The federal Liberals today unveiled a new plan to promote job creation, stimulate learning, research and development and boost Canada’s investment climate.

Finance minister Ralph Goodale made the announcement in his fiscal update, a forecast of economic and budget conditions. The update may prove to be a blank in the Liberal’s election platform should the government fall.

Goodale noted that surplus projections have risen yet again, which is providing room for tax cuts and new spending.

With surpluses expected to total $54.5 billion over the next six years, the government is committing to $30 billion in tax cuts.

It plans to:

  • immediately increase the basic personal amount by $500, effective January 1;
  • immediately reduce the lowest personal income tax rate from 16% to 15%, effective January 1, with subsequent reductions of one percentage point to each of the two middle rates by 2010;
  • consult with the provinces and territories to design and implement a Working Income Tax Benefit to help encourage low-income Canadians to join the workforce.

The government also confirmed the 2-percentage-point reduction in the general corporate tax rate to 19% by 2010 and the elimination of the corporate surtax for all corporations, as well as the elimination of the federal capital tax as of 2006, two years earlier than originally planned.

Goodale said that, based on forecasts by private sector economists, Canada’s economy is expected to grow by 2.8% this year, rising to 2.9% in 2006 and 3.1% in 2007.

Based on independent forecasts, after adjusting for the $3-billion Contingency Reserve and economic prudence and taking into account measures announced since Budget 2005, the amounts available for planning purposes are: for 2005–06, $8.2 billion; in 2006–07 that rises to $9.2 billion; then to $9.5 billion the next year; dropping back to $7.9 billion; then $8.4 billion; and finally in 2010–11 rising back to $11.3 billion.

These surplus forecasts, which total $54.5 billion, have been revised upwards from Budget 2005, reflecting higher projected corporate and personal income tax receipts and lower public debt charges.

Goodale said that the government on track to meet its Budget 2004 target of reducing Canada’s debt-to-GDP ratio to 25% within 10 years and is now setting an even more ambitious target of bringing the ratio down to 20% by 2020.

As for new spending, the government will devote:

  • more than $2.1 billion over five years to improve student financial assistance;
  • $3.5 billion over this year and the next five years to increase workplace-based training programs;
  • $1.3 billion over five years to improve settlement and integration services for new immigrants to Canada; and
  • $1 billion in 2005–06 for provinces and territories for the Post-Secondary Education Innovation Fund.

It also proposes further investments to advance innovation, including:

  • more than $2.1 billion in additional funding, beginning in 2005–06 and over the next five years, for university-based research;
  • almost $200 million over the next five years to create up to 3,500 internships and up to 500 scholarships for natural and health sciences and engineering graduates;
  • $590 million over the next five years to support transportation infrastructure investments;
  • $485 million over five years to implement CAN-Trade—a new international commerce strategy to position Canadian companies, especially small and medium-sized firms, in priority markets such as China and India; and
  • an additional $100 million over the next five years to continue supporting broadband installation in rural, remote and First Nations communities.