 
CANADA FEDERAL BUDGET
2008
A KAIROS Analysis
The federal budget released by the Conservative government on
February 26, 2008 is a reflection of the government’s priorities
and agenda for the coming year. It’s an important political
moment for determining whether government promises are fulfilled
or forgotten. KAIROS has analyzed the budget with reference to
two KAIROS program priorities: promoting energy justice by reducing
fossil fuel use; and reducing poverty in Canada and the global
South.
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Energy justice
a) The budget makes only very minor changes to federal subsidies.
KAIROS has been advocating for the redirection of over $1 billion
in annual subsidies that now go to the oil and gas industries to
programs promoting energy efficiency, conservation and renewable
energy alternatives.
However, the budget adds only one small subsidy for green energy
production worth just $5 million over two years. The Accelerated
Capital Cost Allowance for clean energy generation equipment is
expanded to cover several new items. This allowance permits a faster
than normal write-off of investments in equipment that generates
electricity or heat by using renewable or waste sources or by using
fossil fuel efficiently.
There is no change to any major subsidy program, especially the
Accelerated Capital Cost Allowance for tar sands. This should be
ended immediately instead of the very slow phase-out by 2015 announced
in last year’s budget (which may only encourage companies
to speed up the pace of tar sands development in the meantime).
The budget announces that the EcoAuto program that gives consumers
rebates of $1,000 to $2,000 for the purchase of fuel-efficient
vehicles will not be available beyond the 2008 model year. This
is no great loss as this program is a very inefficient means of
reducing greenhouse gas (GHG) emissions, costing up to $5,600 per
tonne of CO2e reduced. The $2,000 to $4,000 Green Levy on gas guzzling
vehicles was not removed, although this is also not a very efficient
program for reducing GHG emissions.
The budget does not change the $1.5 billion EcoEnergy for biofuels
subsidy over 7 years announced last year nor the $500 million announced
then for research into the next generation of biofuels. However,
it does include a new grant of “$10 million over two
years for scientific research and analysis on biofuels emissions
to support the development of regulations, and demonstration projects
to verify that new blended renewable diesel is safe and effective
for the Canadian climate and conditions.”
Does this allocation imply a questioning of the efficacy
of biofuels for achieving GHG reduction? Recent studies in Science
magazine conclude that when land clearance is taken into account,
all major biofuels cause a net increase in GHG emissions. There
is an additional allocation of up to $3 million over two years to Natural Resources
Canada for a pilot program to promote “E85 fuels” (mixtures
that contain 85 per cent ethanol and 15 per cent gasoline).
The funding is for a program to demonstrate E85 fuelling infrastructure
and promote the commercialization of E85 fuels.
There is $250-million over five years to support research and
development projects for more fuel-efficient vehicles. This subsidy
is intended to help automakers meet the lowest common denominator
North American standard for average fuel economy of 6.7 litres
per 100 kilometres by 2020. This goal ignores the more stringent
California standard that would reach the same goal four years earlier.
More significantly, the scale of GHG emission reductions necessary
to avoid catastrophic climate change will require a huge transformation
from the prevailing car culture to public transit. Ever increasing
growth in the number of private vehicles is likely to cancel out
any benefits from more fuel-efficient vehicles.
An additional $300 million subsidy to Atomic Energy of Canada
Limited (AECL) for 2008–09 “for its operations,
including the development of its next generation nuclear power
reactor” is framed as a “clean energy” initiative.
However, many Canadians question how clean or emission-free nuclear
power really is given GHG emissions associated with uranium mining
and nuclear-waste disposal. This large subsidy augments the $100
million annual subsidy the government already gives to the crown
corporation for research. Last year the government earmarked another
$500 million over five years for AECL’s decommissioning and
waste management plan. Some observers suggest this new spending
might be a prelude to the privatization of AECL.
The budget also announces increased capital cost allowances for
CO2 pipelines and for pumping and compression equipment on CO2
pipelines. These expenditures subsidize petroleum companies that
could well afford to pay for carbon capture and storage systems
themselves since they earned a record $31.1 billion in profits
in 2006.
b) Taxation and Spending Initiatives
The most notable omission from the budget is any mention of a
carbon tax. The province of British Columbia set an important precedent
in its own 2008 budget with the introduction of a $10 per tonne
tax on CO2 emissions that will rise to $30 per tonne in five years.
KAIROS research shows how redirecting subsidies alone will not
reduce our GHG emissions to the levels required to meet our Kyoto
commitments. A tax on carbon emissions is urgently needed to promote
energy efficiency, conservation and markets for low-carbon alternatives.
There is also a need for firm limits (known as hard caps) on GHG
emissions from large industrial emitters. But the budget only re-iterates
the government’s intention to set intensity reduction targets
for large final emitters by 2010. These intensity targets will
allow total GHG emissions to increase. The budget announces spending
of $66 million over two years to set up an electronic tracking
system and a reporting system to administer this intensity-based
system.
Other spending initiatives are for $240 million to
help Saskatchewan build a carbon-capture system for its coal plants
and $5 million to help Nova Scotia research the feasibility of
carbon capture there. There are still many questions about whether
carbon capture and storage can be effective for coal-fired electrical
generation and in the tar sands. Some environmentalists call the
very idea of “clean coal” an oxymoron.
The budget makes a small change to the $33-billion
Building Canada infrastructure plan announced in 2007, part of
which is available to municipalities for public transit, water
and wastewater treatment and local roads. The 2008 budget makes
the $2 billion per year Gas Tax Fund a permanent measure beyond
2013–14. It is not clear how much of this fund will eventually
finance GHG-reducing public transit and how much will go to expanding
motorways.
Another spending initiative sets aside “up to $500 million
in 2007–08 to be paid into a third-party trust, allocated
on a provincial-territorial per capita basis, for public transit
infrastructure”. It may be used for projects such as Vancouver's
Evergreen Light Rapid Transit System, the re-establishment of a
rail link between Toronto and Peterborough, and rapid transit routes
to Montreal airports. While this initiative is welcome it falls
short of the additional $2 billion a year that municipalities actually
need for transit systems.
Another omission from the budget is the absence of any new spending
for building retrofits, especially for buildings inhabited by low-income
Canadians.
All in all, the budget falls far short of the vision needed to
urgently address climate change concerns. It indicates that Canada
will continue to be a laggard rather than a leader on this critical
global issue.
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Poverty reduction
a) Poverty in Canada
The 2008 federal budget does little to contribute to poverty reduction
in Canada.
Given that corporations reaped record profits in 2007, and the
federal government posted budget and EI surpluses of $13 billion
and $2.7 billion respectively, Budget 2008 represented an important
opportunity to strategically invest in people, infrastructure,
services and the environment. Instead, the government chose to
focus on paying down the debt and offering further tax breaks to
companies and individuals.
Measures to address pressing social and economic issues, such
as homelessness, poverty and Indigenous peoples’ rights,
are glaringly absent. Inequality is already on the rise in Canada.
This budget will only exacerbate inequality and its threat to social
cohesion and social justice in our country.
The first problem is the obsession with debt repayment. Over ten
billion dollars will go towards paying down the debt in 2008, a
use of dollars that the Caledon Institute argues against, since “faster
debt repayment only has a very small impact on the speed to which
debt-to-GDP ratio falls” as this ratio falls naturally as
the economy grows.
The second problem is the continued focus on tax reduction, which
will take an estimated $130 billion out of the government’s
coffers over the next six years. Tax cuts disproportionately benefit
the wealthy, since they reduce taxes only for those who owe taxes
(not the poorest) and they lead to reductions in government transfers
to more marginalized groups.
While more detailed analysis is needed on the impact of the new
individual tax break--Tax Free Savings Accounts--it appears likely
that this will primarily benefit people in upper tax brackets who
are able to save $5,000 year after year and to reinvest the resulting
investment income. The Canadian Labour Congress estimates that
half the benefit will go to seniors, and this will be heavily tilted
towards the financially secure.
The budget’s few measures aimed at addressing poverty and
the needs of the vulnerable are severely limited in scope:
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The new Employment Insurance Financing Board to ensure, starting
in 2009, that EI premiums are dedicated exclusively to the
EI program is a step in the right direction. However, the Board
will be provided with only $2 billion to reinvest. This ignores
the previously accumulated $51 billion surplus taken out of
the EI fund and largely used to pay down debt.
- The $110 million for “demonstration projects to develop
best practices to help Canadians facing mental health and homelessness
challenges” is welcome, but unlikely to lead to new knowledge
about what is needed to address mental health issues – namely
affordable homes and accessible and appropriate services.
Beyond these two measures, much is missing:
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There is not a single penny in new spending for affordable
housing even though all three national housing and homelessness
programs are due to expire in March 2009.
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There is no new money for childcare.
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Despite calls from the NDP and Liberals and many others, there
is no announcement of significant poverty reduction measures--no
poverty reduction strategy, no poverty reduction targets.
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There is no expansion of the Working Income Tax Benefit (WITB)
despite indications in the 2007 budget that the WITB would
receive Advantage Canada funds from the budget surplus.
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There is no increase to the Canada Child Tax Benefit, which
remains stuck at 2006 levels.
b) Reducing poverty among Indigenous peoples
Indigenous peoples across Canada were profoundly disappointed
with the 2008 federal budget, saying that the dollars set aside
to clean up dirty drinking water and improve education and health
standards on reserves are grossly insufficient.
Specifically, the 2008 federal budget allocates the following
amounts for Indigenous programs and initiatives.
- $70 million over two years for measures to foster Aboriginal
economic development.
- $70 million over two years to improve First Nations education
outcomes.
- $147 million over two years to improve First Nations
and Inuit health outcomes.
- $43 million over two years for prevention-based models
of child and family services on reserves.
- $330 million over two years to improve access to safe
drinking water in First Nations.
Assembly of First Nations (AFN) National Chief Phil Fontaine said
the government’s budget ignores plans put forward by First
Nations in pre-budget submissions and in meetings with government
officials. The AFN pointed out that First Nations students receive
$2,000 less than students in mainstream schools, and that this
budget does nothing to address that. The AFN is very concerned
that this budget eliminates almost any opportunity to move forward
and make progress.
Federation of Saskatchewan Indians Nations Chief Lawrence Joseph
called the budget a “tool of oppression” because it
does not contribute to economic self-sufficiency and does nothing
to reduce dependency on government.
c) Reducing poverty among Migrants
The 2008 budget clearly caters to market needs for cheap insecure
labour. "Modernizing the immigration system" means priority
is given to temporary migration as apposed to creating a path that
will lead to permanent residence for "low skills" migrant
workers like those in the seasonal agricultural worker program
(SAWP). This budget, in its own words, will "enable employers
to bring in workers more quickly to address their immediate labour
shortages." The new Canada Experience Class program referred
to in budget 2008, with its pledge to attract and retain the "best
and the brightest", will exclude seasonal agricultural workers.
There is hardly any mention of family reunification
and Canada's humanitarian commitments. There is also nothing in
this budget that indicates Canada's desire to offer temporary foreign
workers opportunities to obtain permanent residence.
d) Reducing poverty in the global South
There is very little in the budget concerning Canadian programs
for overcoming global poverty.
The budget repeats a previous promise to “double international
assistance to $5 billion by 2010–11.” However,
this nominal increase will still only represent about 0.3% of Gross
National Income, far below the internationally agreed target of
0.7%.
The budget also says Canada will double aid to Africa by 2008–09.
This is a welcome commitment. However, the Finance Minister has
made no response to KAIROS requests that Canada advocate for changes
to conditions imposed by the International Monetary Fund (IMF)
that prevent aid from being spent on urgent anti-poverty measures.
The budget also announced $450 million over the next three
years for the Global Fund to Fight AIDS, Tuberculosis and
Malaria. While this commitment is important, the amount is only
half as much as would be provided were Canada to pay its fair share
of the Global Fund’s needs.
Finally, the budget says the Minister of International Cooperation
will soon announce details of a plan to transform how Canada delivers
aid around the world. Many non-governmental organizations are apprehensive
about what this plan may entail given how Conservative Senators
have held up approval of a bill, already passed by opposition MPs
in the House of Commons, that would make fighting poverty the principal
goal of Canadian development assistance.
See these links for other commentaries on the budget from the Campaign
2000, Canadian
Centre for Policy Alternatives, the Canadian
Labour Congress, and the Canadian
Housing and Renewal Association.
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