Economic policy of the Stephen Harper government

It has been suggested that this article be merged with Environmental policy of the Stephen Harper government to Domestic policy of the Stephen Harper government. (Discuss) Proposed since January 2022.

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Since its election to power on January 23, 2006, the Conservative Party of Canada led by Prime Minister Stephen Harper adopted several positions and policies in regard to the economic issues of Canada, including various tax cuts, exemptions and credits as well as discussing the issue of fiscal imbalance among provinces and measures to cope with more troubled sectors of the Canadian economy.

Tax Policy[]

A major policy goals of Stephen Harper was to reduce taxes. During his 9 years in government, Harper reduced income taxes, corporate taxes, and the GST. Most of his has cuts were progressive, though a few of them were regressive.^[1]

Goods and services tax[]

On July 1, 2006, the Government of Canada reduced the Goods and services tax by 1 percentage point (to 6%), as promised by the Conservative Party of Canada in the 2006 Canadian federal election campaign.^[2][3][4] They again lowered it to 5%, effective January 1, 2008.^[5] This reduction was included in the Final 2007 Budget Implementation Bill (Bill C-28),^[6] which received Royal Assent on December 14, 2007. This change has been estimated to have decreased government revenues by approximately $6 billion.^[7][8] Opponents of these tax decreases cited that sales taxes target those who spend more and therefore such reductions disproportionately benefit Canadians giving those who have the most and spend the most the largest tax decrease.^[3] Lost government revenues from these cuts amount to about $13.3 Billion Canadian dollars.^[1]

Income taxes[]

During his tenure as Prime Minister, Stephen Harper reduced income taxes. Looking at raw numbers, most of the benefits of these cuts go to the wealthiest Canadians, yet these changes generally made Canada's tax code more progressive. Lost government revenues from these cuts amount to about $17.1 billion Canadian dollars.^[1]

Working income tax benefit[]

The Working Income Tax Benefit is a refundable tax credit in Canada introduced in the 2007 Canadian federal budget, similar to the Earned Income Tax Credit (EITC) in the United States. It offers tax relief to working low-income individuals and encourages others to enter the workforce.^[9]

Corporate taxes[]

Under Stephen Harper, Canada's general corporate taxes reduced from 22% to 15%. Canada's corporate tax rate thus became one of the lowest in the world, and substantially lower than its top marginal tax rate for individuals. At the same time, Canada's small business tax rate reduced from 12% to 11%.^[10]

Fiscal imbalance[]

During the 2006 campaign, Stephen Harper promised the provinces, including Quebec and Ontario, to deal with the issue of fiscal imbalance. When the 2006 budget was announced, there was commitment to deal with the matter, but little money was used for it. No funding was used when Finance Minister Jim Flaherty announced a $13 billion surplus. The Bloc Québécois threatened to topple the government if the Tories did not give an additional $3.9 billion to Quebec. Support for the Conservatives in Quebec was up during the 2006 election campaign due to Harper's promise to deal with the matter.^[11]

On January 16, 2007, an article in a Montreal newspaper, La Presse, reported that the federal government would give an additional $1.5 billion in transfer payments with another $500 million for post-secondary education and infrastructures.^[12]

Several premiers from other provinces criticized the plan. Saskatchewan Finance Minister Andy Thompson asserted that the government was using revenues from the oil industry of the West to gain votes in Quebec.^[13]

During the 2007 budget, on March 19, 2007, Flaherty announced an extra $2.3 billion will go to Quebec, while some provinces will get extra money for social policies.^[14] In July 2008, a Crown share dispute over oil royalties was resolved with Nova Scotia getting a total of $870 million.^[15]

Following a meeting with all premiers after the 2008 election, the federal government removed Newfoundland and Labrador from its list of provinces receiving equalization payments due to revenues from its offshore oil platform Hibernia. In contrast, the federal government added Ontario due to its struggling auto industry and which will receive $347 million while Quebec will receive over $8 billion starting in January 2009.^[16]

Crisis management[]

Softwood lumber dispute[]

In late-2006, the government led by Trade Minister and former Liberal Minister David Emerson, settled a lengthy dispute with the United States over softwood lumber in which its southern counterpart paid back nearly $4 billion in tariffs.

Manufacturing and forestry sectors crisis[]

During the Throne Speech, Harper also addressed issues surrounding the economy because of difficulties in the manufacturing and forest sectors due to the loss of numerous jobs at several companies including the 3 majors automakers in the United States and several small to large forest companies over the past few years due to lower US demand, a stronger Canadian dollar, the softwood lumber dispute, rapidly rising gasoline prices since 2003 and growing fears of a US recession caused by a mortgage and housing crisis. On January 10, 2008, the government announced a $1 billion relief fund for single-industry communities that were hit hard by recent closures particularly in the forest and manufacturing industries but also the fishing sector. The funding, coming from a budget surplus for the fiscal year, was to be split between the provinces and territories based on the proportion of the population and not by the number of jobs. The plan was to focus on job training and economic development creation. However, the plan and funding is conditional pending that the 2008 federal budget would pass legislation.

While some praised the plan as a good step in helping the industries affected by the mass closures, the budget approval condition imposed by Harper drew heavy criticism from the Opposition parties, union groups and some provincial politicians some them calling it an "election platform". Ontario Premier Dalton McGuinty and Quebec Premier Jean Charest also mentioned that the funding is a small fraction of what both provinces had invested in total in the troubled sectors and Canadian Auto Workers Union President Buzz Hargrove mentioned that it would not even be enough to upgrade a single auto parts plant. Dave Coles, president of the Communications, Energy and Paperworkers Union mentioned it would take over $10 billion in federal aid to make significant positive impacts and improvements.^[17][18] The funding was made official in the 2008 budget which also featured the extension of the accelerated capital cost allowances for businesses until 2012–13.^[19]

Auto industry crisis[]

Following a $17 billion bailout announcement from the US government on December 19, 2007, the Canadian government announced the following day a $2.7 billion aid to the auto industry including General Motors and Chrysler. The Ontario government also contributed to $1.3 billion for the industry which has been hit hard by the recent economic downtown initially due to record oil prices which resulted in a sharp drop in the sales of new vehicles, including pick-up trucks and SUVs. The lower demand resulted in massive layoffs and production shutdown at several plants across southern Ontario in addition to plants across the US. Harper told at a press conference on the announcement: "This industry, the three automakers, need serious restructuring We are doing this on the assumption that, obviously, we cannot afford—United States or Canada—a short-term catastrophic collapse, but on the other hand we're doing this with the knowledge that the automakers must change their way of doing business in a very serious way and must bring their products and their costs in line with the marketplace".^[20]

Canada's economic action plan[]

In 2009, Stephen Harper announced a series of budgetary measures aimed at curtailing the effects of the Great Recession in Canada. These measures were marketed as "Canada's Economic Action Plan". Some of the key items in the Economic Action Plan budget were:^[21] $12 billion in new infrastructure stimulus funding for roads, bridges, broadband internet access, electronic health records, laboratories and border crossings across the country, $20 billion in personal income tax relief, $7.8 billion to build quality housing, stimulate construction and enhance energy efficiency, and many other projects.

Financial Services[]

Registered Disability Savings Plan[]

In Budget 2007, Flaherty introduced the Registered Disability Savings Plan (RDSP). The RDSP is a long-term savings plan to help Canadians with disabilities and their families save.^[22] The RDSP resembles its other saving counterparts, the RRSP and the RESP, and is meant to ensure a secure future for people with disabilities. The Government assists these families by contributing through grants and bonds that supplement contributions.^[23]

Tax-Free Savings Account[]

In Budget 2008, Flaherty introduced the Tax-Free Savings Account (TFSA), a flexible, registered, general-purpose savings vehicle that allows Canadians to earn tax-free investment income to more easily meet lifetime savings needs.^[24]

The measure, which came into effect on January 2, 2009, has clear differences with the Registered Retirement Savings Plan (RRSP). There is a tax deduction for contributions to an RRSP, and withdrawals of contributions and investment income are all taxable. In contrast, there are no tax deductions for contributions to a TFSA. Beginning in 2013, contribution room in the TFSA has increased to $5,500 per calendar year. The Canada Revenue Agency describes the difference between the TFSA and an RRSP as follows: "An RRSP is primarily intended for retirement. The TFSA is like an RRSP for everything else in your life."^[25]

Flaherty's measure was supported by many organizations, including the C.D. Howe Institute, which stated: "This tax policy gem is very good news for Canadians, and Mr. Flaherty and his government deserve credit for a novel program."^[26]

Infrastructure[]

Stephen Harper was concerned with improving Canada's infrastructure. His 2009 budget included $12 billion in new infrastructure stimulus funding for roads, bridges, broadband internet access, laboratories and border crossings across the country.^[21]

Infrastructure deals[]

In July 2008, the government concluded an infrastructure deal with Ontario until 2014 worth over $3 billion. Much of the funding would be used mostly for infrastructure repairs and upgrades including the Trans-Canada Highway as well as for rapid transit projects in the Kitchener-Waterloo area and broadband coverage in rural areas of eastern Ontario.^[27]

Public-private partnerships[]

The now defunct Crown Corporation PPP Canada was created under Prime Minister Stephen Harper to highlight the commitment of the federal government to Public-private partnerships (PPP, P3). It was responsible for promoting and facilitating Public-private partnerships, and operated under Infrastructure Canada. PPP Canada managed the “P3 Canada fund” where provinces, territories, and municipalities could apply for funding from the federal government.^[28] PP Canada served as Canada's centralized PPP Unit from its creation in 2009 until it was dissolved in 2018 under Prime Minister Justin Trudeau.^[28]

Stephen Harper intended to fund most of Canada's new infrastructure though Public-private partnerships. The city council of Saint John, New Brunswick was told by their local Conservative MP Rodney Weston that funding their new water treatment plant through a P3 was the only option.^[29] Harper's Finance Minister Jim Flaherty intervened in the 2013 Regina wastewater plant funding referendum, arguing that voters should select the P3 option.^[30]

Building Canada Plan[]

The 2013 Canadian federal budget contained a new Building Canada Plan for the construction of public infrastructure such as roads, bridges, transit and port facilities.^[31] The plan provides $53 billion in investments to support local and economic infrastructure projects, including more than $47 billion in new funding over 10 years, starting in 2014–2015.^[32]

Federal Budgets[]

Nine budgets were presented to the Canadian Parliament under Stephen Harper.

• 2006 Canadian federal budget
• 2007 Canadian federal budget
• 2008 Canadian federal budget
• 2009 Canadian federal budget
• 2010 Canadian federal budget
• 2011 Canadian federal budget (presented in March 2011 and again in June).
• 2012 Canadian federal budget
• 2013 Canadian federal budget
• 2014 Canadian federal budget
• 2015 Canadian federal budget

Footnotes[]