The New Federal Budget
The Empire Club of Canada Addresses (Toronto, Canada), 5 May 2006, p. 494-503
Flaherty, The Hon. James M., Speaker
Media Type
Item Type
A joint meeting of The Empire Club of Canada and The Canadian Club of Toronto.
The nature of public life. The broad principles that formed the basis of Prime Minister Harper's campaign - that underline the five priorities on which the government is focussed. These five priorities as the core underpinnings of the budget. Discussion followed under the headings of these core underpinnings: Principles; Tax Relief; Investing in Priorities; Expenditure Management; Infrastructure; Productivity; Conclusion. Turning a new leaf with this budget and the ways in which this is so.
Date of Original
5 May 2006
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Full Text
The Hon. James M. Flaherty
Minister of Finance, Government of Canada
The New Federal Budget
Chairman: William G. Whittaker
President, The Empire Club of Canada
Head Table Guests

Libby Burnham, QC, DCL, Counsel, Brown Sosnovitch LLP, and Past President and Honorary Director, The Canadian Club of Toronto; Jen Bok, Grade 12 Student, North Toronto Collegiate Institute; Rev. Canon Dr. George Sumner, Principal, Wycliffe Theological College, University of Toronto; Karen Stintz, Councillor, Ward 16, Eglinton-Lawrence, City of Toronto; Duncan N. R. Jackman, Chairman and President, E-L Financial Corporation Ltd., and Director, The Empire Club of Canada; Nicky Eaton, Vice-Chair, St. Michael's Hospital Foundation, Governor, Royal Ontario Museum, and Director, Conservative Fund of Canada; Ivan Fecan, President and CEO, Bell Globemedia, and CEO, CTV Inc.; Lisa A. Baiton, Vice-President, Government Relations, Environics Communications Inc., and Director, The Empire Club of Canada; Shaun Francis, President and CEO, Medcan Health Management Inc.; Howard Sokolowski, CEO, Tribute Communities, and Co-Owner, Toronto Argonauts Football Club; Michael Tremblay, Senior Vice-President, Public Services, SAP Canada Inc.; and Rod Phillips, President and CEO, Warren Shepell, and President, The Canadian Club of Toronto.

Introduction by William Whittaker

It has become customary for the Minister of Finance to address a joint meeting of the Canadian and Empire Clubs following the tabling of the Budget in the House of Commons, a tradition begun almost 50 years ago and continued today by Canada's new Minister of Finance, the Honourable James Flaherty.

Our Canadian budget tradition has its origins in the Parliament of the United Kingdom and traces its history back to Norman times. As our new Finance Minister, Mr. Flaherty may not be aware of the Westminster tradition of allowing Chancellors of the Exchequer to refresh themselves with alcoholic drink during the Budget speech. No doubt, the only stimulant present during Mr. Flaherty's forceful and energetic Budget speech Tuesday was the goading of the opposition parties!

I note from pictures in the newspaper that Mr. Flaherty has continued the tradition of wearing new shoes for Budget day as the markings and Canadian flag on their soles were clearly visible. He was quoted in the Globe and Mail as saying he would be buying a pair of shoes of "modest cost, not too expensive, but hopefully decent quality" which is what he wanted his first budget to say to Canadians.

While Mr. Flaherty is new to federal politics, he survived 11 years in the Ontario legislature, known as one of the most raucous legislatures in Canada and indeed the English-speaking world. He was a senior minister during this time and was Ontario's finance minister during 2001 and 2002.

As a former Ontario finance minister, Mr. Flaherty is no stranger to the intense lobbying and consultations that are part of the budget process. This year, he was lobbied by his son, Quinn, who wanted to know if the Tory campaign promise of a sports tax credit for children's organized physical activity would be in the budget (it was). Mr. Flaherty was also lobbied by parents when he attended his son Galen's play at Galen's high-school. As the father of teenaged triplet boys and the spouse of a member of the Ontario legislature, I hope he didn't talk in his sleep.

Enough teasing of our Finance Minister.

All of us are familiar with the Minister's political career in Ontario ranging from Deputy Premier, Attorney General to Finance Minister. Prior to his election to the Ontario legislature in 1995, Mr. Flaherty was a practicing lawyer for 20 years and was educated at Princeton where he was more than a passable hockey player.

We in Toronto are delighted that someone we know and appreciate so well is our Finance Minister and who also has additional responsibility for the GTA. It has been 15 long years since we were last so fortunate.

Ladies and gentlemen, please join me in welcoming the Honourable James Flaherty, Canada's Minister of Finance, to our podium today.

Jim Flaherty

Good morning. I am delighted to share this podium and have the opportunity not only to reflect on our new government's first budget, but also to build on what Prime Minister Harper said yesterday and place the budget in the broader context of the kind of society Canadians expect government to help strengthen and build.

Public life is not only about debating policies, election campaigns and differing views of our national, provincial or local priorities.

Public life is about reflecting the essence of the objective economic and daily realities in the lives of our fellow Canadians:

The way we work;

The way we live;

The way we care for those we love; and

To reach out to a brighter tomorrow for our families, communities, province and country.

I accepted Stephen Harper's invitation to enter federal politics because I believed in the positive difference he and like-minded Canadians who work with him could make in economic, social, and workplace opportunities for generations of Canadians.

I believed in the need for fundamental re-balancing in the relationship between taxpayers and government, and restoring fiscal balance to the federation.

It is those broad principles that formed the basis of what Prime Minister Harper campaigned on. They underline the five priorities our government is focused on. They were the core underpinnings of the budget it was my privilege to place before Canadians one week ago today here in Ottawa.


The principles are simple, direct and clear.

First, government has no absolute right to more and more of the hard-earned cash of working and investing Canadians when:

Government is too large;

Taxes are too high;

Surpluses are endemic; and

Canadians' ability to compete and make economic and social progress in their homes, communities and families is hampered by all of the above.

Second, there is only one taxpayer who carries the provincial, federal and municipal tax load, not three separate taxpayers unrelated to each other. Governments have a duty to keep this in mind, which is why Prime Minister Harper committed himself and the government to significant tax reduction in our first budget; tax reduction in every way the government raises money from Canadians.

And finally, government must be respectful of the dollars they spend. Taxpayers expect and demand that spending is focused, transparent and accountable. We must ensure Canadians receive good value for the money they send, and the money we spend.

Tax Relief

It was a distinct honour for me to begin the delivery on those commitments by proposing tax reductions totalling $20 billion for Canadians in all walks of life and in every region; the largest tax relief plan in recent history, and greater than all the tax cuts proposed in the last four federal budgets combined.

This budget delivers more than twice as much tax relief as new spending. For every new tax dollar we spend, this government is returning two dollars to hardworking Canadians.

Whether it is the 1-per-cent GST tax reduction across the board, the new Canada Employment Credit, a permanent reduction in the lowest income tax rate, as of July 1, or increases in the basic tax-free exemption for all Canadians, these tax cuts are broad, evenly directed and helpful to millions of Canadians from coast to coast.

This budget delivers tax relief people can see. Tax relief that makes a difference. Tax relief Canadians can count on.

And in fact, over 655,000 of our fellow Canadians who earn in the lowest bracket will be relieved of any federal income tax burden all together.

All this within the iron commitment of our government to a balanced federal budget.

Investing in Priorities

And we are doing all this while investing more in healthcare, more in childcare, more in defence and national security, more in policing, safe communities and protected borders, and standing with our farmers across Canada who deserve and merit transitional support during these challenging and unbalanced global commodity pricing periods.

Part of how we can do this is because we are determined to reduce waste, redundancy, overlap and unchecked growth in the federal government's own spending.

Expenditure Management

Over the past five years, total program spending has grown by an average of 8.2 per cent annually. In 2004/2005 growth in spending increased by 14.4 per cent.

This growth is neither sustainable or desirable.

Our budget brings that down to 5.4 per cent for this year, and 4.1 per cent next year. A clear departure from the past.

As you can see, our government is determined and focused. We are reigning in spending and looking inwards to see if we, as a government, have our own house in order.

As a result, we will be moving ahead with an ongoing review of all programs and departments in order to ensure compliance with the following principles:

First, that government programs are focused on results, and value for money;

Secondly, that programs are consistent with federal responsibilities;

And thirdly, that, when programs no longer serve the purpose for which they were created, they must be terminated.

We intend to identify $1 billion in savings over this year and next and report by the fall.

Our government will be open and straightforward with Canadians regarding the finances of Canada. The days of surprise surpluses are over.

We want to create a new culture of responsibility to replace the culture of entitlement we saw under the previous government.

When a federal government chronically underestimates its revenues, understates its surpluses, so that it is only after the fiscal year is long gone we find out just how much excess cash is sitting in our federal coffers, that means Canadians are taxed too much.

What is worse, it transpires in a way that Canadians, business and community groups, even Parliament itself, are never given the chance to discuss how much of a surplus cushion Ottawa should have and what appropriate tax levels should be.

The tax system does not exist to fund large federal surpluses that give license to spend the people's hard-earned cash as if it belonged to the government of Canada.

Government works for the people, and not the other way around. The relationship between tax dollars collected and federal fiscal planning should portray a genuinely respectful relationship with that principle.

The budget delivered last week underlines and embraces that kind of relationship between a government and the taxpayers to whom it is accountable.

The Canada we have all inherited from those who have come before, and the Canada we all have a duty to help build and make stronger still, was not built by more and more federal programs. It was built by hard-working Canadians striving for better lives for themselves, their families, their communities and their neighbourhoods.

That is why our budget provides Canadian families with children under six a new $1,200 a year Universal Child Care Benefit so they can make their own choices on childcare, helps apprentices in the trades, encourages young Canadians to participate in physical fitness and sports programs, assists with university education deductions, and reduces the tax burden on small business.

It is on the farm, in the classroom, on the factory floor, in research labs and small businesses, on construction sites and community centres and church basements of all denominations where this country moves forward everyday.

And that is where we should be removing the burdens of excess taxation, encouraging independence, initiative, family and hard work, because they are at the very core of what drives and enriches Canadian lives.

Government should be there to help in those areas that cannot be faced alone by hardworking and decent Canadians; in those areas where a framework of equality of opportunity truly reflects our values as caring citizens, neighbours and human beings very much in the Canadian tradition. In education, in health care, in securing safe communities, in public health, in supporting persons with disabilities, in defence and in removing the capital gains tax from donations to cultural, social and health charities, government has a role to play and we have embraced that role in this new budget.

In all cases we are acting to increase opportunity, enterprise, community and the best of Canada in focused and fiscally responsible ways.

As the Finance Minister and Minister Responsible for the GTA, I am honoured to be part of a new government that embraces this kind of break out from the old paradigm of Ottawa over-spending and knowing best.

Instead we are focusing on priorities that produce real results for people in their daily lives. Take infrastructure for example.


Our budget provides over $16 billion in more infrastructure spending over the next four years.

This is a long-term investment that will mean better roads, more efficient borders, and modern public transit, which will occur in two ways: one, over $1 billion in transit capital for new buses and trains and two, we are proposing a 15.5-per-cent transit tax credit on monthly transit passes to get people out of their cars.

The ultimate goal of these investments is to get people and goods moving in order to keep Ottawa, the GTA and all of the regions of Canada competitive.


Making Canada more competitive and more productive is an essential part of what our first budget is all about. In fact, there are 23 specific initiatives in this budget to move us forward on this front.

Productivity and competitiveness is about innovation, fair and reasonable tax rates, education, research and development and enhanced workplace productivity.

From the $1 billion post-secondary infrastructure fund, we will be assisting with textbooks, reducing corporate and small business taxes, increasing the incentives to be in the workplace and moving away from the high-taxes, high-spending, high-surpluses model of federal fiscal policy of the previous federal government.

We are embracing a new beginning: a beginning where the taxpayer is respected as opposed to being overburdened; a beginning where the federal, provincial and territorial governments can work together, like we did on softwood lumber, to restore fiscal balance to the federation; and a beginning where we support families, reward initiative, foster productivity in all regions of Canada.


With this budget we have turned a new leaf.

We have turned a new leaf away from excessive taxation and wasteful federal spending,

We have turned a new leaf away from condescension to the provinces and feigned and unnecessary hostility towards our greatest allies and trading partners to the south,

We have turned a new leaf away from government that puts being big ahead of every other value or attribute.

Our government is focused, deliberate and fiscally responsible. Our government has a few priorities at a time and is not prepared to over-promise nor overspend. Our government knows its place and respects its core accountability to the taxpayer.

During the cold winter campaign just past, we made a commitment to Canadians--a commitment to provide substantial tax relief, a commitment to balance the books and reduce the debt and a commitment to reduce spending and provide real value for the tax dollars Canadians send us.

In this, our government's first budget, we delivered. We provided more tax relief than the last four federal budgets combined. We reduced spending to below the rate of economic growth. We paid off $3 billion in debt, with an ongoing commitment of debt reduction. We delivered our Universal Child Care benefit, restored accountability and began cracking down on crime.

We kept our promises to hardworking Canadians. They entrusted us to focus on priorities and deliver real results and it is for those reasons that I brought forward our budget.

It is in support of that budgetary and governing approach that I am honoured to be here with the members of the Empire and Canadian clubs today.

Thank you all very much.

The appreciation of the meeting was expressed by Rod Phillips, President and CEO, Warren Shepell, and President, The Canadian Club of Toronto.

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The New Federal Budget

A joint meeting of The Empire Club of Canada and The Canadian Club of Toronto.
The nature of public life. The broad principles that formed the basis of Prime Minister Harper's campaign - that underline the five priorities on which the government is focussed. These five priorities as the core underpinnings of the budget. Discussion followed under the headings of these core underpinnings: Principles; Tax Relief; Investing in Priorities; Expenditure Management; Infrastructure; Productivity; Conclusion. Turning a new leaf with this budget and the ways in which this is so.