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Winnipeg Free Press - PRINT EDITION

Tax cuts, new spending out for now: Flaherty

By: Julian Beltrame

23/12/2009 1:00 AM | Comments: 1

OTTAWA -- Ottawa has ruled out significant tax cuts or new spending programs for Canadians in next year's federal budget, Finance Minister Jim Flaherty says.

With the deficit scheduled to hit a record $56 billion for 2009-2010, the finance minister told The Canadian Press in a year-end interview the government must keep spending under control and can't afford further tax cuts.

"I would not anticipate any new substantial spending programs or any new substantial tax reductions in the next budget. This is a stay-the-course budget," he said from his 21st-floor office in downtown Ottawa.

But Flaherty also ruled out tax increases or painful program cuts -- for now -- to rein in the deficit.

Despite having gone through one of the most difficult years any Canadian finance minister has faced since Paul Martin's battle against the deficit in the mid-1990s, Flaherty appeared sanguine about the economy and the protracted challenge of balancing the books.

Barring a shocking development, Flaherty said he is optimistic the Canadian economy has stabilized and will experience moderate growth next year.

"I'm not pessimistic," he said. "Last year at this time was a very uncertain time ... things were grim and getting grimmer.

"A year later I feel there is stability. We still have to see the evidence of true growth but there is stability now, the unemployment numbers have stabilized, we're in a better place."

Although minimal growth returned to the economy in the third quarter, economists are pencilling in a more robust rebound in the four-per-cent range annualized for the last three months of 2009. Forecasts for 2010 range from 2.5 to 3.0 per cent.

As well, while Statistics Canada's employment surveys have been all over the map of late, most have shown the massive job losses of last winter are over.

On Tuesday, the agency said its non-farm payroll survey found 34,500 industrial jobs were added in October. In an earlier report, the agency's more timely household survey showed a 73,000-job gain in November.

Flaherty said he is seeing enough evidence that the economy has weathered the recession that he is sticking with his plan to end the $46.6-billion stimulus program as planned in the spring of 2011, even though he believes some of that money for infrastructure and other projects will never be spent.

Earlier this month, the government announced it has some $400 million in unspent infrastructure funds for this year.

Some of that money will be reallocated to other uses in the budget so it can still be used to stimulate the economy, he said.

But Flaherty added he told his provincial counterparts in Whitehorse last week that the stimulus funds will not be extended beyond the deadline.

"I think that's it," he said. "I'm hopeful that next year we'll see a firm and entrenched recovery and that actually it will be the right thing to do to have that stimulus program end. We don't want stimulus to create an inflationary impact."

Although Flaherty had once assured the country he would never bring in a deficit budget, by the government's own reckoning, it will add $160 billion of debt over the next five years, more than was paid off by the dozen years of surpluses stretching back to the mid-1990s.

But Flaherty said the real mistake would have been for the government to have acted too prudently when the global economy collapsed last fall, taking export-dependent Canada with it.

"I am actually proud of the fact we acted boldly and quickly and that the stimulus we are providing is large. That was the downside risk, in my assessment, that we would not act boldly enough, and that the recession would be deeper and longer."

-- The Canadian Press

Republished from the Winnipeg Free Press print edition December 23, 2009 B6

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