Business Leaders Support Prudent Budget, but Call for Bolder Review of Spending and Tax Policy

March 23, 2004

The federal budget tabled today by Finance Minister Ralph Goodale restores a welcome tone of prudence to the nation’s finances, says the Canadian Council of Chief Executives (CCCE).

“The decision to return the contingency reserve and prudence factors to at least $4 billion a year, the commitment to reduce the federal debt to GDP ratio to 25 percent within 10 years and a long overdue pause in the rampant growth of program spending will all help to maintain Canada’s fiscal leadership and economic competitiveness at a time of considerable global risk and uncertainty,” said the CCCE’s President and Chief Executive, Thomas d’Aquino.

The federal government rightly acknowledges the two main risks to the Canadian economic outlook: the uncertainty surrounding the impact of the rapid rise in the Canadian dollar and the sustainability of the United States economic recovery.

Mr. d’Aquino welcomed the budget’s sharp drop in spending growth.  Direct program spending, which jumped by 15 percent during the current fiscal year, will grow by just 2.3 percent in fiscal 2004/05 before moving back up to 4.9 percent in 2005/06.   Within the modest spending proposals included in the budget, the Council supports the emphasis on measures to increase access to learning, notably the new Canada Learning Bond and extension of the education tax credit to employees who pursue career-related studies at their own expense.

The Council also supports the strong commitment to strengthen transparency and accountability in the management of federal spending, Mr. d’Aquino said.  He noted in particular the new internal controls and plans to improve the governance of Crown corporations.

While fully supporting the budget’s commitment to a rigorous and ongoing expenditure review process, the Council expressed disappointment over the relatively modest target of identifying an additional $3 billion in reallocations over a four-year period.  “We believe that the target for spending review and reallocation should be at least $3 billion in each and every year, not because we want to slash government spending, but because we see the need for substantial new investments in areas such as health care and defence that will have to be funded internally,” Mr. d’Aquino said.

While recognizing that the government’s current fiscal constraints prevented any ambitious new fiscal initiatives, the Council also expressed concern about the lack of attention paid to tax policy in this year’s budget.

“Modest measures to improve productivity such as faster write-offs for investments in new computers are welcome, but the budget seems to have lost sight of the critical role of tax policy in fostering business investment, job creation and rising incomes for Canadians.  We hope that the coming federal election campaign will provide an opportunity to consider bold new ideas for tax reduction and tax reform,” Mr. d’Aquino said.

The CCCE is Canada’s senior business organization and is devoted to strengthening the country’s economy and society through the development of sound public policy in Canada, North America and the world. Its member chief executives head companies that administer more than $2.3 trillion in assets, have annual revenues of close to $600 billion and account for a significant majority of Canada’s private sector investment, exports, training and research and development.

In addition to Mr. d’Aquino, the members of the CCCE’s Executive Committee are: Chairman Richard L. George, President and Chief Executive Officer of Suncor Energy Inc.; Honorary Chairman A. Charles Baillie; and Vice-Chairmen Derek H. Burney, Dominic D’Alessandro, Paul Desmarais, Jr., Gwyn Morgan, Gordon Nixon and Paul M. Tellier, the chief executives respectively of CAE, Manulife Financial, Power Corporation of Canada, EnCana Corporation, Royal Bank of Canada and Bombardier Inc.