• Program spending budgeted to rise 3.4% in 2008/09, but hold the applause - spending has already increased by 14.8% under the Conservatives.
• Gone is the promise to pay down debt by $3-billion a year.

OTTAWA: The Canadian Taxpayers Federation (CTF) reacts to the 2008/09 federal budget, which was tabled in the House of Commons by Finance Minister Jim Flaherty this afternoon.

The Tax-Free Savings Account - A Pro-Growth Tax Plan:

The Conservative government will allow Canadians to invest after-tax dollars and any investment gains from interest, dividends and capital gains will not be subject to tax. Moreover, savings will not trigger clawbacks on government entitlement programs that are income-tested, such as pension allowances and child tax benefits. Starting in 2009, Canadians will be permitted to contribute up to $5,000 a year to this new savings vehicle.

"The new tax-free savings account is a pro-growth policy that will encourage Canadians to save, reward individuals and benefit the economy," said CTF federal director John Williamson. "This is an excellent policy proposal. Canada needs to reward people that save because their investments fuel economic growth and job creation. The big criticism of the GST cut was that it did little to encourage savings. Mr. Flaherty responded to this concern today by proposing a plan that will not punish people that save."

Finance Minister Flaherty Hasn't Controlled Spending So Far. Will He Tomorrow

The budget proposes that program spending will increase to $208.1-billion in the next fiscal year, which is a modest 3.4 per cent rise. Unfortunately, the Conservatives have failed to control spending during their first two years in office. When the Liberals left office total program spending stood at $175-billion (2005/06 fiscal year). In fiscal 2007/08, the current year ending on March 31, the federal government's annual outlays will - for the first time - break the 200-billion-dollar mark.

The Conservative government's first budget called for Ottawa's expenditures to grow by 5.4 per cent in fiscal 2006. Yet, at the end of that year government receipts had instead ballooned an astounding 7.5 per cent. The 2007 budget plan announced an additional 5.6 per cent spending hike. The real amount will be 6.85 per cent.

"Under Mr. Flaherty, the size of the federal government has grown by an astounding 14.8 per cent. How is this fiscally conservative or even 'responsible,'" Williamson asked rhetorically. "As prime minister, Paul Martin grew the federal government by 14 per cent over two years. Amazingly, the Conservatives have bested Liberal spending. This is a spend-thrift government."

"The government's overall expenditure level is disappointing. Spending growth has repeatedly exceeded the minister's own target, which is the economic growth rate. As a result, Canada will pay down less debt in the future," said Williamson.

- Less Debt Repayment:

Minister Flaherty will reduce Canada's $467.3-billion debt by $10.2-billion this fiscal year, which ends on March 31. The government plans to reduce the federal debt by only $2.3-billion next year (fiscal 2008/09) and a trivial $1.3-billion the following year (2009/10). Up until today, Mr. Flaherty had pledged to reduce debt by at least $3-billion each and every year.

"Ottawa needs a more aggressive debt reduction schedule. The Conservatives should not be downplaying the importance of paying off Canada's debt," said Williamson. "Debt servicing will chew up $31.5-billion next year, which amounts to $86-million each day. Ottawa should set yearly debt reduction targets, as was done with the deficit, and make those targets the law."

A Little More Good News - Managing the Employment Insurance (EI) Surplus:

The 2008 budget will establish a Crown corporation to manage the EI fund. Future EI surpluses will be invested until needed for EI payments. At the same time, a new rate-setting mechanism will limit the surplus to $2-billion.

"Ottawa has been using the EI surplus as a cash cow and maintaining higher EI tax rates on workers than necessary. That's an unnecessary tax on jobs," noted Williamson. "It is hoped this new agency will reduce the unnecessarily large tax burden and large surpluses. It is unconscionable that Ottawa has accumulated massive EI surplus, tossed it all into general revenue and spent it. EI taxes should fund EI payments, not government largesse."