Finance Minister Ralph Goodale's first Budget, and the first from Prime Minster Paul Martin's government, was presented to Parliament on Tuesday, March 23. It contained few surprises. The government's seventh balanced budget in succession, it proposes little of what might be called "pre-election spending," such as tax cuts or new social programs. Instead, it seems designed to reassure taxpayers that the public purse is being managed responsibly. Program spending is projected to increase by about $3 billion, but much of it will be financed though re-allocation of funding from existing programs.

In his Budget speech, Minister Goodale said that social and economic policies must be "mutually reinforcing," and that "underlying this must be the prudence of balanced budgets that comes with living within our means." He forecast balanced budgets over the next two fiscal years and announced a goal of reducing the federal debt-to-GDP ratio from 42% in 2003-04 to 25% within ten years. Also, the $3 billion Contingency Reserve will be maintained and $1 billion in "economic prudence" restored, for both 2004-05 and 2005-06.

In its press release, the CICA endorsed the Budget, particularly the renewed commitment to allocating money for prudence and debt reduction, but also cautioned that the success of the government's long-term plans may be contingent on the economy performing well over the coming years.

Pierre Brunet, Chair of the CICA Board of Governors, said: "The government has set the bar high in terms of long-term future revenue growth and its ability to pay down the debt. To achieve these aims, the government is betting on a strong economy that does not require the government to draw on the contingency reserve. That's a fine line, and these plans could be derailed if the economy doesn't perform as hoped for."

In his Budget speech, the Minister forecast economic growth of 2.7% in 2004 and 3.3% in 2005. The main risks, he said, were associated with impacts of a rapidly-rising Canadian dollar, and the sustainability of the U.S. economic recovery.

The CICA also supported new measures aimed at improving government accountability, including re-establishment of the office of the Comptroller General, hiring professionally-accredited comptrollers for each department and strengthening internal auditing across the board. "There is still some distance to go before a culture of accountability and transparency takes hold, but these are steps in the right direction," Brunet said.

The Budget focuses most of its proposals in the areas of health, education, communities, "knowledge and commercialization" and "Canada's relationship with the world." Major measures include:

• An additional $2 billion for the provinces and territories for health.
• Establishment of a new Canada Public Health Agency as a focal point for disease control and emergency response.
• Funding of $665 million over three years to improve Canada's readiness to deal with public health emergencies.
• In total, the Budget directs more than $1 billion to public health initiatives.
• Introduction of a new Canada Learning Bond, to provide up to $2,000 for children in low-income families for post-secondary education, as well as grants of up to $3,000 for first-year, post-secondary students from low-income families.
• Substantial additional funding for research and commercialization.
• New funding of $270 million to enhance access to venture capital financing for promising new companies.
• $7 billion over ten years in GST/HST relief for municipalities.
• $1 billion over seven years for the development and commercialization of new environmental technologies.
• An additional $250 million to cover the costs of peacekeeping in Afghanistan and the fight against terrorism, along with $50 million for peacekeeping in Haiti.
• A further $650 million to address security issues.
• An increase of $248 million, or 8%, in international assistance in 2005-06.

In addition, the Minister said that program costs will be reduced through such measures as cancelling plans for a political history museum, foregoing capital expansion by VIA Rail, terminating the controversial Sponsorship Program and the National Unity Reserve, reducing advertising and trimming departmental budgets across the board. The government also announced that it intends to sell its 19% interest in Petro-Canada.

Tax changes proposed in the Budget are discussed in the following sections.