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Minister of Finance Bill Morneau takes part in an interview at Finance Headquarters in Ottawa on Thursday, March 24, 2016.Sean Kilpatrick/The Canadian Press

Forty-eight hours after releasing his first budget, Finance Minister sat down with The Globe and Mail's Bill Curry in his office on Ottawa's Elgin Street to discuss the plan and what lies ahead. Mr. Morneau discussed the deficit, taxes, the Canada Pension Plan and what Phase 2 of the federal government's infrastructure plan will look like. He clearly didn't want to talk about a basic income guarantee.

I'll start off with the issue of a basic income guarantee, which was not in the budget, but it was in the finance committee's pre-budget report. The Ontario budget said the province wants to have a pilot project. Presumably they're going to be asking for at least logistical help. Why not mention it in the budget?

I have really nothing to say about that at this time. I'll respond to the finance committee and review their point of view and obviously I'll respond to [Ontario finance minister] Charles Sousa from the Ontario government, but it's not part of our plan.

Ontario will probably want the Canada Revenue Agency's help to understand people's income levels, that kind of thing. At the very least, are you open to technical support?

We'll be collaborative with them. I don't know if I have anything else to say about it.

Have you read about it? Do you think it's a good idea?

I'm really focused on the budget. This is not something I'm focused on at this time.

The premiers of Alberta and Saskatchewan have wondered why there are parts of their provinces that are not covered by employment insurance zones. All of Newfoundland is covered by the new benefits, but not all of Alberta and Saskatchewan. Is there any room for revision?

There were two aspects to the changes in employment insurance. The first was the aspects that impact Canadians across the country. I think the changes in the new entrants and the re-entrants will have a positive impact for people across the country. People that are unemployed that are young people that just got into the job market or people that are just re-entering the job market will be able to get EI more quickly. That applies nationally. The additional training fund we've put into the EI system will impact Canadians across the country, so that's positive. So those things will make a big difference across the country. The movement from a two-week waiting period to a one-week waiting period on employment insurance applies nationally. ... So all those things will have an important impact in all of Saskatchewan and all of Alberta and in the rest of the country. The specific measures for the 12 zones were really to deal with sudden rises in unemployment that were significant, and we chose those 12 zones because they were the places that had the biggest change in unemployment levels. That's a temporary measure that we think can help as these areas go through transition.

But you've got the premiers saying there are actually some areas that are affected and the formula is confusing. It might not have been the right way to go. So are you open to any changes?

We've made the changes that we think are important to the system. We think they help Canadians all across the country and we know those areas that are really affected by unemployment, sudden changes in unemployment, were going to have more important impact there. We think it's the right thing to do.

The budget also referred to tax reform in some way. The Liberal platform talked about tax expenditures and the possibility of finding $3-billion a year in savings. The finance committee heard lots of groups saying we need a broader review of the whole tax system. It's not clear what the budget was saying.

High level, we're going to remain committed to tax fairness in this country. The important measures in this budget were around reducing taxes for middle-class Canadians and that we've moved forward on. The other measure that's not directly answering your question but is really important is the Canada Child Benefit, which is basically making sure that the benefit goes to a significant group, but a smaller group of people that are frankly more in need of the Canada Child Benefit. Our intent is to review tax expenditures, as we put in our campaign, and we will embark on that. The goal is to make sure that the expenditures that we have in place are having the intended impact. So we'll get going on that. It's something that we'll be looking at in the coming months.

Is it focused just on the tax credits, so-called tax expenditures, or will you be looking at income-level brackets and corporate tax levels?

Our focus is on the tax expenditures. And we'll have to take a look at the nature of the system in order to consider those things, but that is our focus.

You did move in the budget on a couple of them. The fitness tax credit was eliminated, so what are you hearing from your officials? They've read your platform and there's $3-billion listed as a target. Is there more to be found there? Do you think that's going to be possible?

With every tax expenditure, there's going to be a constituent that feels it's appropriate, and we'll listen to voices that tell us why each part of the tax code makes sense the way it is. But our objective is to make the tax code simpler and our objective is to ensure that there's tax fairness. ... So the reason we took the approach that we did in this budget around those tax credits was because by introducing the Canada Child Benefit, we were taking a new approach to how we dealt with families, saying that we wanted to give significantly more money for those families that are raising their children. So in aggregate, when you take a look at the things that we've done, nine out of 10 families with children will benefit, and the average will be $2,300 among the families that benefit. So you have to look at it together in order to get to the right conclusions. Any review we do will look at how the system impacts people narrowly on the expenditure and more broadly in terms of what's the impact on their situation. We'll want to make sure that we continue down the path of helping middle-class families.

Will that include looking at capital gains rules, because there was a lot of noise before the budget. Some people thought there would be action there and there wasn't.

We didn't consider that in this budget and I don't know where those discussions came from.

What would this review look like? Is it finance officials or a blue-ribbon panel? The finance committee?

There will be more details to come. We don't currently have a definitive plan on the approach.

One surprise was the small business tax rate staying at 10.5 per cent instead of going to 9 per cent. Can you explain the thinking? The Canadian Federation of Independent Business is quite upset about that.

My thinking was that the most important thing we can do for small businesses – for all business, for that matter – is to focus on how we can grow the economy. You know business people wake up in the morning thinking about how they get more clients and customers, and so if we make clients and customers more successful by – in the case of small business in particular – helping middle-class Canadians with more money, that's going to have a positive impact on those businesses. They're going to be able to buy more products and services. If we have more growth in the economy, for most businesses – the overwhelming majority of businesses – a growing economy is going to help their business. And we figured that was the place we should be spending our time ensuring that we get it right.

That was a promise in the platform. Is that still on the table some day? What is the status of that?

Our plan right now is to stay where we are.

Economist Jack Mintz and a lot of the larger business groups were saying it was actually not a good policy idea and it would be better to lower the corporate tax rate instead of the small business rate. Was that part of your thinking?

Really it was around how do we have the biggest positive impact on the economy and that was around improving the situation of the middle class, which for those businesses, it means their customers and growing the economy. Those are the two factors that I considered.

A lot of the attention and questions and commentary were about the deficit and how you can come back into balance. One question a lot of people are asking is: Will this government have to raise taxes? Is that your thinking?

That is not our thinking. What we're clearly showing in the budget is that if we have a focus on growth, if we're able to change this situation we've been in – which is a low-growth environment – and deal with the fact that we're facing demographic challenges by investing in the economy, that we can have a much more positive fiscal track in the future. That's what we're aiming to do. This is an important first step. We identified in the budget that we'll have more details around an innovation agenda. We'll have more details around our longer-term infrastructure spending, and we believe both those things will have a positive impact on growth.

But a tax expenditure review could be seen as tax hikes by some people.

People will speculate, but our goal is to look at tax expenditures.

One of your next big issues to deal with is Canada Pension Plan reform. Probably around June, you'll meet your provincial colleagues and I think the idea is you'll have some kind of draft plan at that point.

The goal in a CPP enhancement is to ensure that the people who currently don't have enough to retire or the people in this generation that, as they get to retirement, might not have saved enough, have an improved situation. So for us, what that means as a starting point is it needs to be universal, so we can't leave anybody out of that. We want to make sure that it helps Canadians across the country. We recognize that it should be fully funded. ... We want to make sure they save appropriately during their working lives, so that they have a continued good situation in retirement. So it is about having a calibrated discussion with the provinces and getting to a place where we think we've addressed the issue of the group of people who aren't in a good situation – which is a group of people that will grow over time based on the changing nature of retirement plans in this country. My sense so far is that we have open-mindedness on the part of the finance ministers from the provinces. The devil's always in the details.

There's also discussion around Old Age Security. You've made the decision to keep the age of eligibility at 65 instead of 67, which was brought in by the Conservatives. Some people are talking about a structural deficit over the long term. Can federal finances sustain that?

My first response is what we've put forward is a plan to grow the economy, and with a growing economy we're in a better position to deal with all of these issues. If we can ensure that we have more innovative companies, if we have better-educated students, we're going to be in a better position tomorrow to deal with demographic challenges. With respect to health care, we are committed to working with the provinces to maintain a strong and effective health-care system. There'll be more discussions about that this year following Minister [Jane] Philpott's discussions with the provinces. With respect to OAS, it's important to recognize the people that benefit from the Old Age Security system – and that is not all Canadians who retire, it's Canadians who retire without a fully funded pension plan, so this is helping people who might not be able to work to 67. If you think about the labourer who literally can't work until that age because he or she has had a job that tires them out, that's what we're recognizing here, and we'll have I guess a more complete picture of the Canadian retirement system as we work through the CPP enhancement with the provinces.

There's a little bit of confusion about Phase 1 and Phase 2 on the urban agenda. When is Phase 2 coming and what will it look like?

What I can say is that [Infrastructure] Minister [Amarjeet] Sohi's immediately embarking on thinking about how we can deliver on Phase 2. What we tried to identify was what we can get going in the very near term is intended to be Phase 1, and the way we get to conclusion on Phase 2 requires discussions with provinces and municipalities, as you know. It also requires thinking about how we can amplify our infrastructure dollars. We'd like to be thinking about how we can get outside investors, institutional investors, as part of the team that's dealing with our infrastructure deficit in this country. So that will take some time, but as you've seen with this government, we want to get at these things quickly, so we'll do our best to have a plan out as rapidly as possible, but we won't get it out until it's ready. We're working on it already and I'm hopeful that we'll have more to say this calendar year. That's the plan.

The Liberal platform on tax expenditures said it would find $3-billion a year. But things change, and now that you're in government, does that $3-billion figure still seem realistic?

It still seems realistic to me. This was budget 2016. Year one of a four-year mandate. We want to make sure that we continue to look at tax fairness. Clearly I don't have an exact number for you at this stage, but we'll remain focused on how we can ensure that the tax system works as best as it can. You've also seen that we've charged the [Canada Revenue Agency] with the responsibility for ensuring that people pay the taxes that they owe. And that's an important part of our plan.

I assume CPP is next on your agenda. Selling the budget and then CPP. Anything else on your agenda in terms of priorities?

I think clearly I want to get out to talk to Canadians about our budget, so they can understand what we've done. I want them to really understand how it's going to make a difference in their day-to-day lives. I hope Canadians will start to realize the tax decrease that we've put in place. I believe we need to be very effective at communicating the new Canada Child Benefit. When the cheques start in July, people will understand much better. But in advance, my goal is to make sure they understand that we've really, significantly changed the situation for the middle class. That's going to take a little while. I want to get out across the country. Yes, CPP is an important agenda following that. During the course of the year, we're going to be working on the innovation agenda. I'll be working with [Innovation] Minister [Navdeep] Bains on that and our hope is to have more to talk about, as I said, this year. I'll be working with Minister Sohi on the infrastructure plan. Our hope is to have more information on that this year. So those two initiatives are really foundational for our government and they're really important. The economic advisory council that I appointed will be part of the deliberations on both those plans. We'll get the point of view from them and they'll help inform us on what are the things that we can do that will have the biggest impact on growth in this country, and that's not only in the long term but in the short and medium term. So we want to get on it.

Why not just put a clear line in the budget on the adjustment for risk, or cushion? This time, it's kind of baked in to the numbers. It's confusing to write about. It's confusing for people to understand and it's bigger than it was in the past, so why not just make it a clear item in the budget?

I think it's really clear. My goal was to make it as open and transparent as possible. So by taking a look at what's happened over the last number of years, and the difference between economists' forecasts and the actual, and using that as effectively our risk adjustment, we've said to Canadians that we're being prudent. There's a factor there that will allow us to plan against an economic projection and ... if the economy grows faster, I will end up sitting with you and with other people and saying the risk adjustment doesn't need to be there or can be [less]. And we'll aim to be really clear about that. I don't know if there's a better way to do it than to say there is a factor in there for prudence because there's been a serial disappointment with the economic provisions in the past. What does [International Monetary Fund managing director] Christine Lagarde call it? She calls it the new mediocre.

This interview has been edited and condensed.

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