Flaherty says government will undertake no new spending in next years budget

The Canadian Press ~ The News
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TORONTO - Emphasizing that government stimulus spending is a temporary measure, federal Finance Minister Jim Flaherty says the Conservative government doesn't plan to undertake major new spending initiatives in next year's budget.
Rather, it will continue with the $61 billion in spending announced last January.
"In preparing next year's budget, I have no doubt our government will hear calls to change course. This short-sightedness completely overlooks everything our sound plan has achieved so far," Flaherty said in a speech Friday to the Canadian Club of Toronto.
"Switching gears now, at such a crucial time, would be the most misguided approach this country could take, and would clearly put our country at risk."
Approximately 90 per cent of this year's portion of Ottawa's stimulus spending program was committed as of September, with 7,500 infrastructure projects identified and more than 4,000 already underway, Flaherty said.
However, he said economic recovery has been "tentative" so far with "no evidence of firm growth."
A couple of recent economic projections have downgraded the outlook for the Canadian economy in 2009.
On Thursday, Bank of Canada governor Mark Carney hinted that the central bank's latest forecast for two per cent real gross domestic product growth for the third quarter is at risk.
And the Organization for Economic Co-operation and Development said it expects the Canadian unemployment rate to keep rising until the end of 2009, reaching 8.8 per cent and remaining there for several months. In the latest reading, in October, the rate stood at 8.6 per cent.
Avery Shenfeld, chief economist at CIBC World Markets, said Friday that the strength of the Canadian dollar and disappointing growth in some industrial sectors prevented Canada's economy from keeping pace with other developed countries in the third quarter.
"We do expect Canada to begin to keep pace with the U.S. in subsequent quarters and perhaps even slightly exceed it in 2010, but I think the Bank of Canada's hope that Canada would substantially outpace the U.S. in the first year of recovery looks quite unlikely," he said.
It could be worse. Canada's unemployment rate is currently 1.6 percentage points below that of the United States - the largest gap between the two countries since 1975.
Although there is much work to be done to turn the economy around, Canadians shouldn't expect emergency stimulus measures to become permanent policy, Flaherty said. He added that the temporary stimulus measures announced in last January's budget will end as planned by the end of the next fiscal year.
"Budget 2010 will be Year 2 of our two-year economic action plan. We will not undertake major new spending initiatives," he said.
"Our economic action plan was a dramatic response to a dramatic situation, but it is not created for eternal life. The action plan contains a built-in exit strategy based on necessary but temporary measures."
Only when a "firm" economic recovery has taken hold will the government move to balance its budget, Flaherty added. The finance minister has said previously that stimulus spending and lower tax revenues will result in five years of budget deficits.
"Act in haste and one risks precipitating another economic slowdown. Wait too long and the result could be chronic deficits Canadians worked too hard to abolish - the kind of structural deficits that other nations are dealing with right now," he said.
"When the time is right, when the economic recovery is entrenched, and if it's necessary, we will determine the amount of spending growth restraint that will be required to balance the budget. It will mean rejecting demands - and there will be many - to make extraordinary temporary stimulus measures into ongoing government programs."
Flaherty also reiterated his commitment not to raise taxes or cut transfers to provinces or individuals in order to pay off Ottawa's deficit.
In response, Liberal finance critic John McCallum said the Conservatives haven't done enough to boost the economy and have missed opportunities to invest in clean energy technology, the manufacturing sector and science, research and development.
"Never has so much been spent to achieve so little," McCallum said. "The Harper Conservatives wasted a historic opportunity to invest in Canada's future economic growth, and instead chose to waste billions in public funds on advertising, signage and pork-barrel projects to further their political interests."
NDP finance critic Tom Mulcair said the government claims it won't raise taxes, but it already is in Ontario and British Columbia with a harmonized federal-provincial sales tax. In addition, it will have to raise employment insurance contributions to keep that fund topped up - all while cutting corporate tax rates.
"I think there's a very easy thing that can be done, . . . just to cancel the Jan. 1 decreases in the corporate tax rates for the most profitable corporations," Mulcair said.
"That's money that wouldn't change anything for those corporations but could make a huge difference to the 1.5 million Canadians who are without jobs."
The finance minister's comments came shortly after the release of data that showed the number of Canadian consumers and businesses filing for bankruptcy was up in September.
The Office of the Superintendent of Bankruptcy reported that 489 businesses had filed for insolvency during the month, a 31.6 per cent increase from August and up 1.6 per cent from September 2008.
Personal bankruptcies spiked to 15,465 in September, an increase of 45.5 per cent from the same month last year and 28.4 per cent higher than in August.
The bankruptcy office suggested seasonal variations may have accounted for a portion of the month-to-month increases, noting there were more insolvencies in September than in August in seven of the last 10 years.

Organizations: Bank of Canada, Canadian Club of Toronto, Organization for Economic Co CIBC World Markets Harper Conservatives NDP Office of the Superintendent of Bankruptcy

Geographic location: Canada, Ottawa, TORONTO United States Ontario British Columbia

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