2008 Federal Budget Analysis

Partnership gives federal government a B- grade for its 2008 budget

February 27, 2008 – Halifax, NS – From an urban centre perspective the 2008 Federal Budget was a “bare cupboard Mother Hubbard” budget with no large expenditures, according to the Greater Halifax Partnership. 

“Only $1.5 billion worth of new fiscal measures announced for fiscal year 2008-09 and tax cuts totaling $9.4 billion that don’t come into force until next fiscal year have hamstrung the government’s ability to respond to potential slowing of the economy and the urgent infrastructure and financing needs of Canada’s urban centres,” says Fred Morley, executive vice president and chief economist, Greater Halifax Partnership.

“Canada’s urban centres had hoped for more action in areas of fiscal balance, their $60 billion infrastructure deficit, transportation and environment,” says Morley. “Overall, the Partnership gives the government a B- grade for its 2008 Budget.”

Greater Halifax Partnership Analysis of the 2008 Federal Budget

A more in-depth analysis of key areas of the budget follows. A grade has been assigned to each area.

Fiscal Balance (B-)
92% of local revenues in Canada come from property tax. Property taxes lack fairness, are unpredictable and inflexible. The United States and most nations in Europe have responded to this gap by working with communities to significantly diversify their tax base. In Canada, with this budget, we have gone at least part way towards predictability and long-term focus.

Key Budget Measures
· Permanent gas tax transfer to municipalities ($2 billion in 2010)

Infrastructure (B-)
80% of Canada’s urban infrastructure is beyond its life expectancy. There is a $60 billion infrastructure deficit in Canadian urban centres. HRM has been dealing with an annual gap in needed infrastructure spending of $50 million. Gaps in infrastructure threaten our economic future and our ability to attract and hold people. Attracting people is more about lifestyle than lattés and lifestyle is about commute times, quality of recreation facilities, and safe communities among other factors. 

Key Budget Measures
· Build Canada Fund, $8.8 billion over 7 years (2007 budget)
· Gas tax made permanent

Transportation (C)
Canadian municipalities have identified a collective $21 billion gap for replacement and new public transit. HRM has enjoyed the highest ridership in the country and the new Metro Link service has taken 400 cars a day off the road. These signify progress but municipalities need to do more in the area of public transit.

Key Budget Measures
· $500 million fund for capital investment in transit.

Gateway (D-)
The federal government has recognized that Canada’s gateways are vital to our economic growth. $2.1 billion has been identified for gateways and border crossings in past budgets. These funds have begun to roll out in every area of the country except Atlantic Canada even though the Halifax Gateway Council was formed and articulated key priorities more than three years ago. Tapping into opportunity means moving quicker than the competition.

Stakeholders have been in full consultation and study mode in Atlantic Canada and the Partnership suggests that we need to move now. As a guide, we recommend that the federal government follow the lead of the private sector and leverage and support the $500 million business investment in the Halifax Gateway over the last few years.

On Atlantic Gateway, the Partnership gives an A for effort but D- for execution. 

Key Budget Measures
· None

Defence and Federal Government (B)
Halifax has a unique strategic position that has lead to Department of National Defence (DND) and other federal presence over the years. DND’s 10,000 personnel in Halifax generate an economic impact of more than $750 million. The Greater Halifax Partnership recognizes that our strategic location, existing critical mass, supportive community, and related industries and services give us the strongest value proposition in the country for retention and expansion of DND projects and personnel. 

Key Budget Measures
· Canada First Defence Strategy, $5.5 billion over 5 years (2006)
· Increase DND spending by an automatic 2% a year by 2010, up from the current 1.5%.
· Coast Guard, $750 million for a new heavy ice breaker

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For more information, contact Fred Morley, Executive Vice President and Chief Economist, Greater Halifax Partnership, at 490-6043 or greaterhalifax.com

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