The Conservative government used its first budget to follow through on several campaign promises, with initiatives that include reducing the GST and bringing in its monthly child-care allowance.

"For years, Ottawa has been overtaxing Canadians," Finance Minister Jim Flaherty said in the advance copy of his speech to the House of Commons. "In this budget, we deliver real tax relief for Canadians."

The Conservatives said they will cut the GST by one percentage point to six per cent on July 1. The move is expected to cost the government $3.52 billion this year and $5.17 billion in 2007.

The government didn't specify when it would cut the rate to five per cent, as Prime Minister Stephen Harper promised during the last election campaign.

Income tax measures both remove and add some relief.

The tax rate on the lowest tax bracket will go to 15.5 per cent on July 1, after the Liberals cut it from 16 per cent to 15 per cent in their fiscal update in November.

At the same time, the government is introducing a new Canada employment benefit that will offer working people a $250 tax credit for 2006 to cover work-related expenses, such as home computers, uniforms and supplies. The credit rises to $1,000 for the 2007 tax year.

Child-care money

The government also followed through on another of its five promises by introducing a $1,200-a-year child-care benefit for all children under the age of six.

The government said it will spend $3.7 billion on the program, starting when the first monthly cheques are mailed in July. The payments will continue until the month in which the child turns six.

"While the universal child-care benefit will support child-care choices by families, we also intend to invest in creating new child-care spaces," Flaherty said in his prepared remarks.

He said the budget includes $250 million, beginning next year, to create child-care spaces.

More cash for the military

Canada's military will see its budget increased by $5.3 billion over the next five years, including money to speed up recruitment of 13,000 regular armed forces and 10,000 more reservists.

The extra money for the armed forces will also go toward new equipment, such as transport planes to replace the country's fleet of aging C-130 Hercules planes.

In keeping with the government's stated focus on security, the budget also includes $303 million over two years for border security and $161 million over two years to expand the number of RCMP officers and hire additional federal prosecutors.

Business tax cuts

Flaherty said the Conservatives will retroactively eliminate the federal capital tax as of Jan. 1, 2006. The tax, which is charged at 0.125 per cent on taxable capital in excess of $50 million, was originally slated to be phased out in 2008.

In order to encourage Canadian companies to hire apprentices, the government is also introducing a non-refundable tax credit equal to up to 10 per cent of the wages paid to qualified workers. The credit will have a maximum of $2,000 per year. Flaherty said the government will try to curb its expenses by cutting some programs deemed to no longer be serving their purpose.

Flaherty said the Treasury Board will aim to find $1 billion in savings for 2006-07 and 2007-08. Details about the cuts, which could affect department and agency employees and the programs they offer, are expected by the autumn.

After putting aside $3 billion in both this year and next for debt reduction, the government said it expects a surplus of roughly $600,000 for the current year and $1.4 billion the following year.