2005 Canadian federal budget
Encyclopedia
The 2005 Canadian federal budget was the budget of the Government of Canada
for the 2005-2006 fiscal year. It was presented on February 23, 2005, by Finance Minister Ralph Goodale
. It was the first federal budget presented by a minority government
in Canada since the budget presented by the government led by Joe Clark
in 1979. The defeat of that budget led to an election in which Clark's Progressive Conservative Party
was defeated.
Having fewer than half the seats in the Canadian House of Commons
meant that the governing Liberal Party of Canada
had to win the support of members of other parties for the 2005 budget to pass. Without that support, the budget would have been defeated, and new elections would likely have been called.
In the 2005-06 fiscal year, the government had a large surplus of expected revenues over expenses, making the government able to fund a wide array of new initiatives. The budget bill (C-43) received Royal Assent on June 28, 2005. In order to gain the necessary support of the New Democratic Party
(NDP) the budget was amended (Bill C-48) and given assent three weeks later following considerable debate.
in a row presented by the Liberal government. It contained minor tax cuts for both businesses and individuals over a five year period. These cuts, however, were mostly scheduled to begin in the latter years of the five-year period, which meant that the majority of them were unlikely to occur before the next election was held.
The personal income tax cut raises the basic personal exemption to $10,000 from its former level of just over $8,000 over the five year period. This was projected to result in an average tax savings of $16 for each Canadian in 2006, with the final total reaching $192 at the end of the five year period. The basic personal exemption is indexed to inflation, so it would likely have risen to roughly $9,000 over the five year period without the changes.
The budget also contained $12.7 billion for the Department of National Defence
over the following five years. However, not all of this money was new funding and, as with most of the budget, it was back-loaded. The total new funding for 2006 was to be $500 million.
Start-up money was provided for Canada's efforts to comply with the Kyoto Accord and for a national child care program. Additional funding was provided for cities, health care, and foreign aid. Some cuts were made. The Air Travel Complaints Commissioner was abolished, and foreign aid to Thailand
, Malaysia, and all countries now in the European Union
was ended. In total, $11 billion in savings are expected.
, the largest opposition party, surprised many by announcing that it would support the budget immediately after it was read in the House of Commons. Party leader Stephen Harper
described it as "better than expected", and described its focus on tax cuts and defence spending as being in line with Conservative policy. It is highly unusual for the official opposition
to vote in favour of the government's budget. However, Harper later changed his position on the budget, and his party joined with the NDP and the Bloc Québécois
in the largest abstention in Canadian history.
The Bloc Québécois and party leader Gilles Duceppe
, who were demanding an overhaul to employment insurance
and the elimination of the fiscal imbalance, voted against the budget.
The New Democratic Party voted against the budget on first reading. Leader Jack Layton
agreed with Harper that it was a "conservative budget" and was especially critical of the corporate tax cuts and the limited new funding for social programs.
Despite the NDP support, the government remained in a precarious position, requiring the support of all three independent Members of Parliament
(MPs). On May 17, Conservative MP Belinda Stronach
crossed the floor
to the Liberals, giving them a crucial extra vote. Soon after, Liberal polling numbers ended their slide and began to recover. Two Conservative MPs from Newfoundland and Labrador
, Loyola Hearn
and Norman Doyle
, were also pressured by provincial premier Danny Williams
to vote in favour of the budget, as it included the provisions of the government's recent Atlantic Accord
s. The Conservatives eventually announced that they would vote in favour of the main budget bill, containing the Atlantic Accord, but would vote against the second bill containing the NDP amendments.
and Chuck Cadman
. The government needed the support of at least one of the two to continue to enjoy the confidence of the House. Cadman was suffering from malignant melanoma, and before the day of the vote it was not clear whether or not he would be able to attend.
On May 19, a vote was held for second reading of Bill C-43 (the main budget), and Bill C-48 (the amendments). The main budget bill passed on a vote of 250 to 54, with only the Bloc Québécois voting against. The second bill received a vote of 152 Yea and 152 Nay. The Conservatives and Bloc Québécois voted against second reading, while the Liberals and NDP voted in favour. Conservative MP Darrel Stinson
was unable to attend the vote due to cancer surgery, so Liberal MP Peter Adams agreed to sit out as a courtesy. Independent MP Kilgour voted against the budget, while Parrish and Cadman voted in favour. In the event of a tied vote, the Speaker is required to cast the tie-breaking vote. According to Parliamentary procedure, the Speaker is required to vote, whenever possible, for the continuation of debate. Thus, the Speaker voted in favour of second reading, "to allow the House time for further debate so that it can make its own decision at some future time."
Allegations were later made in a book by Vancouver journalist Tom Zytaruk in early 2008 that the Conservative Party attempted to get Cadman to support the Conservative's positions by offering him a $1 million life insurance policy. If the allegations are true, what the Conservatives did would amount to bribing an MP, which is a criminal offence. Conservative leader and Prime Minister at the time of the allegations Stephen Harper
denied that the party bribed Cadman. As of February 2008, the allegations have not been proven.
After this vote, the Conservatives admitted their defeat and backed away from their pledge to bring down the government. On June 14, a series of 16 votes were held pertaining to the budget: one for concurring in the committee report for Bill C-43 and dozens of amendments and other motions. As many as 15 were considered confidence votes and could have triggered an election if one was lost. Several opposition members were absent. The government won each vote, virtually guaranteeing that no election would be held in the summer of 2005. http://www.cbc.ca/canada/story/2005/06/14/confidence050614.html
Two days later, Bill C-43 was finally passed, and moved to the Senate. Meanwhile, the NDP amendments came out of committee and debate was launched.
On June 23, the House voted to extend the session into the summer to deal with C-48 and with the same-sex marriage bill (Bill C-38). Then, in a late-night session after several Conservative members had already left the house, the Liberals, NDP, and Bloc voted to invoke closure
on the debate. The Liberals and NDP then voted in favour of passing Bill C-48, defeating the Conservatives and Bloc by a margin of 5 votes. The outcome upset Conservative MPs, and left the same-sex marriage bill as the only major business to be dealt with during the extended session in the House. It, too, was passed on June 28, allowing the House to call a recess
.
The bills moved to the Senate. Bill C-43 was still in committee hearing stage on the morning of June 28, but Liberal senators rushed the bill through the legislative process all day, allowing it to receive Royal Assent before the day was over.
Bill C-48 was more controversial, but continual invocations of closure stopped what might have been a filibuster by the Opposition, and on July 20, it, along with four other controversial government bills, were passed, allowing the Senate to enter into recess. They all received Royal Assent within the day.
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
for the 2005-2006 fiscal year. It was presented on February 23, 2005, by Finance Minister Ralph Goodale
Ralph Goodale
Ralph Edward Goodale, PC, MP was Canada's Minister of Finance from 2003 to 2006 and continues to be a Liberal Member of Parliament...
. It was the first federal budget presented by a minority government
Minority government
A minority government or a minority cabinet is a cabinet of a parliamentary system formed when a political party or coalition of parties does not have a majority of overall seats in the parliament but is sworn into government to break a Hung Parliament election result. It is also known as a...
in Canada since the budget presented by the government led by Joe Clark
Joe Clark
Charles Joseph "Joe" Clark, is a Canadian statesman, businessman, and university professor, and former journalist and politician...
in 1979. The defeat of that budget led to an election in which Clark's Progressive Conservative Party
Progressive Conservative Party of Canada
The Progressive Conservative Party of Canada was a Canadian political party with a centre-right stance on economic issues and, after the 1970s, a centrist stance on social issues....
was defeated.
Having fewer than half the seats in the Canadian House of Commons
Canadian House of Commons
The House of Commons of Canada is a component of the Parliament of Canada, along with the Sovereign and the Senate. The House of Commons is a democratically elected body, consisting of 308 members known as Members of Parliament...
meant that the governing Liberal Party of Canada
Liberal Party of Canada
The Liberal Party of Canada , colloquially known as the Grits, is the oldest federally registered party in Canada. In the conventional political spectrum, the party sits between the centre and the centre-left. Historically the Liberal Party has positioned itself to the left of the Conservative...
had to win the support of members of other parties for the 2005 budget to pass. Without that support, the budget would have been defeated, and new elections would likely have been called.
In the 2005-06 fiscal year, the government had a large surplus of expected revenues over expenses, making the government able to fund a wide array of new initiatives. The budget bill (C-43) received Royal Assent on June 28, 2005. In order to gain the necessary support of the New Democratic Party
New Democratic Party
The New Democratic Party , commonly referred to as the NDP, is a federal social-democratic political party in Canada. The interim leader of the NDP is Nycole Turmel who was appointed to the position due to the illness of Jack Layton, who died on August 22, 2011. The provincial wings of the NDP in...
(NDP) the budget was amended (Bill C-48) and given assent three weeks later following considerable debate.
Details of the budget
The budget was the eighth balanced budgetBalanced budget
A balanced budget is when there is neither a budget deficit or a budget surplus – when revenues equal expenditure – particularly by a government. More generally, it refers to when there is no deficit, but possibly a surplus...
in a row presented by the Liberal government. It contained minor tax cuts for both businesses and individuals over a five year period. These cuts, however, were mostly scheduled to begin in the latter years of the five-year period, which meant that the majority of them were unlikely to occur before the next election was held.
The personal income tax cut raises the basic personal exemption to $10,000 from its former level of just over $8,000 over the five year period. This was projected to result in an average tax savings of $16 for each Canadian in 2006, with the final total reaching $192 at the end of the five year period. The basic personal exemption is indexed to inflation, so it would likely have risen to roughly $9,000 over the five year period without the changes.
The budget also contained $12.7 billion for the Department of National Defence
Department of National Defence (Canada)
The Department of National Defence , frequently referred to by its acronym DND, is the department within the government of Canada with responsibility for all matters concerning the defence of Canada...
over the following five years. However, not all of this money was new funding and, as with most of the budget, it was back-loaded. The total new funding for 2006 was to be $500 million.
Start-up money was provided for Canada's efforts to comply with the Kyoto Accord and for a national child care program. Additional funding was provided for cities, health care, and foreign aid. Some cuts were made. The Air Travel Complaints Commissioner was abolished, and foreign aid to Thailand
Thailand
Thailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
, Malaysia, and all countries now in the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
was ended. In total, $11 billion in savings are expected.
Initial response by opposition parties
The Conservative PartyConservative Party of Canada
The Conservative Party of Canada , is a political party in Canada which was formed by the merger of the Canadian Alliance and the Progressive Conservative Party of Canada in 2003. It is positioned on the right of the Canadian political spectrum...
, the largest opposition party, surprised many by announcing that it would support the budget immediately after it was read in the House of Commons. Party leader Stephen Harper
Stephen Harper
Stephen Joseph Harper is the 22nd and current Prime Minister of Canada and leader of the Conservative Party. Harper became prime minister when his party formed a minority government after the 2006 federal election...
described it as "better than expected", and described its focus on tax cuts and defence spending as being in line with Conservative policy. It is highly unusual for the official opposition
Official Opposition (Canada)
In Canada, Her Majesty's Loyal Opposition , commonly known as the Official Opposition, is usually the largest parliamentary opposition party in the House of Commons or a provincial legislative assembly that is not in government, either on its own or as part of a governing coalition...
to vote in favour of the government's budget. However, Harper later changed his position on the budget, and his party joined with the NDP and the Bloc Québécois
Bloc Québécois
The Bloc Québécois is a federal political party in Canada devoted to the protection of Quebec's interests in the House of Commons of Canada, and the promotion of Quebec sovereignty. The Bloc was originally a party made of Quebec nationalists who defected from the federal Progressive Conservative...
in the largest abstention in Canadian history.
The Bloc Québécois and party leader Gilles Duceppe
Gilles Duceppe
Gilles Duceppe is a Canadian politician, and proponent of the Québec sovereignty movement. He was a Member of Parliament in the Canadian House of Commons for over 20 years and was the leader of the sovereigntist Bloc Québécois for almost 15 years. He is the son of a well-known Quebec actor, Jean...
, who were demanding an overhaul to employment insurance
Unemployment benefit
Unemployment benefits are payments made by the state or other authorized bodies to unemployed people. Benefits may be based on a compulsory para-governmental insurance system...
and the elimination of the fiscal imbalance, voted against the budget.
The New Democratic Party voted against the budget on first reading. Leader Jack Layton
Jack Layton
John Gilbert "Jack" Layton, PC was a Canadian social democratic politician and the Leader of the Official Opposition. He was the leader of the New Democratic Party from 2003 to 2011, and previously sat on Toronto City Council, serving at times during that period as acting mayor and deputy mayor of...
agreed with Harper that it was a "conservative budget" and was especially critical of the corporate tax cuts and the limited new funding for social programs.
Changes following the Liberal-NDP deal
Prior to the second reading the political situation changed dramatically due to Jean Brault's explosive testimony at the Gomery Inquiry. Stephen Harper announced that the Liberals had lost the moral authority to govern and vowed to bring down the government. Thus when the budget came to its second reading the Conservatives rallied against it. In order to ensure the continued confidence of the House, the Liberals struck a deal with the NDP to amend the budget. This amendment called for a reduction of the foreseen corporate tax cuts and $4.6 billion in additional spending on social programs. The bill to implement these measures was dubbed the "NDP budget" by the official opposition.Despite the NDP support, the government remained in a precarious position, requiring the support of all three independent Members of Parliament
Member of Parliament
A Member of Parliament is a representative of the voters to a :parliament. In many countries with bicameral parliaments, the term applies specifically to members of the lower house, as upper houses often have a different title, such as senate, and thus also have different titles for its members,...
(MPs). On May 17, Conservative MP Belinda Stronach
Belinda Stronach
Belinda Caroline Stronach, PC is a Canadian businessperson, philanthropist and former politician. She was a Member of Parliament in the Canadian House of Commons from 2004 to 2008. Originally elected as a Conservative, she later crossed the floor to join the Liberals...
crossed the floor
Crossing the floor
In politics, crossing the floor has two meanings referring to a change of allegiance in a Westminster system parliament.The term originates from the British House of Commons, which is configured with the Government and Opposition facing each other on rows of benches...
to the Liberals, giving them a crucial extra vote. Soon after, Liberal polling numbers ended their slide and began to recover. Two Conservative MPs from Newfoundland and Labrador
Newfoundland and Labrador
Newfoundland and Labrador is the easternmost province of Canada. Situated in the country's Atlantic region, it incorporates the island of Newfoundland and mainland Labrador with a combined area of . As of April 2011, the province's estimated population is 508,400...
, Loyola Hearn
Loyola Hearn
Loyola Hearn, PC is the Canadian Ambassador to Ireland. He served as a Member of the Canadian House of Commons from 2000 to 2008, and as Minister of Fisheries and Oceans from February 6, 2006 to October 30, 2008....
and Norman Doyle
Norman Doyle
Norman E. Doyle, is a Canadian businessman and politician in Newfoundland and Labrador.Doyle was a member of the Newfoundland and Labrador House of Assembly from 1979 to 1993. He was a Conservative Party of Canada Member of Parliament in the Canadian House of Commons. He represented the riding of...
, were also pressured by provincial premier Danny Williams
Danny Williams (politician)
Daniel E. "Danny" Williams, QC, MHA is a Canadian politician, businessman and lawyer who served as the ninth Premier of Newfoundland and Labrador between November 6, 2003, and December 3, 2010. Williams was born and raised in St. John's, Newfoundland and Labrador...
to vote in favour of the budget, as it included the provisions of the government's recent Atlantic Accord
Atlantic Accord
The Atlantic Accord is an agreement signed in 1985 between the Government of Canada and the Government of Newfoundland and Labrador to manage offshore oil and gas resources adjacent to Newfoundland and Labrador....
s. The Conservatives eventually announced that they would vote in favour of the main budget bill, containing the Atlantic Accord, but would vote against the second bill containing the NDP amendments.
Voting in the House of Commons
After Stronach's move, the government could count on the same number of votes as the opposition: the Liberals, the NDP and independent MP Carolyn Parrish supported the budget, while the Conservatives and the Bloc opposed it. The fate of the government thus hung on the decisions of the other two independent MPs: David KilgourDavid Kilgour
David Kilgour, PC is a former Canadian politician.Kilgour graduated from the University of Manitoba in economics in 1962 and the University of Toronto law school in 1966. From crown attorney in northern Alberta to Canadian Cabinet minister, Kilgour ended his 27 year tenure in the Canadian House of...
and Chuck Cadman
Chuck Cadman
Charles "Chuck" Cadman was a Canadian politician and Member of Parliament from 1997 to 2005, representing the riding of Surrey North in Surrey, British Columbia.- Early life :...
. The government needed the support of at least one of the two to continue to enjoy the confidence of the House. Cadman was suffering from malignant melanoma, and before the day of the vote it was not clear whether or not he would be able to attend.
On May 19, a vote was held for second reading of Bill C-43 (the main budget), and Bill C-48 (the amendments). The main budget bill passed on a vote of 250 to 54, with only the Bloc Québécois voting against. The second bill received a vote of 152 Yea and 152 Nay. The Conservatives and Bloc Québécois voted against second reading, while the Liberals and NDP voted in favour. Conservative MP Darrel Stinson
Darrel Stinson
Darrel Stinson is a retired politician in British Columbia, Canada. He was the Member of Parliament for Okanagan—Shuswap from 1993 until the dissolution of the Canadian House of Commons for the 2006 federal election, and was a member of the Conservative Party of Canada parliamentary caucus.-...
was unable to attend the vote due to cancer surgery, so Liberal MP Peter Adams agreed to sit out as a courtesy. Independent MP Kilgour voted against the budget, while Parrish and Cadman voted in favour. In the event of a tied vote, the Speaker is required to cast the tie-breaking vote. According to Parliamentary procedure, the Speaker is required to vote, whenever possible, for the continuation of debate. Thus, the Speaker voted in favour of second reading, "to allow the House time for further debate so that it can make its own decision at some future time."
Allegations were later made in a book by Vancouver journalist Tom Zytaruk in early 2008 that the Conservative Party attempted to get Cadman to support the Conservative's positions by offering him a $1 million life insurance policy. If the allegations are true, what the Conservatives did would amount to bribing an MP, which is a criminal offence. Conservative leader and Prime Minister at the time of the allegations Stephen Harper
Stephen Harper
Stephen Joseph Harper is the 22nd and current Prime Minister of Canada and leader of the Conservative Party. Harper became prime minister when his party formed a minority government after the 2006 federal election...
denied that the party bribed Cadman. As of February 2008, the allegations have not been proven.
After this vote, the Conservatives admitted their defeat and backed away from their pledge to bring down the government. On June 14, a series of 16 votes were held pertaining to the budget: one for concurring in the committee report for Bill C-43 and dozens of amendments and other motions. As many as 15 were considered confidence votes and could have triggered an election if one was lost. Several opposition members were absent. The government won each vote, virtually guaranteeing that no election would be held in the summer of 2005. http://www.cbc.ca/canada/story/2005/06/14/confidence050614.html
Two days later, Bill C-43 was finally passed, and moved to the Senate. Meanwhile, the NDP amendments came out of committee and debate was launched.
On June 23, the House voted to extend the session into the summer to deal with C-48 and with the same-sex marriage bill (Bill C-38). Then, in a late-night session after several Conservative members had already left the house, the Liberals, NDP, and Bloc voted to invoke closure
Cloture
In parliamentary procedure, cloture is a motion or process aimed at bringing debate to a quick end. It is also called closure or, informally, a guillotine. The cloture procedure originated in the French National Assembly, from which the name is taken. Clôture is French for "ending" or "conclusion"...
on the debate. The Liberals and NDP then voted in favour of passing Bill C-48, defeating the Conservatives and Bloc by a margin of 5 votes. The outcome upset Conservative MPs, and left the same-sex marriage bill as the only major business to be dealt with during the extended session in the House. It, too, was passed on June 28, allowing the House to call a recess
Recess (motion)
In parliamentary procedure, "recess" refers to legislative bodies—such as parliaments, assemblies, juries—that are released to reassemble at a later time. The members may leave the meeting room, but are expected to remain nearby. A recess may be simply to allow a break or it may be...
.
The bills moved to the Senate. Bill C-43 was still in committee hearing stage on the morning of June 28, but Liberal senators rushed the bill through the legislative process all day, allowing it to receive Royal Assent before the day was over.
Bill C-48 was more controversial, but continual invocations of closure stopped what might have been a filibuster by the Opposition, and on July 20, it, along with four other controversial government bills, were passed, allowing the Senate to enter into recess. They all received Royal Assent within the day.