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2004 Canadian Budget & Expenditure Review Announcement: Implications for Business & Association Communities

By Michael Teeter, Principal
March 26, 2004

New budget spending commitments are modest but do reflect priorities of new administration. Significant changes will follow the completion of the many reviews taking place.

Overview: This was a budget clearly designed to hold the line on spending while also setting up a clear process for re-allocation of existing resources. The Expenditure Review Process announced on December 12 has resulted in close to $1 billion in savings that are now targeted for re-allocation in fiscal 2004/2005. This budget introduced a further minimum  $3 billion clawback target for collection and re-allocation over the next 4 years. The Expenditure Review process and the accompanying Government operations review processes will form the foundations for the $3 billion clawback while re-allocation will focus on new priorities areas, notably health, learning and workplace skills, knowledge and commercialization, communities and support to municipalities, climate change and environment and public security.

Health: A new Canadian Public Health Agency will be funded over 3 years with $404 million from existing Health Canada resources (Population and Public Health Branch) and a further $250 million. $100 million will be provided to Canada Health Infoway to develop a monitoring and surveillance system and with a further $400 million over 3 years allocated to immunization programming and enhanced disability benefits.

Learning: There is a focus on early learning and childcare, student loan relief, Learning Bonds and the Understanding the Early Years program. $150 million in new resources is allocated to early learning and childcare. Workplace skills development is the priority for adult learning. There will be focus on literacy training, essential skills upgrading, apprenticeship and employer based training.

Knowledge and commercialization: Existing arms length granting foundations and councils to receive some relatively modest additional funding. $100 million extra for commercialization projects at Universities. $270 million is earmarked for the BDC (Business Development Canada) Venture Capital programming. The CCA rate on computer equipment increases from the current 30% to 45%; while the CCA rate on broadband, Internet and Network equipment increases from 20% to 30%.

Communities: Continuing commitment to GST relief, further consultations on the Gas tax transfer and assistance to clean up contaminated sites. Infrastructure Canada commitments in previous budgets will be accelerated.

Environment: Federal contaminated site clean up priority- $3.5 billion over 10 years allocated. New and relatively significant money dedicated to arms length agency dedicated to the promotion and development of environmental technologies.

Defence and International: $250 million in new money for Afghanistan, $50 million for Haiti and $248 million in new International assistance commitments. All committed DND capital projects are on target and there will be modest acceleration of capital funding. Any new commitments must follow completion of Defence and International policy review processes.

Security: New Department of Public Security and Emergency Preparedness will see an increased build-up of its security contingency reserves to $605 million over 5 years. Priority expenditure areas are: Intelligence, Border protection, Marine and Cyber-Security and enhanced coordination of systems and information. The Air Travellers Security charge will be reduced. Smart Border Infrastructure initiatives will continue to be funded with Infrastructure Canada programming.

Expenditure Review

  • Reallocation: As partially announced on December 12, the Expenditure Review Committee of Cabinet will subject all spending to two sets of tests. The policy tests comprise 7 questions to determine if the expenditure should be made in the first place or if that expenditure/program could be better deployed by other levels of government, the voluntary sector or the private sector. Partnership thinking is encouraged. Efficiency, value for money and affordability are also key tests. The second set of criteria are implementation tests. In other words, they focus on questions to ensure that existing and projected spending can achieve its objectives, that there is capacity and it can be managed, that governance is sound and that impacts and risks have been fully examined.
  • Spending Reviews: The spending of 30 of the largest departments and agencies will be reviewed in accordance with the reallocation tests above, as well as Treasury Board's Management Accountability Framework. Horizontal policy reviews will be concluded on priority policies such as climate change, support to aboriginal people, support to municipalities, innovation and public security. Some of these reviews are being coordinated by Parliamentary Secretaries and others assigned following the December 12 swearing in.
  • Government Operations Reviews: Reviews are being conducted in the following areas. The values represent the overall annual costs to the government. Capital Asset Management ($47 billion in assets); Public Service Compensation and Comparability ($25 billion); Procurement and Contracting ($13 billion); Corporate and Administrative Services ($6.5 billion); Professional Services ($6.5 billion); use of Information Technology and its Management ($5.2 billion); Service Delivery Infrastructure ($3 billion); Federal Institutional Governance ($3 billion in annual operations); and Legal Services ($700 million).

Implications: New spending commitments in the March 2004 budget are modest but they do reflect the priorities of the new administration. The significant changes will follow the completion of the many reviews taking place. Given the reallocation and review process, there may be a tendency for government managers to delay decisions until they are certain of future directions.

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