OTTAWA—The federal government is scaling back a planned hike to employment insurance premiums and will extend a work-sharing program as global economic woes slow plans to balance the federal budget.Finance Minister Jim Flaherty is expected to announce both measures in a major speech Tuesday to unveil the fall economic and fiscal update, the Star has learned.
The finance minister may also confirm that Ottawa will miss its target to balance the federal budget by 2014-15 due to slower-than-expected economic growth.
The government is hoping the two actions unveiled in the update will help protect Canadian jobs against economic uncertainty, although critics want Ottawa to scrap the increase in EI premiums altogether.
“We’re not immune to what’s going on in the world,” a government official said Monday, highlighting the debt crisis in Europe and economic woes in the United States that “pose serious danger to Canada’s economic recovery.”
The economic update comes just days after Prime Minister Stephen Harper returned home from the G20 summit in Cannes, France, where leaders struggled to contain a Greek-induced financial meltdown.
While Canada has boasted that it has fared better than most nations with lower unemployment and a stable banking sector, the Conservatives got a wake-up call with news that Canada lost 54,000 jobs in October as unemployment rose to 7.3 per cent.
That’s one reason that jobs will be a focus when Flaherty speaks Tuesday to the Calgary Chamber of Commerce.
The government official said chopping the planned EI increase will reduce the burden on businesses and leave more money in the pockets of employees, though the reduction will save less than $50 a year for a worker making $43,000.
The employment insurance premiums were slated to rise by 10 cents per $100 of insurable earnings in 2012. But Flaherty will announce that Ottawa is slashing the increase by half, to 5 cents.
The decision echoes a similar move taken by the Conservatives a year ago when a 15 cent hike in EI premiums was capped at 5 cents as well.
On Monday, the Canadian Federation of Independent Business called on Ottawa to scrap the increase altogether.
“Given the ongoing economic uncertainty, now is not the time to be increasing EI premiums as it may end up deterring employers from hiring new employees,” said Dan Kelly, the organization’s senior vice-president of legislative affairs.
“A rate hike at this time will serve only to set back economic recovery and job creation,” he said in a statement.
To help protect against further job losses, the Tories will extend work-sharing agreements by up to 16 weeks. These programs allow companies to avoid layoffs by offering employment insurance benefits to workers willing to work at reduced hours while their company recovers. The measure had been previously extended in the March budget and at the time, the government said that 280,000 jobs had already been saved.
“With the global economy still fragile, the economic and fiscal update will demonstrate once again the government’s top priority is the economy and a low-tax plan to create jobs and growth,” the official said.
“Our government will take targeted action to protect Canadian jobs and strengthen the economy,” the official said.
But the update is also expected to lay bare the toll the global uncertainty has taken on Ottawa’s own financial strategy as the timeline to eliminate the deficit slips.
Flaherty dropped some hints last month when he told reporters the government was on track to run a surplus in the “medium term,” a less specific timeline that many took as a signal that the original deficit plan was no longer possible.
In Toronto, Ontario Finance Minister Dwight Duncan said he expected Flaherty to revise the date when Ottawa would balance its books to something closer to the province’s target of 2017-18.
“Clearly, that’s the signal they’ve been sending. That’s one of the reasons we set out on a longer timeframe than most other governments because I believe we did a more candid analysis of the future uncertainty,” Duncan said in an interview Monday.
“My guess is the others will catch up to us.”
Last month, the Bank of Canada cut its forecast of economic growth, echoing private sector economists who said the Canadian economy will grow at 2.2 per cent in 2011, down from their prediction of 2.9 per cent in March. Less growth means less revenue for the federal coffers.
Origin
Source: Toronto Star
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