The Next Phase of Canada’s Economic Action Plan —A Low-Tax Plan for Jobs and Growth

The Next Phase of Canada’s Economic Action Plan—A Low-Tax Plan for Jobs and Growth will invest in the key drivers of economic growth—innovation, investment, education and training—and will seek to foster an environment in which all Canadians contribute to and benefit from a stronger economy. In doing so, the Government will reinforce Canada’s comparative advantages.

The Government will build on the sustainable low-tax environment and growth-friendly policies put in place since 2006. The focus of the Next Phase of Canada’s Economic Action Plan will be supporting job creation, supporting families and communities, investing in innovation, education and training, and preserving Canada’s fiscal advantage.

Supporting Job Creation by helping businesses and entrepreneurs succeed, keeping taxes low, investing in projects of national importance, and maintaining Canada’s brand as one of the best places to invest. Budget 2011 advances these priorities by:

• Providing a temporary Hiring Credit for Small Business to encourage additional hiring by this vital sector.
• Extending the work-sharing program and the Targeted Initiative for Older Workers to help Canadians in some of the hardest hit areas stay in the workforce.
• Supporting the manufacturing and processing sector by extending the accelerated capital cost allowance treatment for investments in manufacturing and processing machinery and equipment for two years.
• Renewing the Best 14 Weeks and Working While on Claim EI pilot projects for one year.
• Extending the temporary 15-per-cent Mineral Exploration Tax Credit for an additional year (until March 31, 2012) to continue to help companies raise capital for mineral exploration.
• Providing renewed funding of almost $100 million over two years for research, development and demonstrations of clean energy and energy efficiency.
• Contributing $150 million toward the construction of an all-season road between Inuvik and Tuktoyaktuk that completes the Dempster Highway, connecting Canadians from coast to coast to coast.

Supporting Families and Communities so that all Canadians enjoy a high standard of living and our communities stay vibrant and safe. Budget 2011 invests in these goals by:

• Enhancing the Guaranteed Income Supplement (GIS) for those seniors who rely almost exclusively on their Old Age Security and the GIS and may therefore be at risk of experiencing financial difficulties. This measure will provide a new top-up benefit of up to $600 annually for single seniors and $840 for couples. This measure represents an investment of more than $300 million per year, and will improve the financial security of more than 680,000 seniors across Canada.
• Attracting more health care workers to underserved rural and remote communities by forgiving up to $40,000 of the federal component of Canada Student Loans for new family physicians and up to $20,000 for nurse practitioners and nurses.
• Introducing a Family Caregiver Tax Credit and Children’s Arts Tax Credit to support Canadian families.
• Introducing a Volunteer Firefighters Tax Credit for volunteer firefighters who perform at least 200 hours of service in their communities.
• Providing nearly $870 million over two years to address climate change and air quality, including the extension of the ecoENERGY Retrofit – Homes program that will help homeowners make their homes more energy efficient and reduce the burden of high energy costs.

Investing in Innovation, Education and Training to promote research in leading-edge technologies and to provide Canadians with the opportunity and incentives to acquire the skills needed for jobs in today’s labour market. Budget 2011 makes important progress on these priorities by:

• Providing $80 million in new funding over three years through the Industrial Research Assistance Program to help small and medium-sized businesses accelerate their adoption of key information and communications technologies through collaborative projects with colleges.
• Establishing 10 new Canada Excellence Research Chairs. Some of these new chairs will be active in fields relevant to Canada’s Digital Economy Strategy.
• Increasing the budgets of all three federal granting councils by $47 million annually, including support for indirect costs.
• Improving commercialization and supporting demonstration of new technologies in the marketplace by supporting research links between colleges, universities and businesses.
• Enhancing and expanding eligibility for the Canada Student Loan and Grant Program for part-time and full-time post-secondary students.
• Helping apprentices in the skilled trades and workers in regulated professions by making occupational, trade and professional examination fees eligible for the Tuition Tax Credit.

Preserving Canada’s Fiscal Advantage in order to be able to invest in the priorities of Canadians, to keep Canada’s economy growing strongly, and to maintain low interest rates. Budget 2011 advances these objectives by:

• Reaffirming the Government’s plan to return to balanced budgets without raising taxes, cutting transfers to persons, including those for seniors, children and the unemployed, or cutting transfers to other levels of government that support health care and social services, Equalization, and the gas tax transfer to municipalities.
• Identifying savings that reach over $500 million annually from the 2010 round of strategic reviews. Together with measures to restrain the growth of National Defence spending, the first cycle of strategic reviews has resulted in $11 billion in savings over seven years and more than $2.8 billion in ongoing savings.
• Protecting the integrity and fairness of the Canadian tax system by closing tax loopholes.

The deficit in 2012–13 is projected to be cut by almost two-thirds from its level in 2009–10, and it is projected to shrink by more than 25 per cent again in 2011–12. The deficit is projected to continue to decline to $0.3 billion in 2014–15. It is expected that there will be a surplus of $4.2 billion in 2015–16.

In addition, the Government is moving forward with a comprehensive review of direct program spending to be completed in 2011–12. The Strategic and Operating Review will build on the first cycle of strategic reviews to support the return to balanced budgets by 2014-15, and provide fiscal room to continue paying down debt and investing in the priorities of Canadians, including lowering taxes for families. The review will focus on improving the efficiency and effectiveness of government operations and programs to ensure value for taxpayer money.

Without including any targeted savings from the Strategic and Operating Review, the Government is projected to return to balanced budgets by 2015-16. The Government remains committed to balancing the budget one year earlier, by 2014-15. It will achieve this by reducing expenses through the Strategic and Operating Review. The budgetary savings associated with the Strategic and Operating Review will be reflected in the Government’s fiscal projections once these actions are determined and implemented in Budget 2012.

Going forward, the Government will maintain its focus on the priorities set out in the Next Phase of Canada’s Economic Action Plan. The cornerstone of this plan will be returning to balanced budgets.

Based on the latest reporting from our partners, over 28,500 Economic Action Plan projects have been completed or are underway across Canada. These include:

• Over 8,100 provincial, territorial and municipal infrastructure projects, including over 4,100 Infrastructure Stimulus Fund projects, and over 2,000 Recreational Infrastructure Canada projects.
• Over 14,000 social housing and First Nations housing projects.
• Over 500 projects to improve infrastructure at colleges and universities.
• Almost 1,900 projects to assist communities hardest hit by the recession through the Community Adjustment Fund.
• Over 2,100 projects to renovate and repair Crown-owned buildings, including 300 projects to enhance accessibility for persons with disabilities.
• 272 projects to improve small craft harbours.
• 140 cultural infrastructure projects.
• 230 projects to upgrade facilities at National Parks
  and National Historic Sites.
• Over 200 projects to modernize federal laboratories.
• Almost 100 major infrastructure projects in First Nations communities.

In addition to delivering an immediate boost to local jobs and incomes, these projects will continue to deliver benefits to communities for many years ahead. For example, improvements to roads and bridges will reduce travel times for commuters and speed delivery of goods and services; better water systems and recreational infrastructure will keep Canadians healthy and active; and investments in post-secondary education will help to attract the best minds to our colleges and universities.

The significant and timely stimulus has contributed to a major acceleration in government infrastructure investment. As of the fourth quarter of 2010, government infrastructure investment was $7.5 billion higher than the trend in place prior to the implementation of the Economic Action Plan, which has delivered a major boost to jobs and growth. This performance is in sharp contrast to that of the U.S., where government capital investment has remained near its trend over the last two years.

Infrastructure investments through Canada's Economic Action Plan have in turn contributed to a solid recovery in employment. Indeed, Canada's labour market has performed better than those of its G-7 peers, with Canada posting the strongest employment growth among G-7 countries since June 2009.

The rollout of one of the most ambitious infrastructure investments in Canadian history represents a major achievement requiring the coordination and effort of countless individuals working in the private sector and across multiple levels of government.

In order to provide additional flexibility to the Government's partners, a one-time extension of the completion deadline, from March 31, 2011 to October 31, 2011, was announced for projects under four programs: the Infrastructure Stimulus Fund, the Building Canada Fund Communities Component Top-Up, the Knowledge Infrastructure Program and the Recreational Infrastructure Canada program.

Provinces and territories have since requested extensions for a total of roughly 2,200 projects under the four programs. They have indicated that approximately $6 billion out of a total of $7 billion in federal contributions available through the four infrastructure programs will be claimed within the original two-year window. The remaining $1 billion is expected to flow in 2011–12.

Moving to the Next Phase of Canada's Economic Action Plan

Because the stimulus in Canada's Economic Action Plan was designed to provide temporary support to the economy, the vast majority of initiatives announced in Budget 2009 will wind down as planned on March 31, 2011. Canada's Economic Action Plan succeeded in creating jobs and growth when support was needed most. As the Economic Action Plan moves into a new phase focused on long-term growth and prosperity, the investments made to combat the global economic recession will continue to pay benefits. For example, the tens of thousands of infrastructure projects funded through the Plan will leave a legacy of more efficient transportation networks, cleaner water systems and improved recreational facilities that will make our economy more competitive and increase our standard of living.

Permanent tax reductions announced in the Plan and provided by the Government since 2006 will allow hard-working Canadians to keep more of their earnings, while encouraging business investment and supporting job growth.

In short, by supporting productive investments, Canada's Economic Action Plan has helped lay the foundation for long-term economic growth and prosperity.