1993 Canadian federal budget

The budget is presented amid poor economic conditions and soaring federal deficit. Two month earlier, Brian Mulroney had announced his intention to resign as soon as a new Progressive Conservative leader is elected.

On 18 June 1992 the Spending Control Act received royal assent. That act provided for a legislated ceiling for federal program spending from 1991–92 to 1995–96. Few programs were excluded from the scope of the Act (notably Unemployment insurance).[plan 1] It is a complement to the Expenditure Control Plan announced in the 1990 budget and extended in 1991.[2]

The budget did not brought sweeping tax changes but introduced some technical changes for corporations :

• The budget allowed for faster depreciation of selected capital property items :
  • Creating an election to place eligible property (electronic data processing equipment, photocopiers) in separate CCA classes when the cost was $1,000 or more to allow immediate deduction for the taxpayer upon disposition of the equipment. That disposition is advantageous for equipment that depreciates fast.[plan 2]
  • A new CCA class with a rate of 25% was made available to patents and licence-to-use patents acquired after 26 April 1993. This measure allowed for faster amortization of patents in the first few years after the acquisition.[plan 3]
• The budget also announced that the 25% withholding tax on payments for the use of patents would be repealed. That tax was imposed on Canadian corporations' usage of foreign companies' patents.[plan 4]

The budget planned for $7.5 billion of expenditure cuts over 5 years. Most of the cuts were however announced in the December 1992 Economic Statement[2] ($5.3 billion) and few cuts were contained in the 1993 budget ($1.2 billion):[3]

• The federal government planned to abolish 16,500 more jobs over 5 years (the 1992 Economic Statement already introduced a 2-year wage freeze for all public servants, including the Prime Minister, cabinet ministers, MPs, senators and the federal judiciary) ;
• $300 million were withheld from non-allocated reserves ;
• Defence spending levels would be frozen to their 1994-95 level ;
• The unemployment benefits rate reduction was made permanent: it would remain at 57% even after April 1995 ;
• Funding for social housing was frozen at $2 billion yearly and the CMHC would no longer grant 35-year subsidies ;
• Growth in funding for research and international aid was capped at 1.5% in 1994–95.

The budget was poorly received, and described as "stand pat",[4] "do nothing",[5] "non-budget"[6] and a "lame duck".[7] Claude Picher, from La Presse, pointed out that the 100-pages long budget was one of the shortest budget ever and strongly criticized its lack of substance, overoptimistic economic forecasts and unimaginative measures.[6]

Preceding the budget, Mazankowski had stated that government revenues would decrease compared to 1992 as a result of "slow economic growth, continued high unemployment and low inflation".[8]

The Canadian Bond Rating Service downgraded Canada's federal debt rating from AAA to AA+,[4] and the budgetary deficit for the fiscal year was expected to be $32.6 billion. Mazankowski stated that the rating service had based its decision on "erroneous information".[4]

The value of the Canadian dollar declined with respect to the United States dollar in the foreign exchange market the day after the budget speech,[4] and interest rates "climbed sharply".[5]

The spending cuts announcements of the December 1992 Economic Statement and the 1993 Budget were included in the Government Expenditure Restraint Act, 1993 No. 2 which received royal assent on 2 April 1993.[9]

• The Budget 1993 at Department of Finance Canada
• The Budget in Brief at Department of Finance Canada