Finance Minister Jim Flaherty will no doubt look back on 2013 as a very successful year. He is, after all, on track to achieve the only thing he cares about, and that is the elimination of the deficit in 2015-16. This will allow the government in the 2015 election to fulfill its 2011 election promises to introduce income splitting for families with children 18 years of age and under; to extend the fitness tax credit to adults, and to double the amount allowed for tax-free savings accounts.

The elimination of the deficit and the forecast that surpluses will continue for the next five years will also help the opposition parties. The 2015 election will be fought over how to best to use the surplus and not over whether there will be surpluses.

But the job description of the Minister of Finance goes beyond simply eliminating the deficit. In fact, simply eliminating a deficit was never part of any job description for a Minister of Finance. The responsibilities of a Minister of Finance are much broader than that.

The Minister of Finance is responsible for the overall economic and financial management of the economy. Among other things, this includes strengthening economic growth, creating jobs, reducing unemployment, increasing the standard of living of Canadians, promoting openness and accountability, providing economic leadership, strengthening the federation and building confidence in the future. Finance Minister Wilson understood this; Finance Minister Martin understood this; Finance Minister Flaherty apparently not so much.

The year 2013 has not been a good year for economic growth and job creation in Canada. In fact the economy has not been doing well for some time. The reality is the economy has been in a growth decline since 2010 and job creation has been dismal since then. In 2009, real GDP declined by 2.9 per cent and then bounced back in 2010 to 3.3 percent. Since then, growth has been slowing: to 2.4 per cent in 2011; to 1.7 per cent in 2012; and to a forecast rate of around 1.6 per cent in 2013.
Economic growth is forecast to increase in 2014 to around 2.5 per cent but economists have been forecasting a turnaround for the past three years and it just hasn’t happened. Why should it happen in 2014 when the global economy is expected to underperform and significant risks remain? Flaherty is betting everything on a strong rebound in U.S. growth and in the EURO zone.

In promoting its job creation record, the government makes the claim that the economy has recovered all the jobs lost during the recession. Not bad when compared to some other G-7 counties, but certainly not good enough for Canadians.
In February 2008, the unemployment rate hit a low of 5.9 per cent; in November 2013 it was 6.9 per cent. In February 2008, the labor force participation rate hit a high of 67.8 per cent; in November 2013, it had fallen to 66.5 per cent, clearly indicating that many Canadians had simply withdrawn from the labor force because of a lack of job opportunities. It also means that the “real” unemployment rate, which includes discouraged workers, is much higher than 6.9 per cent.
In February 2008, the ratio of persons employed aged 15 and over to the population of Canadians aged 15 and over (referred to as the employment rate) reached a high of 63.8 per cent; by November 2013, it had fallen to 61.7 per cent. In other words, the economy is just not growing fast enough to create enough jobs for a growing working age population.  The youth unemployment rate remains stubbornly and unacceptably high.

These kinds of numbers don’t seem to interest Finance Minister Flaherty. The only thing that matters to him is that the deficit be eliminated in 2015-16. Finance Minister Flaherty has decided to ignore the advice of the International Monetary Fund (IMF) in its latest review of Canada. The IMF concluded, “continued progress in fiscal consolidation is appropriate to rebuild the room for fiscal maneuver used during the crisis, but there is room to delay the adjustment needed to return to a balanced budget in 2015 if there is no meaningful pick-up in economic growth”.

2013, as in the previous seven years, showed once again that the government has no long-term strategy to promote economic growth and job creation. Potential economic growth has fallen to below 2 per cent and yet the government has shown no interest in adopting policies to promote labor force participation or strengthen productivity growth. There is no interest in simplifying the tax system and removing market distortions; there is no interest in reducing the staggeringly high marginal effective tax rates confronting low-income earners; and, there is no interest in strengthening Canada’s education and physical infrastructure.

The one thing the government is interested in is signing free trade deals, as it should be. Despite this commitment to free trade, the government has shown no interest in the one “free trade agreement” that would have a greater economic impact than any of the ones it is currently pursing. The government should be pursuing an internal free trade agreement with all the provinces to “free up” the movement of goods and services across provincial boundaries. It is somewhat ironic that, with the signing of the EU free trade agreement, companies in Europe will have more access to all Canadian provincial markets than a company in Ontario.

Such a strategy for growth and jobs requires a federal government that believes it has a role to play shaping the economic future of the country. This government does not hold that view
In 2012, the government set a new low in standards for transparency and accountability with its budget omnibus bill of over a thousand pages. Budget 2013 continued this trend. For the Harper government, Parliament is irrelevant.
In November 2013, the Minister of Finance tabled BILL C-4; the second omnibus bill related to measures proposed in the March 2013 Budget.  Like most of the others tabled by the Minister, this was another brick, totaling 322 pages. And like the others, it included measures that were not explicitly referred to in the budget.

BILL C-4 included an amendment to the Supreme Court Act, to clarify the appointment of a judge to the Supreme Court from the Province of Quebec.  This issue arose almost six months after the tabling of the March 2013 Budget.  There obviously could not have been a reference to it in the March Budget. No one seemed to care, not even the Speaker of the House

In the March 2013 Budget, the Government indicated that it would “propose changes to the labor relations regime” but no details were provided.  The President of the Treasury Board announced the he would not provide any details on changes to the federal labor laws and procedures until after BILL C-4 received Royal Assent.  How were Parliamentarians supposed to debate the merits of these changes without the details?   What is the Government attempting to hide?  For a Government that claims to be accountable and transparent, this doesn’t pass the smell test.

The inclusion of these measures in a budget omnibus bill clearly violates the spirit and intent of budget legislation.  These measures should be presented in stand-alone legislation and debated by the appropriate committees of the House and Senate, rather than being buried, without sufficient details, in the Budget Omnibus Bill.   Allowing these measures to be included in the budget bill undermine the credibility of the Budget process and the authority of Parliament.

In January 2013, Kevin Page indicated that he would not seek another term as Canada’s Parliamentary Budget Officer. The sounds of joy emanating from the Prime Minister’s Office could be heard across the country. The government with its arrogance, lack of openness and transparency, lack of accountability and an inability or unwillingness to be civil made Mr. Page what he is today. It is too early to judge the new PBO and the approach he may take to holding the government to account.

2013 was not a good year for the federal-provincial relations, at least if you believe the federal government has some responsibility to provide economic leadership and to maintain and strengthen the economic federation. In the March 2013 Budget the government announced major reforms to federal-provincial training agreements without any prior consultation with the provinces. Not surprisingly, the provinces, which would lose control and funding, were not impressed. It is not likely that any agreement will reached in the near future.

The federal government has been following the “take it or leave it” approach to federal-provincial relations for some time. There was no discussion on changes to the funding of the Canada Health transfer or changes to the age of entitlement for Old Age Security. The same is true for discussions on the need to strengthen savings and enhance the Canada Pension Plan (CPP), despite what appears to be a consensus among provincial finance ministers for more study on the nature and timing of CPP reform. 
Finance Minister Flaherty simply vetoed the idea by saying global economic growth was too uncertain and the domestic economy was too “fragile”. He also stated that he didn’t believe that governments should make commitments far down the road.  What does he think Ministers of Finance and governments are supposed to do? Why did he then support changing the age of entitlements for elderly benefits and the Canada Health Transfer escalator? Why did he make a commitment in 2010 to eliminate the deficit by 2015-16? If it is not the federal government’s obligation to undertake long-term structural changes to enhance the economic and social well being of Canadians, whose role is it?

Parliament’s ability to fulfill its fundamental responsibility of reviewing and approving government spending continued to be eroded during 2013. The Government has yet to provide details of the spending restraint measures announced in the March 2012 Budget to the PBO. The deficit for 2012-13 was $6.9 billion lower than forecast in the March 2013 Budget.  The Minister of Finance credited this to “strict control over spending”. However, the better-than-expected results primarily stem from additional “buffers” built in the Finance Minister’s forecast of direct program expenses.  This was a practice he and the Prime Minister criticized the Liberal government for while in opposition, but now it appears they have endorsed it as part of their budget planning process.

There continues to be a significant mismatch between the budget spending estimates for the upcoming year to those presented by the President of the Treasury Board through the Estimates.  The budget continues to be tabled after the Main Estimates, rendering the Estimates out-of-date the moment the budget is tabled/. No reconciliation between the two sources is provided.  The President of the Treasury Board claims spending is declining while the Minister of Finance forecasts an increase.  Who is to be believed?  In reviewing the Estimates, Parliamentarians are confused and frustrated by the lack of relevant information.

In 2012-13, government departments and agencies spent over $10 billion less than what they were appropriated by Parliament.  To date, the President of the Treasury Board has been unable or unwilling to explain this historical large lapse in spending. 
In 2013, the federal government continued, as in the past, to show its ideological arrogance; its unwillingness to confront major economic challenges; its disdain for Parliament; its aversion to openness and transparency; its rejection of a  federal role  in working with the provinces to strengthen the Federation; and its inability to adopt evidence based policy.

This has been the government’s method of operation for the past seven years. Why change now? Expect more of the same in 2014.