bptoce•good 2/17/03 11:01 AM Page 1 Supplementary Information and Notices of Ways and Means Motions Included bptoce•good 2/17/03 11:01 AM Page 2 © Her Majesty the Queen in Right of Canada (2003) All rights reserved All requests for permission to reproduce this document or any part thereof shall be addressed to Public Works and Government Services Canada. Available from the Distribution Centre Department of Finance Canada Room P-135, West Tower 300 Laurier Avenue West Ottawa, Ontario K1A 0G5 Tel: (613) 943-8665 Fax: (613) 996-0901 and from participating bookstores. Price: $26.75 including GST This document is available free on the Internet at www.fin.gc.ca Cette publication est également disponible en français. Cat. No.: F1-23/2003-3E ISBN 0-660-18999-2 bptoce•good 2/17/03 11:01 AM Page 3 Table of Contents 1 Introduction and Overview . 7 Budget 2003—Building the Canada We Want . 8 Economic Developments and Prospects . 10 Investing in Canada’s Health Care System . 12 Investing in Canadian Families and Their Communities . 14 Investing in a More Productive, Sustainable Economy . 17 Canada in the World . 21 Improving Expenditure Management and Accountability . 24 Sound Financial Management in an Uncertain World . 27 Summary of Spending and Revenue Initiatives in This Budget . 29 2 Economic Developments and Prospects . 33 Highlights . 34 Introduction . 36 Canada continues to face an uncertain global environment . 37 The U.S. recovery has been uneven . 38 Canadian growth outperformed that of the United States during the 2001 global downturn and the 2002 recovery . 40 Canada’s performance has been led by solid domestic demand . 41 Canada’s employment performance in 2002 was stellar . 42 Canada’s unemployment rate gap with the U.S. has narrowed . 43 Strong fundamentals, led by an improved fiscal position and low inflation, have supported Canada’s solid economic performance . 45 With Canada’s stronger economic and fiscal performance, our current account balance and net foreign indebtedness have improved significantly . 47 Sustained balanced budgets and a proven record of low and stable inflation have increased the Bank of Canada’s room to manoeuvre . 49 Unlike the U.S., Canadian consumer confidence has been resilient . 51 Housing activity has been exceptionally strong . 52 Corporate profits and business confidence remain high... 54 …which bodes well for future investment . 56 3 bptoce•good 2/17/03 11:01 AM Page 4 THE BUDGET PLAN 2003 Improved fundamentals and increased business investment have strengthened our productivity performance... 57 ...and this improved productivity growth, plus Canada’s superior labour market performance, has generated stronger growth in living standards . 58 Forecasters expect continued solid growth in the Canadian economy . 59 Downside risks to the U.S. and global outlooks remain . 62 3 Investing in Canada’s Health Care System . 63 Highlights . 64 Introduction . 66 February 2003 Accord—A Five-Year Plan Focused on Improving Access . 67 Support Through Transfers to Provinces and Territories . 69 Health Reform . 70 Direct Health Accord Initiatives . 72 Other Health Initiatives in Support of Reform . 76 First Nations and Inuit Health . 79 Federal Transfers to Provinces and Territories . 80 4 Investing in Canadian Families and Their Communities . 89 Highlights . 90 Introduction . 92 Supporting Canadian Families . 92 Supporting Communities . 105 Strengthening Aboriginal Communities . 109 Promoting Canadian Culture and Values . 111 5 Investing in a More Productive, Sustainable Economy . 117 Highlights . 118 Introduction . 122 Strengthening Research and Innovation . 123 Supporting Skills and Learning . 130 Improving the Tax System . 136 Supporting Canadian Families: Increasing the National Child Benefit Supplement and Introducing the Child Disability Benefit . 137 Encouraging Savings by Canadians: Increasing the RPP/RRSP Limits . 137 4 bptoce•good 2/17/03 11:01 AM Page 5 BUILDING THE CANADA WE WANT Promoting Entrepreneurship and Small Business . 140 Strengthening the Canadian Tax Advantage . 143 Advancing Sustainable Development . 148 Climate Change . 149 The Environment . 153 Renewing Canadian Agriculture . 155 6 Canada in the World . 159 Highlights . 160 Introduction . 162 Strengthening Canada’s Military . 163 Ensuring Security at Home . 164 Enhancing Canada–U.S.Trade . 167 Increasing Canada’s International Assistance . 168 7 Improving Expenditure Management and Accountability . 171 Highlights . 172 Introduction . 174 Commitment to Expenditure Reallocation and Sound Program Management . 175 Implementing Full Accrual Accounting . 177 The Accountability of Foundations . 179 Improving Reporting and Accountability to Parliament . 182 The Accountability of Health Transfers . 182 Employment Insurance Premium Rates . 183 Regulation and Investor Confidence . 184 Air Travellers Security Charge . 187 Debt Servicing and Reduction Account . 188 User Charging and Cost Recovery . 189 8 Sound Financial Management in an Uncertain World . 191 Highlights . 192 Introduction . 193 Approach to Budget Planning . 194 Implications of the Revised Economic Outlook and Current Financial Developments . 195 Impact of Full Accrual Accounting on the Fiscal Projections . 197 Fiscal Surplus for Planning Purposes . 199 5 bptoce•good 2/17/03 11:01 AM Page 6 THE BUDGET PLAN 2003 Impact of Measures in Budget 2003 on the Budgetary Balance . 200 Summary Statement of Transactions . 202 The Government’s Fiscal Progress . 203 Canada only G7 country to record surplus in 2002 . 204 Federal debt-to-GDP ratio on downward track . 205 Canada has achieved the largest decline in the debt burden among the G7 countries . 206 Details of the 2003 Budget Plan: Outlook for Revenues . 207 Outlook for Budgetary Revenues . 208 Revenue ratio lowered due to tax cuts . 209 Details of the 2003 Budget Plan: Outlook for Program Spending . ..