Finance Minister Jim Flaherty will deliver the federal government's updated budget forecast Tuesday afternoon, one that some analysts speculate could include big tax cuts.

Outside the House of Commons on Monday, Flaherty was peppered with questions about whether his fall economic statement would include tax breaks.

He grinned and answered vaguely, "Well, we certainly feel that Canadians pay too much tax."

Earlier this month, Flaherty played down expectations that his economic statement would contain tax breaks or other specific measures.

"It's possible to take some tax measures in the fall update," he said following a caucus meeting on Oct. 17, "but I'm not anticipating that right now because we're not far from the budget, fairly early in the new year."

But speculation has been swirling that the statement will include a further one percentage point cut in the GST — a measure that was mentioned in the recent throne speech as a government goal. Such a cut would cost in the neighbourhood of $5 billion a year.

The economic statement will be delivered after the markets close at 4 p.m. ET in the National Press Theatre, across the street from the House of Commons.

Flaherty had wanted to present his fiscal update in the House. But changing the House schedule on one day's notice requires the unanimous consent of all parties, and the NDP refused, calling the late-notice announcement a political stunt.

"If I can't do it in the House of Commons because of the NDP, then I'll do it somewhere else," Flaherty told reporters.

CBC-TV's senior parliamentary editor, Don Newman, noted that the last time an economic update was delivered in the House of Commons — rather than before the House of Commons finance committee — was Oct. 18, 2000. That economic statement included large tax cuts.

Days later, the governing Liberals called a general election.

Tuesday's fiscal update could eventually lead to an election. If there are tax cuts, they must be voted on by Parliament, giving opposition parties a chance to bring down the minority government.

$14B surplus expected

The federal government would have room for tax cuts whenever they appear. A report Monday from TD Economics estimates that the federal surplus will be $14.5 billion in 2007-08, rising to $27.5 billion by 2012-13. 

Some economists and the Liberals have argued against a GST cut, saying that would boost consumer spending at a time when the Bank of Canada is worried about inflation.

"The action people want to see in that kind of context is not yet more spending to fill up that fiscal room, but actually plain vanilla simple tax cuts," said Don Drummond, chief economist with TD Bank Financial Group.

"That's what the economy needs. I think that's what it deserves given how high the tax burden is right now," he said .

The Finance Department said last Friday that Ottawa ran an $8.7-billion surplus through the first five months of the current fiscal year.

The government said its revenues were up by $5.9 billion, or more than six per cent, because of higher income-tax and non-tax revenues.

Spending was up $4.4 billion, or six per cent, on higher transfer payments and operating expenses of government agencies and departments, including National Defence.

The surplus for the 2006-2007 fiscal year was $13.8 billion, ahead of the budget estimate of $9.2 billion.