Flaherty promises a few budget surprises

Last Updated: Monday, February 25, 2008 | 1:13 PM ET

CBC News

Finance Minister Jim Flaherty promised "one or two" surprises in Tuesday's federal budget, but said not to expect major expenditures.

Flaherty dropped those hints as he put on a pair of resoled shoes at an Ottawa shoe repair store. The minister said the resoled shoes fit with the theme of his budget, adding that he will step up efforts to find more savings in government.

Finance Minister Jim Flaherty laces up his newly resoled shoes during a traditional pre-budget photo op at a shoe repair store in Ottawa Monday.
(Tom Hanson/Canadian Press)

Flaherty has already hinted his third budget will be a cautious and prudent one for uncertain financial times.

"You don't throw money around when times are tight," he said in a meeting with journalists last week. "In fact, you never throw money around, but you want to be especially careful now in a time of economic slowdown."

Questions remain over whether the Opposition Liberals will support the budget or follow the NDP and Bloc Québécois, who have already indicated they may vote against it.

"We will make our decisions with respect to the budget and other votes based upon what we think is right for Canadians," Liberal House leader Ralph Goodale said.

The surplus is forecast to be smaller than usual at $1.4 billion for the upcoming 2008-09 federal budget and $1.3 billion for 2009-10. If those figures hold up, Flaherty can do very little.

He is expected to include in the budget an extension of the manufacturers' writeoff on investments in machinery and equipment, at a cost of about $1.3 billion over five years. The mining sector may get an extension of the exploration tax credit scheduled to expire March 31.

But there is widespread belief that Flaherty has more room to act.

Economists pointed to the $7 billion surplus this fiscal year that Flaherty earmarked for debt reduction in October, plus a $3 billion contingency fund and a $1.6 billion planning surplus — and any other money the expected program review of federal departments can scare up.

"I find it hard to believe we're going to have a budget that could possibly precede an election and have virtually nothing in it," said TD chief economist Don Drummond.  

One report suggests the Conservative government might have at least $1 billion more than expected in surplus money. A government official with information about the budget told the Canadian Press on Monday that some of the extra money will likely go into job-creating projects such as rebuilding infrastructure, including roads and bridges.

Insider says Flaherty likes surprises

One Conservative insider said, "Jim [Flaherty] always likes to have a surprise or two in his budgets."

Those surprises are expected to include:

• Measures to encourage Canadians to save, either through an enriched RRSP program, an investment income deduction of up to $1,000, or an investment savings fund that would allow people to park and grow savings withdrawn upon retirement.
• A request for proposals for a carbon capture or sequestration pilot project in the Alberta tarsands.
• An extension of the lake cleanup initiatives he announced in the last budget, as well as funds for clean water projects. Much of this will build on programs aimed at winning votes in Ontario.
• Revamped and enriched programs to encourage research and development, such as the science, research and experimental development programs.

Flaherty will likely sweeten the working tax income benefit, designed to increase incentives for low-income individuals to enter or stay in the work force.

He will also likely opt for a renewed and enhanced commitment to post-secondary education funding.

Economists also pointed to infrastructure spending as a possible area for investment.

The manufacturing sector, in vote-rich Ontario and Quebec, has been dealing with thousands of layoffs and may get a little more than the $1-billion aid package announced in January. 

Bloc seeks more for Quebec

In Monday's question period in the House of Commons, Bloc Québécois MPs pressed the government to include spending to help Quebec's forestry and manufacturing sectors.

"One-hundred-and-fifty-thousand jobs have been lost in manufacturing and forestry in five years and half of that was under the Conservatives," said Bloc industry critic Paul Crête, calling on the Conservatives to "act strongly" to help the ailing industries.

"With $10.6 billion in surpluses for the current fiscal year, the prime minister has the means to intervene without creating any deficits," Bloc leader Gilles Duceppe said.

But Prime Minister Stephen Harper defended his government's deficit reduction and tax-cutting approach, implying it would assist Quebec industry.

"Quebecers supported the GST cut and personal income tax cuts," Harper said. "At the same time, exporters and manufacturers in Quebec supported the cuts for corporations … There will be an $8 billion tax cut for manufacturing, including $2 billion for Quebec manufacturers."

With files from the Canadian Press