

Currently released so far... 12478 / 251,287
Browse latest releases
2010/12/01
2010/12/02
2010/12/03
2010/12/04
2010/12/05
2010/12/06
2010/12/07
2010/12/08
2010/12/09
2010/12/10
2010/12/11
2010/12/12
2010/12/13
2010/12/14
2010/12/15
2010/12/16
2010/12/17
2010/12/18
2010/12/19
2010/12/20
2010/12/21
2010/12/22
2010/12/23
2010/12/24
2010/12/25
2010/12/26
2010/12/27
2010/12/28
2010/12/29
2010/12/30
2011/01/01
2011/01/02
2011/01/04
2011/01/05
2011/01/07
2011/01/09
2011/01/10
2011/01/11
2011/01/12
2011/01/13
2011/01/14
2011/01/15
2011/01/16
2011/01/17
2011/01/18
2011/01/19
2011/01/20
2011/01/21
2011/01/22
2011/01/23
2011/01/24
2011/01/25
2011/01/26
2011/01/27
2011/01/28
2011/01/29
2011/01/30
2011/01/31
2011/02/01
2011/02/02
2011/02/03
2011/02/04
2011/02/05
2011/02/06
2011/02/07
2011/02/08
2011/02/09
2011/02/10
2011/02/11
2011/02/12
2011/02/13
2011/02/14
2011/02/15
2011/02/16
2011/02/17
2011/02/18
2011/02/19
2011/02/20
2011/02/21
2011/02/22
2011/02/23
2011/02/24
2011/02/25
2011/02/26
2011/02/27
2011/02/28
2011/03/01
2011/03/02
2011/03/03
2011/03/04
2011/03/05
2011/03/06
2011/03/07
2011/03/08
2011/03/09
2011/03/10
2011/03/11
2011/03/13
2011/03/14
2011/03/15
2011/03/16
2011/03/17
2011/03/18
2011/03/19
2011/03/20
2011/03/21
2011/03/22
2011/03/23
2011/03/24
2011/03/25
2011/03/26
2011/03/27
2011/03/28
2011/03/29
2011/03/30
2011/03/31
2011/04/01
2011/04/02
2011/04/03
2011/04/04
2011/04/05
2011/04/06
2011/04/07
2011/04/08
2011/04/09
2011/04/10
2011/04/11
2011/04/12
2011/04/13
2011/04/14
2011/04/15
2011/04/16
2011/04/17
2011/04/18
2011/04/19
2011/04/20
2011/04/21
2011/04/22
2011/04/23
2011/04/24
2011/04/25
2011/04/26
2011/04/27
2011/04/28
2011/04/29
2011/04/30
Browse by creation date
Browse by origin
Embassy Athens
Embassy Asuncion
Embassy Astana
Embassy Asmara
Embassy Ashgabat
Embassy Apia
Embassy Ankara
Embassy Amman
Embassy Algiers
Embassy Addis Ababa
Embassy Accra
Embassy Abuja
Embassy Abu Dhabi
Embassy Abidjan
Consulate Auckland
Consulate Amsterdam
Consulate Adana
American Institute Taiwan, Taipei
Embassy Bujumbura
Embassy Buenos Aires
Embassy Budapest
Embassy Bucharest
Embassy Brussels
Embassy Bridgetown
Embassy Bratislava
Embassy Brasilia
Embassy Bogota
Embassy Bishkek
Embassy Bern
Embassy Berlin
Embassy Belmopan
Embassy Belgrade
Embassy Beirut
Embassy Beijing
Embassy Banjul
Embassy Bangkok
Embassy Bandar Seri Begawan
Embassy Bamako
Embassy Baku
Embassy Baghdad
Consulate Barcelona
Embassy Copenhagen
Embassy Conakry
Embassy Colombo
Embassy Chisinau
Embassy Caracas
Embassy Canberra
Embassy Cairo
Consulate Curacao
Consulate Ciudad Juarez
Consulate Chennai
Consulate Casablanca
Consulate Cape Town
Consulate Calgary
Embassy Dushanbe
Embassy Dublin
Embassy Doha
Embassy Djibouti
Embassy Dili
Embassy Dhaka
Embassy Dar Es Salaam
Embassy Damascus
Embassy Dakar
Consulate Dubai
Embassy Helsinki
Embassy Harare
Embassy Hanoi
Consulate Ho Chi Minh City
Consulate Hermosillo
Consulate Hamilton
Consulate Hamburg
Consulate Halifax
Embassy Kyiv
Embassy Kuwait
Embassy Kuala Lumpur
Embassy Kinshasa
Embassy Kingston
Embassy Kigali
Embassy Khartoum
Embassy Kathmandu
Embassy Kampala
Embassy Kabul
Consulate Kolkata
Embassy Luxembourg
Embassy Luanda
Embassy London
Embassy Ljubljana
Embassy Lisbon
Embassy Lima
Embassy Lilongwe
Embassy La Paz
Consulate Lahore
Consulate Lagos
Mission USOSCE
Mission USNATO
Mission UNESCO
Embassy Muscat
Embassy Moscow
Embassy Montevideo
Embassy Monrovia
Embassy Minsk
Embassy Mexico
Embassy Mbabane
Embassy Maputo
Embassy Manila
Embassy Manama
Embassy Managua
Embassy Malabo
Embassy Madrid
Consulate Munich
Consulate Mumbai
Consulate Montreal
Consulate Monterrey
Consulate Milan
Consulate Melbourne
Embassy Nicosia
Embassy Niamey
Embassy New Delhi
Embassy Ndjamena
Embassy Nassau
Embassy Nairobi
Consulate Naples
Consulate Naha
Embassy Pristina
Embassy Pretoria
Embassy Prague
Embassy Port Of Spain
Embassy Port Louis
Embassy Port Au Prince
Embassy Phnom Penh
Embassy Paris
Embassy Paramaribo
Embassy Panama
Consulate Peshawar
REO Basrah
Embassy Rome
Embassy Riyadh
Embassy Riga
Embassy Reykjavik
Embassy Rangoon
Embassy Rabat
Consulate Rio De Janeiro
Consulate Recife
Secretary of State
Embassy Suva
Embassy Stockholm
Embassy Sofia
Embassy Skopje
Embassy Singapore
Embassy Seoul
Embassy Sarajevo
Embassy Santo Domingo
Embassy Santiago
Embassy Sanaa
Embassy San Salvador
Embassy San Jose
Consulate Strasbourg
Consulate St Petersburg
Consulate Shenyang
Consulate Shanghai
Consulate Sapporo
Consulate Sao Paulo
Embassy Tunis
Embassy Tripoli
Embassy Tokyo
Embassy The Hague
Embassy Tel Aviv
Embassy Tehran
Embassy Tegucigalpa
Embassy Tbilisi
Embassy Tashkent
Embassy Tallinn
Consulate Toronto
Consulate Tijuana
USUN New York
USEU Brussels
US Office Almaty
US Mission Geneva
US Interests Section Havana
US Delegation, Secretary
UNVIE
Embassy Ulaanbaatar
Embassy Vilnius
Embassy Vienna
Embassy Vatican
Embassy Valletta
Consulate Vladivostok
Consulate Vancouver
Browse by tag
AU
ASEC
AE
AF
AORC
AEMR
AMGT
ABUD
AFFAIRS
APER
AS
AMED
AY
AG
AR
AJ
AL
AID
AM
AODE
ABLD
AMG
AFIN
ATRN
AGAO
AFU
AN
AA
ALOW
APECO
ADM
ARF
ASEAN
APEC
AMBASSADOR
AO
ASUP
AZ
AADP
ACOA
ANET
AMCHAMS
ACABQ
ASECKFRDCVISKIRFPHUMSMIGEG
APCS
AGMT
AINF
AIT
AORL
ACS
AFSI
AFSN
ACBAQ
AFGHANISTAN
ADANA
ADPM
AX
ADCO
AECL
AMEX
ACAO
ASCH
AORG
AGR
AROC
ASIG
AND
ARM
AQ
ATFN
AC
AUC
ASEX
AER
AVERY
AGRICULTURE
BL
BR
BO
BA
BD
BM
BK
BG
BU
BB
BH
BTIO
BY
BEXP
BP
BE
BRUSSELS
BF
BIDEN
BT
BX
BC
BILAT
BN
BBSR
BTIU
BWC
BMGT
CA
CASC
CVIS
CM
CH
CO
CU
CD
CWC
CI
CS
CY
CMGT
CF
CG
CR
CB
CV
CW
CE
CBW
CT
CPAS
COUNTERTERRORISM
CJAN
CODEL
CIDA
CDG
CDC
CIA
CTR
CNARC
CSW
CN
CONS
CLINTON
COE
CROS
CARICOM
CONDOLEEZZA
COUNTER
CL
COM
CICTE
CIS
CFED
COUNTRY
CJUS
CBSA
CEUDA
CLMT
CAC
COPUOS
CIC
CBE
CHR
CTM
CVR
CITEL
CLEARANCE
CACS
CAN
CITT
CARSON
CACM
CDB
CAPC
CKGR
CBC
EC
EG
EPET
ECON
ETRD
EFIN
EIND
EMIN
ENRG
EAID
EAGR
EUN
ETTC
EAIR
ENIV
ES
EU
EINV
ELAB
ECIN
EFIS
ELTN
EWWT
ECPS
ECONOMIC
ENGR
EN
EINT
EPA
ELN
ESA
EZ
ER
ET
EFTA
EINVECONSENVCSJA
EUMEM
ETRA
EXTERNAL
EI
EUR
EK
ERNG
ENGY
ETRDEINVECINPGOVCS
ENERG
EINVEFIN
ENVR
ECA
ELECTIONS
ETC
EUREM
ENNP
EFINECONCS
EURN
ECINECONCS
EEPET
EXIM
ERD
ENVI
ETRC
ETRDEINVTINTCS
ETRO
EDU
ETRN
EAIG
ECONCS
ECONOMICS
EAP
ECONOMY
EINN
EIAR
EXBS
ECUN
EINDETRD
EREL
EUC
ESENV
ECONEFIN
ECIP
EFIM
EAIDS
ETRDECONWTOCS
EUNCH
EINVETC
IZ
IT
IR
IS
IN
IC
IAEA
IO
ICAO
IWC
ID
IV
ISRAEL
IAHRC
IQ
ICTR
IMF
IRS
IDP
IGAD
ICRC
ICTY
IMO
IL
INRA
INRO
ICJ
ITU
IBRD
INMARSAT
IIP
ITALY
IEFIN
IACI
ILO
INTELSAT
ILC
ITRA
IDA
INRB
IRC
INTERPOL
IA
IPR
IRAQI
ISRAELI
INTERNAL
ISLAMISTS
INDO
ITPHUM
ITPGOV
ITALIAN
IBET
INR
IEA
IZPREL
IRAJ
ITF
IF
KDEM
KU
KPAL
KNNP
KCRM
KZ
KN
KS
KJUS
KTFN
KSCA
KV
KISL
KPAO
KPKO
KIRF
KTIA
KIPR
KFLO
KFRD
KTIP
KAWC
KSUM
KCOM
KAID
KE
KTDB
KMDR
KOMC
KWBG
KDRG
KVPR
KTEX
KGIC
KWMN
KSCI
KCOR
KACT
KDDG
KHLS
KSAF
KFLU
KSEO
KMRS
KSPR
KOLY
KSEP
KVIR
KGHG
KIRC
KUNR
KIFR
KCIP
KMCA
KMPI
KBCT
KHSA
KICC
KIDE
KCRS
KMFO
KRVC
KRGY
KR
KAWK
KG
KFIN
KHIV
KBIO
KOCI
KBTR
KNEI
KPOA
KCFE
KPLS
KSTC
KHDP
KPRP
KCRCM
KLIG
KCFC
KTER
KREC
KTBT
KPRV
KSTH
KRIM
KRAD
KWAC
KWMM
KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG
KOMS
KX
KMIG
KRCM
KVRP
KBTS
KPAONZ
KNUC
KNAR
KPWR
KNPP
KDEMAF
KNUP
KNNPMNUC
KERG
KGIT
KPAI
KTLA
KFSC
KCSY
KSAC
KTRD
KID
KOM
KMOC
KJUST
KGCC
KREL
KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG
KFTFN
KO
KNSD
KHUM
KSEC
KCMR
KCHG
KICA
KPIN
KESS
KDEV
KCGC
KWWMN
KPAK
KWNM
KWMNCS
KRFD
MOPS
MCAP
MPOS
MARR
MO
MNUC
MX
MASS
MG
MY
MU
ML
MR
MILITARY
MTCRE
MT
MEPP
MA
MDC
MP
MAR
MASSMNUC
MARAD
MAPP
MZ
MD
MI
MEETINGS
MK
MCC
MEPN
MRCRE
MAS
MIL
MASC
MC
MV
MTCR
MIK
MUCN
MEDIA
MERCOSUR
MW
MOPPS
MTS
MLS
MILI
MTRE
MEPI
MQADHAFI
MAPS
NO
NATO
NL
NP
NZ
NSF
NI
NH
NG
NAFTA
NU
NASA
NR
NATOPREL
NSSP
NSG
NA
NT
NW
NK
NPT
NPA
NATIONAL
NPG
NSFO
NS
NSC
NE
NGO
NDP
NIPP
NRR
NEW
NZUS
NC
NAR
NV
NORAD
OTRA
OPCW
OVIP
OAS
OREP
OPIC
OIIP
OPRC
ODIP
OEXC
OPDC
OSCE
OIC
OSCI
OECD
OFDP
OFDA
OMIG
OPAD
OFFICIALS
OVP
OIE
OHUM
OCS
OBSP
OTR
OSAC
ON
OCII
OES
PGOV
PREL
PHUM
PTER
PINS
PINR
PREF
PK
PROP
PA
PARM
PBTS
PMAR
PM
PGIV
PE
PRAM
PHUH
PHSA
PL
PNAT
PO
PLN
PAO
PSA
PHUMPGOV
PF
PEL
PBIO
POLITICS
PHUMBA
PAS
POL
PREO
PAHO
PMIL
POGOV
POV
PAK
PNR
PRL
PG
PREFA
PSI
PINL
PU
PARMS
PRGOV
PALESTINIAN
PAIGH
POLITICAL
PARTIES
POSTS
PROG
PORG
PTBS
PUNE
POLICY
PDOV
PCI
PGOVSMIGKCRMKWMNPHUMCVISKFRDCA
PBT
PP
PS
PY
PTERE
PGOF
PKFK
PSOE
PEPR
PPA
PINT
PRELP
PSEPC
PGOVE
PINF
PNG
PGOC
PFOR
PCUL
POLINT
PGGV
PHALANAGE
PARTY
PGOVLO
PHUS
PDEM
PECON
PROV
PHUMPREL
RS
RU
RELATIONS
RW
RO
RM
RP
ROOD
RICE
RUPREL
RSO
RCMP
REACTION
REPORT
REGION
RIGHTS
RF
RFE
RSP
RIGHTSPOLMIL
ROBERT
SU
SCUL
SNAR
SOCI
SF
SA
SHUM
SENV
SP
SR
SY
SANC
SC
SMIG
SZ
SARS
SW
SEVN
SO
SEN
SL
SNARCS
SNARN
SI
SG
SN
SH
SYR
SAARC
SPCE
SHI
SCRS
SENVKGHG
SYRIA
SWE
STEINBERG
SIPRS
ST
SNARIZ
SSA
SK
SPCVIS
SOFA
SIPDIS
SAN
TC
TI
TBIO
TH
TSPL
TRGY
TSPA
TPHY
TU
TW
TS
TAGS
TK
TX
TNGD
TZ
TF
TL
TV
TN
TD
TIP
TR
TP
TO
TT
TFIN
THPY
TERRORISM
TINT
TRSY
TURKEY
TBID
US
UK
UNGA
UP
UZ
UNMIK
USTR
UNO
UNSC
UN
UNESCO
UNAUS
UNHRC
UY
UG
UNHCR
UNCND
USOAS
USEU
UNICEF
UNEP
UV
UNPUOS
UNCSD
USUN
UNCHR
UNDC
USNC
UE
UNDP
UNC
USPS
USAID
UNVIE
UAE
UNFICYP
UNODC
UNCHS
UNIDROIT
UNDESCO
UNCHC
Browse by classification
Community resources
courage is contagious
Viewing cable 05OTTAWA640, CANADA'S 2005 BUDGET: SOMETHING FOR EVERYONE
If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Understanding cables
Every cable message consists of three parts:
- The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
- The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
- The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #05OTTAWA640.
Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
05OTTAWA640 | 2005-03-01 19:10 | 2011-04-28 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Ottawa |
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS E F T O SECTION 01 OF 05 OTTAWA 000640
SIPDIS
SENSITIVE
DEPARTMENT FOR EB/IFD, EB/OMA, WHA/EPSC, AND WHA/CAN
STATE PASS FEDERAL RESERVE BANK FOR CHUGH
STATE PASS SEC FOR JACOBS
TREASURY FOR WILBUR MONROE AND DAVID NAGOSKI
PARIS ALSO FOR USOECD
E.O. 12958: N/A
TAGS: EFIN ECON PGOV CA
SUBJECT: CANADA'S 2005 BUDGET: SOMETHING FOR EVERYONE
REF: A. OTTAWA 594 (BUDGET POLITICS)
¶B. OTTAWA 375 (BUDGET PREVIEW)
¶C. 04 OTTAWA 2779 (SURPLUS)
¶D. 04 OTTAWA 2837 (EQUALIZATION)
¶E. 04 OTTAWA 2560 (HEALTH CARE SUMMIT)
¶F. 04 OTTAWA 832 (2004 BUDGET)
¶1. Sensitive but unclassified. Not for Internet or
distribution outside the USG.
¶2. (U) Introduction and Summary: Canada's Opposition
parties were hard-pressed to complain about the minority
Liberal Party's February 23 budget. Prime Minister Paul
Martin and Finance Minister Ralph Goodale listened to
Canadians, and tabled a smorgasbord that funds Liberal
campaign promises, appeases Conservatives with tax cuts and
increases in defense spending, and provides a nod to the Left
with funding for the environment and social programs (refs A
and B). This budget takes a five-year, rather than the
previous years' two-year, outlook and continues the GOC's
commitment to "balanced budgets or better." The hefty budget
drew criticism from some for its lack of focus, its skimpy
funding for many programs, and for back-loading most spending
and tax cuts until after 2007. It is expected to be approved
by Parliament the week of March 7.
¶3. (U) With fiscal impact next year (2005-06) of C$7.4
billion (US$6 billion), new initiatives in Canada's eighth
consecutive balanced budget total C$75.7 billion (US$60
billion) through 2010, with relatively little spending in the
first two "skinny" years and most spending in the out years
(2008-10). The Liberal party campaigned on promises to boost
spending on health care (ref E), to revise equalization
payments for the provinces (ref D), and to support cities, a
national childcare program, and senior citizens. This budget
funds those priorities while adopting attractive initiatives
from the Opposition parties. The budget previews the
long-awaited (and long delayed) International Policy
Statement by providing additional money for foreign affairs,
steep increases in defense spending (someday), and continuing
the commitment to increase aid budgets by 8% a year.
¶4. (U) Although markets were largely unmoved (pre-budget
leaks were, on the whole, accurate), analysts attribute the
Canadian dollar's brief post-budget fainting spell to the
announcement that the 30% foreign content ceiling on
tax-advantaged retirement investments would be abolished.
Details of spending follow in paragraph 8. End introduction
and summary.
Notes:
-- Canada's fiscal year runs from April 1-March 31.
-- Canadian dollar amounts are converted at the exchange rate
of about C$0.80/US$1.
-- The budget documents are available at the Department of
Finance website: www.fin.gc.ca/finsearch/wn e.asp.
Assumptions
-----------
¶5. (U) Using a consensus of private-sector forecasts, the
budget assumes that Canada's economy will grow 2.9% in 2005
(slightly lower than previous forecasts), at 3.2% in 2006,
and at an average of 2.9% for 2007-2009. Growth slowed
towards the end of 2004, and expectations for economic growth
in 2005 have been revised downward as the impact of Canadian
dollar appreciation is re-assessed. The budget is based on
the assumption that in the near term the GOC will not enjoy
revenue flows that created larger-than-anticipated surpluses
in recent years.
-- Commodity prices will remain strong, providing continuing
support to the Canadian dollar.
Fiscal Projections
------------------
¶6. (U) Measures proposed since the last budget (ref F) have
a fiscal impact of C$10.9 billion (US$8.7 billion) in 2004-05
and C$7.4 billion (US$6.9 billion) in 2005-06. In addition
to the measures announced on February 23, these figures
include federal commitments made later in 2004 to fund
healthcare (ref E), revise the equalization framework (ref
D), and support those affected by the impact of discovery of
cases of BSE (bovine spongiform encephalopathy) in Canada.
After a surge in spending this fiscal year, the GOC projects
two "skinny" years before spending increases after 2007. Tax
cuts are either phased in gradually (as with elimination of
the tax on jewelry) or take effect starting in 2007 or 2008.
Total net cost of budget initiatives proposed since March
2004:
Fiscal Year C$ billions US$ billion
----------- ----------- -----------
2004-05 10.9 8.7
2005-06 7.4 6.9
2006-07 8.8 7.0
2007-08 11.1 8.9
2008-09 16.3 13.0
2009-10 21.2 17.0
Total net cost 75.7 60.6
¶7. (U) This budget continues the GOC's decade-long
commitment to debt reduction. The unexpectedly large surplus
in 2004, added to the usual annual C$3 billion set aside for
debt reduction, mean Canada's debt/GDP ratio continues to
decline, reaching 38.6% in 2004-05. The federal debt/GDP
ratio is on target to reach 30.6% by 2009-10 (down from 68.4%
in 1995 and with a goal of reaching 25% in 2015). This budget
maintains the traditional C$3 billion contingency reserve and
an additional cushion for "economic prudence." If not needed
during the year, the contingency reserve is dedicated to
reducing the federal debt. The allocation for economic
prudence increases from C$1 billion (US$800 million) next
year to C$2 billion (US$1.6 billion) in 2006-07 and C$4
billion (US$3.2 billion) in 2009-10, reflecting the increased
uncertainty in longer-term projections.
-- Program expenses: Federal program spending as a share of
GDP is expected to increase 0.6% to 12.2% in 2004-05 due to
one-time commitments to the provinces made last year.
Program expenses in 2005-06 are expected to increase only 2%,
due to the impact of the one-time measures in 2004-05 that
boosted spending by 11.9%. Growth in program expenses in
2006-07 and 2007-08 is expected to be about 5%. In the last
two years of the budget horizon the GOC anticipates growth in
program spending of about 4.5%. Overall, program spending
increases 23% through 2009-10, to C$194.5 billion (US$155.6
billion) from the current C$158.1 billion (126.5 billion).
-- Surplus: This year's surplus is expected to exceed last
year's C$9 billion (US$7 billion) windfall (ref C) but the
GOC projects declining surpluses in the next two years
(2006-07 and 2007-08). Current forecasts show increasing
surpluses after 2008 as economic growth picks up. (Note:
The surplus in 2004 and 2005 has benefited from unexpectedly
strong growth in tax revenue. Corporate tax revenues in 2004
increased 16.6% in 2004 and profits are strong this year.
Revenue from personal taxes grew by 5.8% in 2004. End note.)
The GOC budget addresses that by front-loading some spending
commitments to 2004-05 and postponing others. Over C$11
billion (nearly US$9 billion) committed to the provinces for
healthcare and equalization payments in 2004-05 are pending
Senate passage and royal assent, but are expected to be
booked by the March 31 end of this fiscal year.
-- Expenditure review: Upon taking office in December 2003,
Prime Minister Martin called for expenditure review by all
departments and agencies, with the objective of identifying
C$12 billion in low-priority spending that could be
reallocated (refs C and F). This budget reflects the result,
with C$11 billion (almost US$9 billion) in cost cutting.
Minister Goodale emphasized in his budget speech that
expenditure review will be an ongoing feature of government
operations. Changes include standardizing procurement,
upgrading technology for check processing, reducing the space
and cost of furnishings allocated to federal employees, and
improved property management. About 10% of the savings comes
from actually eliminating programs.
-- Provincial governments: The GOC has agreed to C$41.3
billion (US$33 billion) over 10 years in new health care
funding (ref E) and an increase of C$33.4 billion (US$26.7
billion) over 10 years for a new framework for "equalization"
payments from rich to poor provinces (ref D). The
consolidated provincial-territorial budgets are expected to
return to surplus this year after two years of deficit, with
combined federal, provincial and municipal surpluses of C$17
billion (US$13.6 billion). The provincial-territorial
debt/GDP ratio declines to 22.3% in 2004-05, well below the
federal level. The recent deals with the provinces have
focused attention on the ways in which the federal government
distributes revenues, with Ontario (a net donor province)
calling for more federal money.
Specific Programs: a little for everyone
-----------------------------------------
-- Diplomacy and International Relations
¶8. (SBU) This budget provides an encouraging preview of the
likely direction of the GOC's long-delayed International
Policy Statement. The Department of Foreign Affairs receives
a significant boost:
o C$42 million (US$33.6 million; "what we hoped for"
according to a policy expert at Foreign Affairs) to increase
the number of diplomats abroad. (Canada severely cut back its
overseas presence in the 1990s due to budget constraints.)
o C$59 million (US$47 million) to boost security at foreign
missions.
o C$500 million (US$400 million) over five years for new a
"Peace and Security Fund" controlled by the Department of
Foreign Affairs. (Comment: Although this money is part of
the foreign assistance envelope, it will be used to fund
foreign policy initiatives such as capacity building for
counter-terrorism and African peacekeeping; police training
(Iraq and Haiti); the Global Partnership with Russia to
dismantle nuclear weapons, and other similar projects. End
comment.)
-- Defense
¶9. (SBU) The C$12.8 billion (US$10.2 billion) headline
figure in additional spending for defense is the largest in
20 years, although most spending will be after 2008 and much
is for previously-announced projects. Spending increases in
2005-06 (C$500 million/US$400 million) and 2006-07 (C$600
million/US$480 million) are actually smaller than in past
years. By 2009, it is anticipated that the defense budget
will include additional spending of C$5.7 billion (US$4.6
billion) a year. (Note: Officials at Finance explained that
once these spending increases are implemented, the reference
level for future defense spending will be over 20% higher.
End note.) Provisions include:
o C$3 billion (US$2.4 billion) over five years to increase
the number of active duty troops by 5,000 and reservists by
3,000 and C$3.2 billion (US$2.6 billion) for sustaining
operations.
o C$2.8 billion (US$2.2 billion) to fund equipment purchases
such as transport helicopters, aircraft, and support for the
special forces teams and C$3.8 billion (US$3 billion) to fund
the "new defense policy." None of those funds will be
allocated until 2007.
-- Foreign Assistance
¶10. (U) The foreign assistance envelope increases by C$3.4
billion (US$2.7 billion) over five years, continuing the
commitment to increase foreign aid by 8% a year through 2010
and double aid to Africa from 2003 levels. As with defense,
most of the increased aid spending will come after 2006, with
only C$100 million (US$80 million) of the increase in
FY2005-06. This also signals the start of Canada's new
policy of reducing the number of its recipient countries to
target those that can make best use of assistance. The GOC
says that Canada's generous tsunami response boosted Canada's
ratio of aid to GDP to 0.3% (from 0.25%), and the new money
will allow it to maintain the 0.3% level.
-- Security
¶11. (U) C$1 billion (US$800 million) over five years is
allocated for security, including:
o C$222 million (US$178 million) for marine security (patrol
vessels in the Great Lakes and port patrols).
o C$433 million (US$346 million) for U.S.-Canada border
security. (Comment: This funding is new, and hasn't yet
been allocated. End comment.)
-- Environment
¶12. (U) Environmental programs are considered "winners," with
C$5 billion (US$4 billion) in funding, of which C$3 billion
is new, scattered through a range of programs. Canada is a
Kyoto Accord signatory, and is feeling public pressure to
start addressing emissions targets. About half the spending
provides incentives to reduce greenhouse gases, including:
o C$1 billion (US$800 million) for a "Clean Fund" to
stimulate reduction in greenhouse gases.
o C$225 million (US$180 million) over five years to subsidize
energy-efficient retrofitting of homes.
o C$200 million (US$176 million) over five years (and C$920
million over 15 years) to encourage installation of wind
power turbines;
o C$295 million (US$236 million) over five years to
accelerate the write-off of business spending on energy
efficient technology.
o C$85 million (US$68 million) over five years to combat
invasive species in the Great Lakes and
o C$209 million (US$167 million) over five years to improve
the infrastructure in national parks.
-- Taxes and Finance
¶13. (SBU) Businesses received a cumulative C$4.9 billion
(US$4 billion) in tax breaks, but they are either phased in
very gradually (such as elimination of the tax on jewelry) or
take effect after 2007. One of the most notable is the
reduction in the corporate income tax rate to 19% from 21% by
¶2010. Capital cost allowance rates will also be better
aligned with the life of the assets. (Note: We are told
that tax cuts will not be a high priority going forward. The
magnitude of corporate tax cuts probably won't change, but
implementation may be advanced. It would be hard to take
further action on corporate taxes without matching efforts on
personal taxes. End note.) Tax provisions include:
o Increasing the basic personal tax exemption to C$10,000
(US$8,000) over five years (from C$6,500 now).
o Increasing the contribution limits for tax-advantaged
retirement accounts to C$22,000 in 2010, from C$18,000 in
¶2006.
o Increasing tax benefits for those caring for disabled
dependents or adopting a child.
-- Financial sector
¶14. (U) There was reiteration of federal support
(non-financial) for "an enhanced system of securities
regulation," and the GOC plans to convene a meeting with the
provinces to work on the issue.
-- There was no mention in the budget of a long-awaited
decision on bank mergers.
-- The budget launched a review of financial institutions
legislation, seeking to "refine the current framework to
increase legislative and regulatory efficiency." The review
should result in legislation in 2006.
-- A provision removing the 30% limit on foreign content in
tax-advantaged retirement plans received widespread
attention. Analysts attribute the Canadian dollar's brief
post-budget fainting spell to this measure);
Everybody's paid, but not everybody's happy
-------------------------------------------
¶15. (SBU) A GOC fiscal expert describes the budget as a
"qualified success." The Liberals handily avoided a
no-confidence vote, but have been criticized for lack of
focus, skimpy funding for many programs, and for back-loading
the spending and the tax cuts. Several analysts commented on
the switch to a five-year horizon, despite Paul Martin's
repeated opposition to long-term budgeting while he was
finance minister. The explanation is straight-forward:
revenues in the coming two "skinny years" are inadequate to
fund campaign promises and an increasing number of
initiatives have a five-year (or longer) implementation
strategy. Finance officials say "we would have been killed"
had the budget only addressed funding for the next two years.
The five-year time frame was praised by private-sector
forecasters (and was recommended by the IMF and others) but,
given that most spending was deferred to the out-years, drew
some cynical response that this government is making promises
it may not be around to fulfill. There has also been
criticism that for a government preaching "fiscal prudence,"
this much spending is only possible due to surpluses
resulting from over-taxing Canadians.
¶16. (SBU) Some of the strongest opposition came from
officials of the Ontario Liberal Party (not to be confused
with the federal Liberals). Premier Dalton McGuinty is
outspoken about the fact that Ontario provides 40% of federal
government revenues but receives C$23 billion a year less
than it provides due to the "equalization payments" to fund
health care and other provincial services. As the central
government revises the equalization framework to provide more
goodies to Quebec, the Atlantic provinces, the west and
various interest groups (ref D), Ontario, one of the three
"donor" provinces, is starting to demand more attention.
Visit Canada's Classified Web Site at
http://www.state.sgov.gov/p/wha/ottawa
CELLUCCI