Prime Minister Stephen Harper will move to establish the fiscal reputation of his new government today with an inaugural federal budget that sources say will include the largest tax-relief package in the recent past.
The first Conservative budget in 13 years is expected to include a reduction in the goods and services tax, breaks for transit riders, aid for tradespeople and a $1,200 annual allowance for parents of children under six years old.
Much of the budget will focus on the party's five priorities, which include the GST cut, the daycare allowance, a crackdown on crime, a political accountability act and a pledge to reduce medical waiting times. Sources said the provinces should not expect extra money to fund the health guarantee because the Conservatives believe the system is adequately funded.
The budget's main appeal is expected to be to the Tory political base: middle-class voters in rural and suburban Canada.
Mr. Flaherty's budget will also include a paper outlining how the Tories will tackle a pledge to fix the so-called fiscal imbalance between the federal government and the provinces — a situation the Conservatives promised to remedy by sharing Ottawa's wealth.
The Tories have insisted that they will keep recent campaign promises in their budget. The document is also expected to include:
– A transit-pass tax credit for commuters,
– A federal tax credit on spending of up to $500 for parents of children under 16 years old in sports programs, to provide a break for registration fees and memberships,
– A tax deduction on tools of up to $500 for tradespeople,
– An increase in the threshold for the small-business tax rate and a reduction of the tax rate on small businesses,
– A textbook tax deduction and an exemption for scholarship income,
– An exemption for the first $500,000 of capital gains from taxation for transferring family fishing assets,
– Reinstatement of the corporate income-tax relief cancelled by the Liberals in their deal with the NDP for the 2005 budget.
Even as they champion tax cuts, the Tories are also planning to take a knife to government spending. They'll not only trim Liberal commitments to daycare and climate-change abatement, but also slash future spending growth by about $22.5-billion over five years.
Make no mistake: this is a budget that can double as an election budget, if the opposition all want to press their luck.
Little in the way of promised new spending, except for defence which badly needs it, but plenty of tax relief and a focus on the five priorities.
But expect the budget to pass with perhaps only the NDP to oppose it. The Bloc will support it because of the fiscal imbalance plan, and the Liberals will make all sorts of noise but hold their noses and vote for it because it can't fight an election under the slogan "Three months is time for a change; vote for the leader to be named later!"
More on the budget after it comes out.