CANADA

Austerity for hard times

Ottawa cuts spending to reduce its deficit

E. KAYE FULTON December 14 1992
CANADA

Austerity for hard times

Ottawa cuts spending to reduce its deficit

E. KAYE FULTON December 14 1992

Austerity for hard times

Ottawa cuts spending to reduce its deficit

E. KAYE FULTON

LUKE FISHER

ANTHONY WILSON-SMITH

Frustrated with poor career prospects after five years as a computer operator for the department of external affairs in Ottawa, Kevin McCarthy left his job last December and joined the unemployed. Over the next 10 months, he collected a total of $7,800 in unemployment benefits—and sold personal belongings to cover living expenses that included $400 a month for rent. He also laid plans to start his own business. On Nov. 20, a month after his UI benefits ran out, McCarthy, 28, and four partners opened an Ottawa-based communications company that specializes in fibre optics and computer software. The former public-service union steward says that he had no qualms about drawing unemployment while planning his future.

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Added McCarthy: “I paid enough into the system that I felt I could take a chance to look for something better.”

But with last week’s economic statement by Finance Minister Donald Mazankowski, that traditional cushion will soon disappear.

In a mini-budget that slashed $7.8 billion from projected government spending over three years while offering a “gentle nudge” to Canada’s depressed economy, Mazankowski also tightened services to the most vulnerable Canadians—the unemployed.

Among the measures to take effect in April, 1993: a five-per-cent reduction

in unemployment payments and the elimination of benefits to workers who resign without “just cause” or are fired for misconduct. Describing his critics as “bleeding hearts,” Mazankowski defended his austere measures. Said the finance minister: “There’s a sense that all we do

In the late 1980s, higher taxes helped reduce the federal deficit. But the recession has slowed revenue growth -and the deficit is once again increasing.

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is bring out the cheque-writing machine. Those days are over.”

Indeed, the financial statement painted a bleak economic forecast—and put forward the argument that Ottawa has little room to manoeuvre. For one thing, poorer-than-predicted economic conditions have resulted in a projected federal deficit of $34.4 billion for the 19921993 fiscal year—almost $7 billion higher than Mazankowski originally estimated in his February budget.

According to senior Tories, that forced the finance minister to rebuff pressure from some caucus colleagues to consider cuts to either the present seven-per-cent Goods and Services Tax or to personal income taxes. Instead, he chose modest spending programs that included a $500-million highway-improvement program; a freeze on unemployment insurance premiums for existing jobs; and a 10-per-cent investment tax credit for small businesses.

But the outcry over Mazankowski’s changes to Canada’s unemployment insurance program, which is paid for by employers and employees, overshadowed those other measures. Employment and Immigration Canada officials estimate that of the three million people a year who file for unemployment benefits, 225,000 quit their jobs without just cause while another 40,000 are fired for misconduct. As of next April, UI officials will decide whether a claim is justified on the basis of information supplied by employer and employee. The decision can be appealed to a tribunal—a process that can take as long as 30 days. But by tightening eligibility, Mazankowski said, the unemployment insurance program will save $300 million in 1993 alone.

Although business spokesmen applauded the measures, critics charged that the new rules are discriminatory, especially against women and the poor. Under the Unemployment Insurance Act, “just cause” includes leaving a job because of “sexual or other harassment, hazardous working conditions, obligations to follow a spouse, discrimination under the Human Rights Act or obligation to care for a child.” Last week, representatives of women’s groups argued that, among other things, it is still difficult for women to prove that they have been sexually harassed in the workplace. And the National Anti-Poverty Organization, an Ottawa-based lobby for 100 social assistance groups, said that the new rules unfairly limit the options available for poorer Canadians. Said Lynne Toupin, the organization’s executive director: “People who work in low-paying, dead-end jobs will be forced to stick to those jobs, afraid to move.” In a recession-wracked economy, Mazankowski’s strong medicine will clearly be unpalatable to many Canadians.

E. KAYE FULTON with LUKE FISHER and ANTHONY WILSON-SMITH in Ottawa