OTTAWA -- The federal government will not only balance the budget in 2015, it will run up a sizable surplus before the next federal election, says Finance Minister Jim Flaherty.
The minister made the pledge after meeting private-sector economists in his office Monday, and after the Parliamentary Budget Officer released his latest analysis of the books, showing a razor-thin surplus in the critical 2015-16 year.
"The plan is to budget a surplus in 2015 and not a tiny surplus," Flaherty said. "There will be no doubt that we're balanced in 2015."
The distinction is significant because Prime Minister Stephen Harper is counting on a balanced budget in March 2015 -- and preferably a significant surplus -- to fulfil a 2011 campaign pledge to introduce income splitting for couples with children in time for the October 2015 election. The promise was contingent on having eliminated the deficit.
To explain the unexpected surplus projection, Flaherty noted the government signalled in the throne speech two weeks ago it intends to freeze the operating budget, thereby restraining public-service hiring and pay increases.
The minister said his officials will inform the PBO on the savings the measure will realize, as well as discuss with the budget watchdog so-called lapses in departmental spending, "and we're talking substantial sums of money," the minister said.
Last week, Flaherty reported Ottawa had realized a $7-billion windfall in the just-completed 2012-13 fiscal year, reducing the deficit to $18.7 billion, rather than the previously projected $25.9 billion.
About two-thirds of that windfall, or $4.9 billion, came as a result of lower departmental spending than had been allotted. The PBO has said it will examine how much of the savings was just a one-time occurrence and how much could be carried forward.
In the latest report card, the PBO predicts slower-than-anticipated economic growth and lower commodity prices will cut into government revenues, shaving some of the government's fiscal projections.
The report forecasts Ottawa's surplus in 2015-16 will be a mere $200 million, rather than the $800 million projected in the March budget, and the following year's surplus will come in at $1.7 billion, less than half what was expected.
But that's not enough to pay for Ottawa's income-splitting plan. The C.D. Howe Institute has calculated allowing splitting of up to $50,000 of income among couples will cost federal coffers $2.7 billion annually, and provinces another $1.7 billion.
-- The Canadian Press