budget, as his province would receive over $2 billion dollars in additional equalization payment. However, Nova Scotia
Premier Rodney MacDonald
and Newfoundland and Labrador
Premier Danny Williams
argued that Harper broke a written promise to shield revenues from oil
and natural gas
revenues that the two provinces are receiving; Harper has denied this and accused Williams of misinforming the province http://www.canada.com/nationalpost/news/story.html?id=5a801300-758a-4b5c-9cfc-ad82d2eba899&k=24751. In addition, Saskatchewan
Premier Lorne Calvert
argued that his province will receive no new money and alleged that the Conservatives were favouring Ontario and Quebec at the expense of other provinces, which MP Maurice Vellacott
has disputed. Other premiers including New Brunswick's Shawn Graham
, British Columbia's Gordon Campbell had some reservations. However, Ontario Premier Dalton McGuinty
said that the budget represented "real progress" for his province.
During the second vote on the budget Conservative MP Bill Casey
voted against the budget in protest of the treatment of the 2005 Atlantic Accord on offshore revenues. He was removed from the Conservative Caucus afterwards. Premier MacDonald later urged all his province's MPS to vote against the budget after a letter Flaherty that was published in a Nova Scotia newspaper. 9 of the 11 MPs voted against it in the third reading. After the 2007 passed, the government started to work on a comprise with Nova Scotia to settle the dispute. Many Ontario-based and Western-Canadian columnists have supported Flaherty's budget, citing figures that indicate that the per capital income in Newfoundland and Nova Scotia has improved significantly, at the expense of Ontario, and that allowing the Maritime provinces to keep both equalization payments and resource revenues would hurt Ontario even more. http://www.canada.com/nationalpost/news/issuesideas/story.html?id=e82635f3-84b8-439b-b639-c1d4a36f72f5.
The opposition parties criticized the mini-budget as the NDP leader Jack Layton mentioned that the budget did little for impoverished Canadians
, and that big corporations such as oil companies and major banks will receive hefty tax breaks. The Liberals were critical of the GST cut as being not an efficient tax-relief but did praise the corporate tax cuts. The mini-budget, a confidence motion did pass 127–76 but without support of any opposition party as the Liberals abstained from voting as they did with the Fall 2007 Throne Speech.
, where an individual can deposit up to $5,000 a year. Flaherty said that it is the "single most important savings vehicle since the introduction of the RRSP". Funding was also announced for public transit, infrastructures, hiring new police officers, the reconstruction of Afghanistan, a new Student Grant Program (replacing the Millennium Scholarship Fund) and for the manufacturing sectors. In addition, the government announced the creation of a new independent crown corporation to administer the Employment Insurance System while gas tax rebate fund to the cities was made permanent. 10.2 billion dollars will be spent on the payment of the national debt.
, while criticizing the budget as modest and being "one mile wide" and "one inch deep", said that the party will support the budget due to measures announced surrounding the manufacturing sector as well as environment due to avoiding a spring election. Both the Bloc Québécois
and the NDP announced that they were voting against the budget.
The NDP explained that the budget failed to address the need for average workers while the winners were banks, polluting industries and the well-off. Social programs got one-time commitments while corporate tax cuts were granted for many years. They further mentioned that tax cuts for big business take priority over new spending on the order of 6 to 1. http://www.ndp.ca/page/6216
The Bloc cited that there was insufficient funding for the forestry sector and no major announcements for the province of Quebec.
Ontario Finance Minister
Dwight Duncan
mentioned that the budget came short in regards to the manufacturing sector and told that it was "missed opportunity for Ontario and Ottawa to work together during a tough economic period". Buzz Hargrove
, from the Canadian Auto Workers Union also mentioned that the budget was a step in the wrong direction for the auto industry Quebec Finance Minister Monique Jerome-Forget
also criticized the budget by saying that it does not reflect the priorities for Quebec including the province's forest sector and post-secondary education. The Minister did praised however the permanency of gas tax rebate for the municipalities.
Canadian Taxpayers Federation director John Williamson
mentioned and applauded that the registered savings plan was "very good" for the middle class. Economist Andrew Jackson, from the Canadian Labour Congress
, mentioned however that the plan will give little to the average worker while Don Scott, a taxation specialist, added that the program may incite some investors to contribute less to their RRSP. The creation of the new savings account also had positive reviews from several Canadian newspapers including Le Devoir
, La Presse, The Globe and Mail
and the National Post
. Aaron Freeman, policy director for the Environmental Defence, criticized the government for having no clear direction on the environment making reference to the suspension after 2008 of the tax-rebate program on fuel-efficient vehicles but praised the funding for transit and for the protection of consumers from toxins in products.
Dan McTeague
tabled a Private Member's Bill
that proposed to give parents substantial tax breaks for saving education money; taxpayers who deposited $5,000 into a RESP for their children's post-secondary education would earn a $5,000 tax deduction, similar to the deduction allowed for contributions to a RRSP. Under the Tax-Free Savings Account
, introduced in Conservative Finance Minister Jim Flaherty
's 2008 budget, there was no deduction for annual contributions.
Though McTeague's bill passed through the Canadian House of Commons
on March 5, 2008, after Speaker of the House
, Liberal Peter Milliken
, approved the bill for debate, it is constitutionally decreed that any money measure that does not have royal recommendation, that is, if it doesn't originate from the Crown, is to be considered unlawful. So, any private member's money bill must be regarded as a Motion of Confidence. Flaherty served notice to the House of Commons on March 11 that he would introduce a motion to nullify the bill by including a provision to do so in legislation implementing the federal budget, which is automatically a confidence motion. The RESP bill was the first time since 1840 that the Commons had attempted to force a change to the government's budget.
was possible. Many economists and groups predicted significant deficits after 2009 and for a couple of years and urged Parliament to quickly adopt a stimulus package
to encourage spending. Parliamentary budget officer Kevin Page had forecast a deficit of between 4 and 14 billion dollars.
Flaherty announced two controversial measures including the suspension of the right to strike among government workers which previously approved a 6.8% pay hike for the next 4 years (2.3% for the first year and 1.5% for the following three). The minister also announced a significant reduction of funding of political parties resulting in election results with a lower value per vote. It had also announced the possibility of cut spending by as much as $2 billion on various programs as well as the sale of various federal properties. It has also reduced the pay raises and bonuses of several bureaucrats and politicians including the cancellation of a three percent raise for MPs and cut unnecessary traveling.
The opposition parties threaten to topple the government on a non-confidence motion in relation to the economic statement. The opposition criticized the lack of immediate economic stimulus packages to help cope with the struggling economy as well as the political party subsidies cuts which the latter was reversed by the government one day later and would not be included on a bill. This led a political crisis and the subsequent suspension of the Parliament on December 3, 2008 as the opposition threaten to defeat the government on a confidence motion that was set for December 1 and later one week later before the prorogation of the House. While the budget was scheduled for the early-spring, pressure due to the economic crisis and the opposition parties forced the government to move ahead the budget set for January 27, 2008, one day after Parliament resumes. On December 20, 2008, the government announced it would spend approximately $30 billion in order to stimulate the economy while forecasting a deep deficit for a five-year period.
, settled a lengthy dispute with the United States
over softwood lumber in which its southern counterpart paid back nearly $4 billion dollars in tariffs.
, the softwood lumber dispute
, rapidly rising gasoline prices since 2003 and growing fears of a US recession
caused by a mortgage and housing crisis
. On January 10, 2008, the government announced a $1 billion relief fund for single-industry communities that were hit hard by recent closures particularly in the forest and manufacturing industries but also the fishing sector. The funding, coming from a budget surplus for the fiscal year, was to be split between the provinces and territories based on the proportion of the population and not by the number of jobs. The plan was to focus on job training and economic development creation. However, the plan and funding is conditional pending that the 2008 federal budget would pass legislation.
While some praised the plan as a good step in helping the industries affected by the mass closures, the budget approval condition imposed by Harper drew heavy criticism from the Opposition parties, union groups and some provincial politicians some them calling it an "election platform". Ontario Premier Dalton McGuinty and Quebec Premier Jean Charest also mentioned that the funding is a small fraction of what both provinces had invested in total in the troubled sectors and Canadian Auto Workers
Union President Buzz Hargrove
mentioned that it would not even be enough to upgrade a single auto parts plant. Dave Coles, president of the Communications, Energy and Paperworkers Union mentioned it would take over $10 billion in federal aid to make significant positive impacts and improvements. The funding was made official in the 2008 budget which also featured the extension of the accelerated capital cost allowances for businesses until 2012–13.
and Chrysler
. The Ontario government also contributed to $1.3 billion for the industry which has been hit hard by the recent economic downtown initially due to record oil prices which resulted in a sharp drop in the sales of new vehicles, including pick-up trucks and SUVs. The lower demand resulted in massive layoffs and production shutdown at several plants across southern Ontario in addition to plants across the US. Harper told at a press conference on the announcement: "This industry, the three automakers, need serious restructuring We are doing this on the assumption that, obviously, we cannot afford—United States or Canada—a short-term catastrophic collapse, but on the other hand we're doing this with the knowledge that the automakers must change their way of doing business in a very serious way and must bring their products and their costs in line with the marketplace".
. When the 2006 budget was announced, there was commitment to deal with the matter, but little money was used for it. No funding was used when Finance Minister Jim Flaherty
announced a $13 billion surplus. The Bloc Québécois
threatened to topple the government if the Tories did not give an additional $3.9 billion to Quebec. Support for the Conservatives in Quebec was up during the 2006 election campaign due to Harper's promise to deal with the matter.
On January 16, 2007, an article in a Montreal
newspaper, La Presse
, reported that the federal government would give an additional $1.5 billion in transfer payments with another $500 million dollars for post-secondary education and infrastructures.
Several premiers from other provinces criticized the plan. Saskatchewan
Finance Minister Andy Thompson asserted that the government was using revenues from the oil industry of the West to gain votes in Quebec.
During the 2007 budget, on March 19, 2007, Flaherty announced an extra $2.3 billion will go to Quebec, while some provinces will get extra money for social policies.
In July 2008, the government concluded an infrastructure deal with Ontario until 2014 worth over $3 billion. Much of the funding would be used mostly for infrastructure repairs and upgrades including the Trans-Canada Highway
as well as for rapid transit projects in the Kitchener
-Waterloo
area and broadband coverage in rural areas of eastern Ontario. In the same month, a Crown share dispute over oil royalties
was resolved with Nova Scotia getting a total of $870 million.
Following a meeting with all premiers after the 2008 election, the federal government removed Newfoundland and Labrador from its list of provinces receiving equalization payments due to revenues from its offshore oil platform Hibernia
. In contrast, the federal government added Ontario due to its struggling auto industry and which will receive $347 million while Quebec will receive over $8 billion starting in January 2009.
Canadian federal election, 2006
The 2006 Canadian federal election was held on January 23, 2006, to elect members of the Canadian House of Commons of the 39th Parliament of Canada. The Conservative Party of Canada won the greatest number of seats: 40.3% of seats, or 124 out of 308, up from 99 seats in 2004, and 36.3% of votes:...
to power on January 23, 2006, the Conservative Party of Canada
Conservative Party of Canada
The Conservative Party of Canada , is a political party in Canada which was formed by the merger of the Canadian Alliance and the Progressive Conservative Party of Canada in 2003. It is positioned on the right of the Canadian political spectrum...
led by Prime Minister
Prime Minister of Canada
The Prime Minister of Canada is the primary minister of the Crown, chairman of the Cabinet, and thus head of government for Canada, charged with advising the Canadian monarch or viceroy on the exercise of the executive powers vested in them by the constitution...
Stephen Harper
Stephen Harper
Stephen Joseph Harper is the 22nd and current Prime Minister of Canada and leader of the Conservative Party. Harper became prime minister when his party formed a minority government after the 2006 federal election...
adopted several positions and policies in regards to the economic issues of Canada including various tax cuts, exemptions and credits as well as discussing the issue of fiscal imbalance among provinces and measures to cope with more troubled sectors of the Canadian economy.
2006 Budget
The first federal budget of the Conservative government was released on May 2, 2006 by Finance Minister Jim FlahertyJim Flaherty
James Michael "Jim" Flaherty, PC, MP is Canada's Minister of Finance and he has also served as Ontario's Minister of Finance. From 1995 until 2005, he was the Member of Provincial Parliament for Whitby—Ajax, and a member of the Progressive Conservative Party caucus...
.
GST cut
The Conservative government promised to lower the federal Goods and Services TaxGoods and Services Tax (Canada)
The Goods and Services Tax is a multi-level value added tax introduced in Canada on January 1, 1991, by then Prime Minister Brian Mulroney and his finance minister Michael Wilson. The GST replaced a hidden 13.5% Manufacturers' Sales Tax ; Mulroney claimed the GST was implemented because the MST...
from 7% to 6% for the first budget and to lower it to 5% by 2011. There were some concerns from activists, that the cut would only benefit the rich. Some retailers have raised their prices to compensate.
Finally, there were also possibilities that some provincial governments take advantage and raise their provincial taxes. During the 2006 election campaign, the Martin
Paul Martin
Paul Edgar Philippe Martin, PC , also known as Paul Martin, Jr. is a Canadian politician who was the 21st Prime Minister of Canada, as well as leader of the Liberal Party of Canada....
government proposed income tax cuts for lower-middle income earners. The Liberals
Liberal Party of Canada
The Liberal Party of Canada , colloquially known as the Grits, is the oldest federally registered party in Canada. In the conventional political spectrum, the party sits between the centre and the centre-left. Historically the Liberal Party has positioned itself to the left of the Conservative...
have claimed that the GST cut would effectively result in a tax increase for those in the lower-middle income bracket
Tax bracket
Tax brackets are the divisions at which tax rates change in a progressive tax system . Essentially, they are the cutoff values for taxable income — income past a certain point will be taxed at a higher rate.-Example:Imagine that there are three tax brackets: 10%, 20%, and 30%...
. The Conservatives argued that the GST cuts would benefit all Canadians, including low-income earners and those outside the workforce who do not pay income tax.
The first GST cut went into effect on July 1, 2006, and no provinces have raised provincial sales tax as of yet. The second cut was later announced in the 2007 Throne Speech and officially confirmed on October 30, 2007 during an economic statement update on the country finances.
Reception
It was met with dissent by the LiberalLiberal Party of Canada
The Liberal Party of Canada , colloquially known as the Grits, is the oldest federally registered party in Canada. In the conventional political spectrum, the party sits between the centre and the centre-left. Historically the Liberal Party has positioned itself to the left of the Conservative...
and New Democratic
New Democratic Party
The New Democratic Party , commonly referred to as the NDP, is a federal social-democratic political party in Canada. The interim leader of the NDP is Nycole Turmel who was appointed to the position due to the illness of Jack Layton, who died on August 22, 2011. The provincial wings of the NDP in...
parties and mostly positive reception from the Bloc. The Liberals and NDP voiced disapproval over the Conservatives following through on their election of their design.
Vote
While it initially appeared that the only way the Conservatives' budget would pass would be with the support of the Bloc QuébécoisBloc Québécois
The Bloc Québécois is a federal political party in Canada devoted to the protection of Quebec's interests in the House of Commons of Canada, and the promotion of Quebec sovereignty. The Bloc was originally a party made of Quebec nationalists who defected from the federal Progressive Conservative...
, the budget passed third reading without dissent on June 6, 2006 when the members of the Opposition accidentally Economist Yves Fortin has challenged the reasons for the change in tax regime announced by Flaherty and disputes the Harper government assertion that the Trust structure has led to lose of tax revenue because of trust conversions in his research paper. Income Trusts and Tax Leakage: Is there a problem?
Analyst Gordon Tait has also raised concerns about the lack of consultation and misconceptions surrounding the change in tax policy on Trusts in The Inconvenient Truth About Trusts
A December 11, 2006 Income Trust Report by PricewaterhouseCoopers
PricewaterhouseCoopers
PricewaterhouseCoopers is a global professional services firm headquartered in London, United Kingdom. It is the world's largest professional services firm measured by revenues and one of the "Big Four" accountancy firms....
reviewed the surveys and studies conducted in 2004 and 2005, the economic benefits and impact of income trust
Income trust
An income trust is an investment that may hold equities, debt instruments, royalty interests or real properties. The trust can receive interest, royalty or lease payments from an operating entity carrying on a business, as well as dividends and a return of capital.The main attraction of income...
s in Canada. The report concludes that Income Trusts do have a place in Canadian capital markets and the 'Tax Fairness Plan' is unfair to Canadian Investors who hold Trusts in a tax-deferred Registered Retirement Savings Plan
Registered Retirement Savings Plan
A Registered Retirement Savings Plan or RRSP is a type of Canadian account for holding savings and investment assets. Introduced in 1957, the RRSP's purpose is to promote savings for retirement by employees. It must comply with a variety of restrictions stipulated in the Canadian Income Tax Act...
or a Registered Retirement Income Fund
Registered Retirement Income Fund
A Registered Retirement Income Fund or RRIF is a tax-deferred retirement plan under Canadian tax law. Individuals use an RRIF to generate income from the savings accumulated under their Registered Retirement Savings Plan...
In a year-end interview with the Canadian Press
Canadian Press
Canadian Press Enterprises Inc. is the entity which "will take over the operations of the Canadian Press" according to a November 26, 2010 article in the Toronto Star...
, Harper mentioned that this was "the toughest decision for the government". The Canadian Press voted the Harper Government and Jim Flaherty 'Business Newsmaker of 2006' for the announcement to tax Income Trusts on Halloween.
Analyst Cameron Renkas refutes the Department of Finance assertion that the United States and Australia have taken action to shut down flow-through structures. In his research paper Digging Deeper he gives a perspective on how the United States taxes publicly traded flow-through entities
Flow-through entity
A flow-through entity is a legal entity where income "flows through" to investors or owners; that is, the income of the entity is treated as the income of the investors or owners. Flow-through entities are also known as pass-through entities or fiscally-transparent entities...
and Master limited partnerships
Master limited partnership
Master limited partnership is a limited partnership that is publicly traded on a securities exchange. It combines the tax benefits of a limited partnership with the liquidity of publicly traded securities....
, the US equivalent of Canadian Income Trusts.
In a January 12, 2007 paper Yves Fortin outlines his concerns regarding the claim of tax leakage. Finance Minister Jim Flaherty stated in his October 31, 2006 policy statement "If left unchecked, these corporate decisions would result in billions of dollars in less tax revenue for the federal government to invest in the priorities of Canadians, including more personal income tax relief" http://www.caif.ca/content/TaxLossRecipe.Fortin.pdf but Minister Flaherty has not documented his allegation nor has he cited any research to back up his claim. Mr. Fortin's paper A Recipe For Tax Loss gives several examples on how the tax on income trusts could lead to a loss in government tax revenue, not a gain.
Analyst Dirk Lever wrote on January 15, 2007 "We cannot understand why any Canadians would support double taxation of retirement benefits - it affects all of us eventually". Mr. Lever has also cited several flaws in the Conservative government's policy in his research paper Deep Dive into Tax Issues: Canadian Pensioners Taxed Twice on Canadian Corporate Dividends. In the report Mr. Lever asks:
- Why are Canadian Pension Benefits are taxed twice on Canadian Corporate Dividends?
- Why are foreign investors allowed more favorable tax treatment than Canadian retail investors?
Special hearings by the Finance Committee commenced January 30, 2007. John McCallum
John McCallum
John McCallum, PC, MP is a Liberal Canadian politician, economist and university professor. Following the 2006 Federal Election, he became the Liberal Finance Critic in the Official Opposition Shadow Cabinet...
, the Liberal Finance critic has called on Minister Flaherty to explain the reasoning behind the change in Income Trust Tax policy. In a February 8, 2007 news release John McCallum is quoted "Essentially they released close to a thousand pages of public documents, not one of which brings Canadians any closer to understanding what type of information or calculations led the Minister break his election promise and tax income trusts, either the Minister is in contempt of the committee’s motion or he had absolutely no data from his own department before shutting down the sector and destroying tens of thousands of Canadians’ life savings. The first possibility is disturbing, the second is deplorable." The Conservatives have the support of the Jack Layton
Jack Layton
John Gilbert "Jack" Layton, PC was a Canadian social democratic politician and the Leader of the Official Opposition. He was the leader of the New Democratic Party from 2003 to 2011, and previously sat on Toronto City Council, serving at times during that period as acting mayor and deputy mayor of...
and the NDP on this issue.
In a July 9, 2007 interview on Business News Network
Business News Network
Business News Network ' is a Canadian English language Category A specialty channel. BNN broadcasts programming related to business and financial news and analysis. As of December 2010, the station is based from 299 Queen Street West in Downtown Toronto and is owned by Bell Media...
, former Conservative Alberta Premier Ralph Klein criticized PM Stephen Harper
Stephen Harper
Stephen Joseph Harper is the 22nd and current Prime Minister of Canada and leader of the Conservative Party. Harper became prime minister when his party formed a minority government after the 2006 federal election...
and Finance Minister Jim Flaherty
Jim Flaherty
James Michael "Jim" Flaherty, PC, MP is Canada's Minister of Finance and he has also served as Ontario's Minister of Finance. From 1995 until 2005, he was the Member of Provincial Parliament for Whitby—Ajax, and a member of the Progressive Conservative Party caucus...
for their mishandling of the Income Trust issue and for not keeping their word on Income Trust taxation.http://www.youtube.com/watch?v=ocqD1BbpcTo According to the Canadian Association of Income Trust Investors the change in tax rules cost investors $35 billion dollars in market value. http://stockcharts.com/charts/performance/perf.html?$WTIC,$RTEN,$SPTEN,$RTCM,$TSX Stephen Harper specifically promised "not to raid Senior's nest eggs" during the 2006 Federal Election. http://www.youtube.com/watch?v=U9mibZYpVPY
Budget summary
Flaherty presented the 2007 budget on March 19, 2007. No income tax or GST cuts were announced but there were tax credits (of up to $310 per child) for some families with children under 18. It was confirmed that the budget will passed the House of Commons as the Bloc Québécois supported it due to the additional money that the province of Quebec will receive as part of the equalization payment system.The budget passed 174 to 109 in the House of Commons in first reading. It would later pass the second and third readings in June.
Reception
Quebec Premier Jean CharestJean Charest
John James "Jean" Charest, PC, MNA is a Canadian politician who has been the 29th Premier of Quebec since 2003. He was leader of the federal Progressive Conservative Party of Canada from 1993 to 1998 and has been leader of the Quebec Liberal Party since 1998....
had applauded the budget, as his province would receive over $2 billion dollars in additional equalization payment. However, Nova Scotia
Nova Scotia
Nova Scotia is one of Canada's three Maritime provinces and is the most populous province in Atlantic Canada. The name of the province is Latin for "New Scotland," but "Nova Scotia" is the recognized, English-language name of the province. The provincial capital is Halifax. Nova Scotia is the...
Premier Rodney MacDonald
Rodney MacDonald
Rodney Joseph MacDonald is a Canadian politician, educator and musician who served as the 26th Premier of Nova Scotia from 2006 to 2009 and as MLA for the riding of Inverness in the Nova Scotia House of Assembly from 1999 to 2009....
and Newfoundland and Labrador
Newfoundland and Labrador
Newfoundland and Labrador is the easternmost province of Canada. Situated in the country's Atlantic region, it incorporates the island of Newfoundland and mainland Labrador with a combined area of . As of April 2011, the province's estimated population is 508,400...
Premier Danny Williams
Danny Williams (politician)
Daniel E. "Danny" Williams, QC, MHA is a Canadian politician, businessman and lawyer who served as the ninth Premier of Newfoundland and Labrador between November 6, 2003, and December 3, 2010. Williams was born and raised in St. John's, Newfoundland and Labrador...
argued that Harper broke a written promise to shield revenues from oil
Oil
An oil is any substance that is liquid at ambient temperatures and does not mix with water but may mix with other oils and organic solvents. This general definition includes vegetable oils, volatile essential oils, petrochemical oils, and synthetic oils....
and natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
revenues that the two provinces are receiving; Harper has denied this and accused Williams of misinforming the province http://www.canada.com/nationalpost/news/story.html?id=5a801300-758a-4b5c-9cfc-ad82d2eba899&k=24751. In addition, Saskatchewan
Saskatchewan
Saskatchewan is a prairie province in Canada, which has an area of . Saskatchewan is bordered on the west by Alberta, on the north by the Northwest Territories, on the east by Manitoba, and on the south by the U.S. states of Montana and North Dakota....
Premier Lorne Calvert
Lorne Calvert
Lorne Albert Calvert, MLA was the 13th Premier of Saskatchewan, from 2001 to 2007. Calvert, was the leader of the Saskatchewan New Democratic Party from 2001 to June 6, 2009, when he was succeeded by Dwain Lingenfelter.In 1975, Calvert married Betty Sluzalo of Perdue, Saskatchewan. After attending...
argued that his province will receive no new money and alleged that the Conservatives were favouring Ontario and Quebec at the expense of other provinces, which MP Maurice Vellacott
Maurice Vellacott
Maurice Vellacott is a Canadian politician. He has served in the Canadian House of Commons since 1997, and is currently the Conservative Member of Parliament for the riding of Saskatoon—Wanuskewin in the province of Saskatchewan....
has disputed. Other premiers including New Brunswick's Shawn Graham
Shawn Graham
Shawn Michael Graham, MLA is a New Brunswick politician, who served as the 31st Premier of New Brunswick. He received a Bachelor of Physical Education Degree in 1991 and a Bachelor of Education Degree in 1993, he worked for New Brunswick's civil service before being elected to the Legislative...
, British Columbia's Gordon Campbell had some reservations. However, Ontario Premier Dalton McGuinty
Dalton McGuinty
Dalton James Patrick McGuinty, Jr., MPP is a Canadian lawyer, politician and, since October 23, 2003, the 24th and current Premier of the Canadian province of Ontario....
said that the budget represented "real progress" for his province.
During the second vote on the budget Conservative MP Bill Casey
Bill Casey
William D. "Bill" Casey is a Canadian politician. He is a former Member of Parliament in the Canadian House of Commons.-Life and career:...
voted against the budget in protest of the treatment of the 2005 Atlantic Accord on offshore revenues. He was removed from the Conservative Caucus afterwards. Premier MacDonald later urged all his province's MPS to vote against the budget after a letter Flaherty that was published in a Nova Scotia newspaper. 9 of the 11 MPs voted against it in the third reading. After the 2007 passed, the government started to work on a comprise with Nova Scotia to settle the dispute. Many Ontario-based and Western-Canadian columnists have supported Flaherty's budget, citing figures that indicate that the per capital income in Newfoundland and Nova Scotia has improved significantly, at the expense of Ontario, and that allowing the Maritime provinces to keep both equalization payments and resource revenues would hurt Ontario even more. http://www.canada.com/nationalpost/news/issuesideas/story.html?id=e82635f3-84b8-439b-b639-c1d4a36f72f5.
October 2007 economic statement
On October 30, 2007, the Conservatives tabled an economic statement (similar to a mini-budget) and announced various tax cuts and exemptions. Overall, the government proposed a total of $60 billion in tax cuts over five years, including $14 billion in corporate tax cuts by 2012 (or a drop of 33%), a 1% drop of the GST to 5%, an increase of the basic personal tax exemption to $10,100 per year by 2009. The stated goal of the corporate tax cuts was to set Canadian corporate tax rates as the lowest in the G7, although this would require the provinces do matching tax cuts. The lowest personal tax rate will be reduced from 15.5% to 15%, effective January 1, 2007 back to the same level as when the Conservatives were elected in 2006. Economists said that with the large surpluses the federal government accumulated as well as high tax levels, there was another room for significant tax cuts.The opposition parties criticized the mini-budget as the NDP leader Jack Layton mentioned that the budget did little for impoverished Canadians
Poverty in Canada
Poverty in Canada remains prevalent with some segments of society. The measurement of poverty has been a challenge as there is no official government measure. There is an ongoing debate in Canada about whether a relative measure of poverty, or absolute measure of poverty, is more valid...
, and that big corporations such as oil companies and major banks will receive hefty tax breaks. The Liberals were critical of the GST cut as being not an efficient tax-relief but did praise the corporate tax cuts. The mini-budget, a confidence motion did pass 127–76 but without support of any opposition party as the Liberals abstained from voting as they did with the Fall 2007 Throne Speech.
Highlights
The 2008 budget was tabled on February 26, 2008. No new tax cuts were announced in the budget, but Finance Minister Jim Flaherty announced the creation of a new Tax-Free Savings AccountTax-Free Savings Account
The Tax-Free Savings Account is an account that provides tax benefits for saving in Canada. Contributions to a TFSA are not deductible for income tax purposes. Investment income, including capital gains, earned in a TFSA is not taxed, even when withdrawn.-History:It was introduced by Jim...
, where an individual can deposit up to $5,000 a year. Flaherty said that it is the "single most important savings vehicle since the introduction of the RRSP". Funding was also announced for public transit, infrastructures, hiring new police officers, the reconstruction of Afghanistan, a new Student Grant Program (replacing the Millennium Scholarship Fund) and for the manufacturing sectors. In addition, the government announced the creation of a new independent crown corporation to administer the Employment Insurance System while gas tax rebate fund to the cities was made permanent. 10.2 billion dollars will be spent on the payment of the national debt.
Reception
As did in the past, the 2008 Conservative budget was met with mixed reactions. Liberal leader Stéphane DionStéphane Dion
Stéphane Maurice Dion, PC, MP is a Canadian politician who has been the Member of Parliament for the riding of Saint-Laurent–Cartierville in Montreal since 1996. He was the leader of the Liberal Party of Canada and the Leader of the Opposition in the Canadian House of Commons from 2006 to 2008...
, while criticizing the budget as modest and being "one mile wide" and "one inch deep", said that the party will support the budget due to measures announced surrounding the manufacturing sector as well as environment due to avoiding a spring election. Both the Bloc Québécois
Bloc Québécois
The Bloc Québécois is a federal political party in Canada devoted to the protection of Quebec's interests in the House of Commons of Canada, and the promotion of Quebec sovereignty. The Bloc was originally a party made of Quebec nationalists who defected from the federal Progressive Conservative...
and the NDP announced that they were voting against the budget.
The NDP explained that the budget failed to address the need for average workers while the winners were banks, polluting industries and the well-off. Social programs got one-time commitments while corporate tax cuts were granted for many years. They further mentioned that tax cuts for big business take priority over new spending on the order of 6 to 1. http://www.ndp.ca/page/6216
The Bloc cited that there was insufficient funding for the forestry sector and no major announcements for the province of Quebec.
Ontario Finance Minister
Ministry of Finance (Ontario)
The Ministry of Finance is a portfolio in the Executive Council of Ontario commonly known as the cabinet. The Finance Minister is responsible for managing the fiscal, financial and related regulatory affairs of the Canadian province of Ontario...
Dwight Duncan
Dwight Duncan
Dwight Duncan, MPP is a politician in Ontario, Canada. He has been a member of the Legislative Assembly of Ontario since 1995, and is the Minister of Finance in the government of Dalton McGuinty...
mentioned that the budget came short in regards to the manufacturing sector and told that it was "missed opportunity for Ontario and Ottawa to work together during a tough economic period". Buzz Hargrove
Buzz Hargrove
Basil Eldon "Buzz" Hargrove, OC is the former National President of the Canadian Auto Workers trade union...
, from the Canadian Auto Workers Union also mentioned that the budget was a step in the wrong direction for the auto industry Quebec Finance Minister Monique Jerome-Forget
Monique Jérôme-Forget
Monique Jérôme-Forget is a psychologist and a former Quebec politician. She was the Member of National Assembly for the riding of Marguerite-Bourgeois in the Montreal region as a member of the Quebec Liberal Party between 1998 and 2009...
also criticized the budget by saying that it does not reflect the priorities for Quebec including the province's forest sector and post-secondary education. The Minister did praised however the permanency of gas tax rebate for the municipalities.
Canadian Taxpayers Federation director John Williamson
John Williamson (Canadian politician)
John Williamson is a Canadian politician, who was elected to the Canadian House of Commons in the 2011 election. He represents the electoral district of New Brunswick Southwest as a member of the Conservative Party.-Education:...
mentioned and applauded that the registered savings plan was "very good" for the middle class. Economist Andrew Jackson, from the Canadian Labour Congress
Canadian Labour Congress
The Canadian Labour Congress, or CLC is a national trade union centre, the central labour body in English Canada to which most Canadian labour unions are affiliated.- Formation :...
, mentioned however that the plan will give little to the average worker while Don Scott, a taxation specialist, added that the program may incite some investors to contribute less to their RRSP. The creation of the new savings account also had positive reviews from several Canadian newspapers including Le Devoir
Le Devoir
Le Devoir is a French-language newspaper published in Montreal and distributed in Quebec and the rest of Canada. It was founded by journalist, politician, and nationalist Henri Bourassa in 1910....
, La Presse, The Globe and Mail
The Globe and Mail
The Globe and Mail is a nationally distributed Canadian newspaper, based in Toronto and printed in six cities across the country. With a weekly readership of approximately 1 million, it is Canada's largest-circulation national newspaper and second-largest daily newspaper after the Toronto Star...
and the National Post
National Post
The National Post is a Canadian English-language national newspaper based in Don Mills, a district of Toronto. The paper is owned by Postmedia Network Inc. and is published Mondays through Saturdays...
. Aaron Freeman, policy director for the Environmental Defence, criticized the government for having no clear direction on the environment making reference to the suspension after 2008 of the tax-rebate program on fuel-efficient vehicles but praised the funding for transit and for the protection of consumers from toxins in products.
McTeague private member bill
Liberal MPMember of Parliament
A Member of Parliament is a representative of the voters to a :parliament. In many countries with bicameral parliaments, the term applies specifically to members of the lower house, as upper houses often have a different title, such as senate, and thus also have different titles for its members,...
Dan McTeague
Dan McTeague
Daniel P. "Dan" McTeague, PC is a former Canadian Member of Parliament for the Ontario riding of Pickering—Scarborough East.-Background:He was born to a devoutly Catholic family, one of three children...
tabled a Private Member's Bill
Private Member's Bill
A member of parliament’s legislative motion, called a private member's bill or a member's bill in some parliaments, is a proposed law introduced by a member of a legislature. In most countries with a parliamentary system, most bills are proposed by the government, not by individual members of the...
that proposed to give parents substantial tax breaks for saving education money; taxpayers who deposited $5,000 into a RESP for their children's post-secondary education would earn a $5,000 tax deduction, similar to the deduction allowed for contributions to a RRSP. Under the Tax-Free Savings Account
Tax-Free Savings Account
The Tax-Free Savings Account is an account that provides tax benefits for saving in Canada. Contributions to a TFSA are not deductible for income tax purposes. Investment income, including capital gains, earned in a TFSA is not taxed, even when withdrawn.-History:It was introduced by Jim...
, introduced in Conservative Finance Minister Jim Flaherty
Jim Flaherty
James Michael "Jim" Flaherty, PC, MP is Canada's Minister of Finance and he has also served as Ontario's Minister of Finance. From 1995 until 2005, he was the Member of Provincial Parliament for Whitby—Ajax, and a member of the Progressive Conservative Party caucus...
's 2008 budget, there was no deduction for annual contributions.
Though McTeague's bill passed through the Canadian House of Commons
Canadian House of Commons
The House of Commons of Canada is a component of the Parliament of Canada, along with the Sovereign and the Senate. The House of Commons is a democratically elected body, consisting of 308 members known as Members of Parliament...
on March 5, 2008, after Speaker of the House
Speaker of the Canadian House of Commons
The Speaker of the House of Commons of Canada is the presiding officer of the lower house of the Parliament of Canada and is elected at the beginning of each new parliament by fellow Members of Parliament...
, Liberal Peter Milliken
Peter Milliken
Peter Andrew Stewart Milliken, UE is a Canadian lawyer and politician. He was a member of the Canadian House of Commons from 1988 until his retirement in 2011 and served as Speaker of the House for 10 years beginning in 2001. Milliken represented the Ontario riding of Kingston and the Islands as a...
, approved the bill for debate, it is constitutionally decreed that any money measure that does not have royal recommendation, that is, if it doesn't originate from the Crown, is to be considered unlawful. So, any private member's money bill must be regarded as a Motion of Confidence. Flaherty served notice to the House of Commons on March 11 that he would introduce a motion to nullify the bill by including a provision to do so in legislation implementing the federal budget, which is automatically a confidence motion. The RESP bill was the first time since 1840 that the Commons had attempted to force a change to the government's budget.
Economic crisis and parliamentary dispute
Prior to the 2009 budget, on November 26, 2008, Jim Flaherty released an economic statement to which according to many experts would measures to deal with a significant worldwide economic slowdown that started earlier during the year where millions of jobs were lost in several sectors across the world including thousands in Canada particularly in the auto sector in southern Ontario. While announcing that there will be no deficits in 2008–09 fiscal year, he added that any measures to deal with the economic slowdown would result in a deficit though the government that the situation in Canada compared to the other G7 countries is not as bad. He also added prior to the announcement that a "technical" recessionRecession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...
was possible. Many economists and groups predicted significant deficits after 2009 and for a couple of years and urged Parliament to quickly adopt a stimulus package
Stimulus (economic)
In economics, stimulus refers to attempts to use monetary or fiscal policy to stimulate the economy. Recently "stimulus" has become particularly associated with Keynesian economics and the theory that government spending projects can generate economic growth in a recession...
to encourage spending. Parliamentary budget officer Kevin Page had forecast a deficit of between 4 and 14 billion dollars.
Flaherty announced two controversial measures including the suspension of the right to strike among government workers which previously approved a 6.8% pay hike for the next 4 years (2.3% for the first year and 1.5% for the following three). The minister also announced a significant reduction of funding of political parties resulting in election results with a lower value per vote. It had also announced the possibility of cut spending by as much as $2 billion on various programs as well as the sale of various federal properties. It has also reduced the pay raises and bonuses of several bureaucrats and politicians including the cancellation of a three percent raise for MPs and cut unnecessary traveling.
The opposition parties threaten to topple the government on a non-confidence motion in relation to the economic statement. The opposition criticized the lack of immediate economic stimulus packages to help cope with the struggling economy as well as the political party subsidies cuts which the latter was reversed by the government one day later and would not be included on a bill. This led a political crisis and the subsequent suspension of the Parliament on December 3, 2008 as the opposition threaten to defeat the government on a confidence motion that was set for December 1 and later one week later before the prorogation of the House. While the budget was scheduled for the early-spring, pressure due to the economic crisis and the opposition parties forced the government to move ahead the budget set for January 27, 2008, one day after Parliament resumes. On December 20, 2008, the government announced it would spend approximately $30 billion in order to stimulate the economy while forecasting a deep deficit for a five-year period.
Highlights
A $33.7 billion deficit for the 2009–10 fiscal was announced during the deposition of the budget on January 27, 2009 with a projected deficit of $29.7 billion for the following year as well as additional deficits until 2013 for a total of $85 billion over five years while Flaherty also announced a $1.1 billion deficit for the end of the 2008–09 financial year. It is the first deficit announced since the 1996–97 fiscal year. $12 billion was earmarked for various new infrastructure projects including roads, internet broadband access with additional funding for renovations on aging infrastructures as well as for green infrastructure projects. $8 billion was also announced for social housing renovation projects, $1.5 billion for job training, $2.7 billion for short-term loans for the auto industry as well as various income and corporate tax cuts and tax credits up to $20 billion for individuals and $2 billion for businesses. Among the tax measures included were a new home renovation tax credit of up to $1350, the extension of the EI benefits by five weeks for the next two years as well as the increase of the basic personal amount to $10,320 before any payment of federal income tax. The government estimated that the $40 billion in economic stimulus and other measures would create close to 200 000 jobs while it forecast a one percent growth of the economy over the next two years.Reception
The Liberal Party, now headed by Michael Ignatieff who replaced Dion during the prorogation of the Parliament, supported the budget but also proposed in return an amendment, which passed 214–84, The amendment would force the government to present occasional reports on the progress and costs of the budget. Both the NDP and the Bloc Québécois opposed the budget. The Bloc cited the lost of transfer payments for the province while the NDP cited a lack of funding for the vulnerable and also criticized the infrastructure funding as well as pay-equity reforms introduced in November. Six Liberal MPs from Newfoundland and Labrador also expressed opposition to the budget citing that the province would lose up to $1.6 billion in transfer payments as it no longer collects equalization. Ignatieff permitted his members to vote against his party lines. The budget passed 211 to 91. Among popular opinion, a Strategic Council poll indicated that 62% of Canadians were in favour of the budget against 38% who were not in favour while Canadians were split on whether the government failed the economy in Canada.Softwood lumber dispute
In late-2006, the government led by Trade Minister and former Liberal Minister David EmersonDavid Emerson
David Lee Emerson, PC, OBC is a Canadian politician, businessman and civil servant.Emerson is a former Member of Parliament for the riding of Vancouver Kingsway. He was first elected as a Liberal and served as Minister of Industry under Prime Minister Paul Martin...
, settled a lengthy dispute with the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
over softwood lumber in which its southern counterpart paid back nearly $4 billion dollars in tariffs.
Manufacturing and forestry sectors crisis
During the Throne Speech, Harper also addressed issues surrounding the economy because of difficulties in the manufacturing and forest sectors due to the loss of numerous jobs at several companies including the 3 majors automakers in the United States and several small to large forest companies over the past few years due to lower US demand, a stronger Canadian dollarCanadian dollar
The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies...
, the softwood lumber dispute
United States-Canada softwood lumber dispute
The Canada–United States softwood lumber dispute is one of the most significant and enduring trade disputes in modern history. The dispute has had its biggest effect on British Columbia, the major Canadian exporter of softwood lumber to the United States....
, rapidly rising gasoline prices since 2003 and growing fears of a US recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...
caused by a mortgage and housing crisis
United States housing bubble
The United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and may not yet have hit bottom as of 2011. On December 30, 2008 the...
. On January 10, 2008, the government announced a $1 billion relief fund for single-industry communities that were hit hard by recent closures particularly in the forest and manufacturing industries but also the fishing sector. The funding, coming from a budget surplus for the fiscal year, was to be split between the provinces and territories based on the proportion of the population and not by the number of jobs. The plan was to focus on job training and economic development creation. However, the plan and funding is conditional pending that the 2008 federal budget would pass legislation.
While some praised the plan as a good step in helping the industries affected by the mass closures, the budget approval condition imposed by Harper drew heavy criticism from the Opposition parties, union groups and some provincial politicians some them calling it an "election platform". Ontario Premier Dalton McGuinty and Quebec Premier Jean Charest also mentioned that the funding is a small fraction of what both provinces had invested in total in the troubled sectors and Canadian Auto Workers
Canadian Auto Workers
The Canadian Auto Workers is one of Canada's largest and highest profile social unions. While rooted in Ontario's large auto plants of Windsor, Brampton, Oakville, St...
Union President Buzz Hargrove
Buzz Hargrove
Basil Eldon "Buzz" Hargrove, OC is the former National President of the Canadian Auto Workers trade union...
mentioned that it would not even be enough to upgrade a single auto parts plant. Dave Coles, president of the Communications, Energy and Paperworkers Union mentioned it would take over $10 billion in federal aid to make significant positive impacts and improvements. The funding was made official in the 2008 budget which also featured the extension of the accelerated capital cost allowances for businesses until 2012–13.
Auto industry crisis
Following a $17 billion bailout announcement from the US government on December 19, 2007, the Canadian government announced the following day a $2.7 billion aid to the auto industry including General MotorsGeneral Motors
General Motors Company , commonly known as GM, formerly incorporated as General Motors Corporation, is an American multinational automotive corporation headquartered in Detroit, Michigan and the world's second-largest automaker in 2010...
and Chrysler
Chrysler
Chrysler Group LLC is a multinational automaker headquartered in Auburn Hills, Michigan, USA. Chrysler was first organized as the Chrysler Corporation in 1925....
. The Ontario government also contributed to $1.3 billion for the industry which has been hit hard by the recent economic downtown initially due to record oil prices which resulted in a sharp drop in the sales of new vehicles, including pick-up trucks and SUVs. The lower demand resulted in massive layoffs and production shutdown at several plants across southern Ontario in addition to plants across the US. Harper told at a press conference on the announcement: "This industry, the three automakers, need serious restructuring We are doing this on the assumption that, obviously, we cannot afford—United States or Canada—a short-term catastrophic collapse, but on the other hand we're doing this with the knowledge that the automakers must change their way of doing business in a very serious way and must bring their products and their costs in line with the marketplace".
Fiscal imbalance
During the 2006 campaign, Stephen Harper promised the provinces, including Quebec and Ontario, to deal with the issue of fiscal imbalanceFiscal imbalance
- Meaning and Types :Fiscal imbalance is the term used to denote a mismatch in the revenue powers and expenditure responsibilities of a government. In the literature on fiscal federalism, two types of fiscal imbalances are measured: Vertical Fiscal Imbalance and Horizontal Fiscal Imbalance...
. When the 2006 budget was announced, there was commitment to deal with the matter, but little money was used for it. No funding was used when Finance Minister Jim Flaherty
Jim Flaherty
James Michael "Jim" Flaherty, PC, MP is Canada's Minister of Finance and he has also served as Ontario's Minister of Finance. From 1995 until 2005, he was the Member of Provincial Parliament for Whitby—Ajax, and a member of the Progressive Conservative Party caucus...
announced a $13 billion surplus. The Bloc Québécois
Bloc Québécois
The Bloc Québécois is a federal political party in Canada devoted to the protection of Quebec's interests in the House of Commons of Canada, and the promotion of Quebec sovereignty. The Bloc was originally a party made of Quebec nationalists who defected from the federal Progressive Conservative...
threatened to topple the government if the Tories did not give an additional $3.9 billion to Quebec. Support for the Conservatives in Quebec was up during the 2006 election campaign due to Harper's promise to deal with the matter.
On January 16, 2007, an article in a Montreal
Montreal
Montreal is a city in Canada. It is the largest city in the province of Quebec, the second-largest city in Canada and the seventh largest in North America...
newspaper, La Presse
La Presse (Canada)
La Presse, founded in 1884, is a French-language Monday-Saturday newspaper published in Montreal, Quebec, Canada. It is owned today by Groupe Gesca, a subsidiary of Power Corporation of Canada. The Sunday version was dropped in 2009.-Description:...
, reported that the federal government would give an additional $1.5 billion in transfer payments with another $500 million dollars for post-secondary education and infrastructures.
Several premiers from other provinces criticized the plan. Saskatchewan
Saskatchewan
Saskatchewan is a prairie province in Canada, which has an area of . Saskatchewan is bordered on the west by Alberta, on the north by the Northwest Territories, on the east by Manitoba, and on the south by the U.S. states of Montana and North Dakota....
Finance Minister Andy Thompson asserted that the government was using revenues from the oil industry of the West to gain votes in Quebec.
During the 2007 budget, on March 19, 2007, Flaherty announced an extra $2.3 billion will go to Quebec, while some provinces will get extra money for social policies.
In July 2008, the government concluded an infrastructure deal with Ontario until 2014 worth over $3 billion. Much of the funding would be used mostly for infrastructure repairs and upgrades including the Trans-Canada Highway
Trans-Canada Highway
The Trans-Canada Highway is a federal-provincial highway system that joins the ten provinces of Canada. It is, along with the Trans-Siberian Highway and Australia's Highway 1, one of the world's longest national highways, with the main route spanning 8,030 km...
as well as for rapid transit projects in the Kitchener
Kitchener, Ontario
The City of Kitchener is a city in Southern Ontario, Canada. It was the Town of Berlin from 1854 until 1912 and the City of Berlin from 1912 until 1916. The city had a population of 204,668 in the Canada 2006 Census...
-Waterloo
Waterloo, Ontario
Waterloo is a city in Southern Ontario, Canada. It is the smallest of the three cities in the Regional Municipality of Waterloo, and is adjacent to the city of Kitchener....
area and broadband coverage in rural areas of eastern Ontario. In the same month, a Crown share dispute over oil royalties
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...
was resolved with Nova Scotia getting a total of $870 million.
Following a meeting with all premiers after the 2008 election, the federal government removed Newfoundland and Labrador from its list of provinces receiving equalization payments due to revenues from its offshore oil platform Hibernia
Hibernia
Hibernia is the Classical Latin name for the island of Ireland. The name Hibernia was taken from Greek geographical accounts. During his exploration of northwest Europe , Pytheas of Massilia called the island Ierne . In his book Geographia Hibernia is the Classical Latin name for the island of...
. In contrast, the federal government added Ontario due to its struggling auto industry and which will receive $347 million while Quebec will receive over $8 billion starting in January 2009.