Prime Minister Paul Martin on the deal with the NDP: 'This agreement is fiscally responsible. It is progressive."

Prime Minister Paul Martin has reached an agreement-in-principle with the New Democrats to earn support for his minority government's budget – a deal that includes a $4.6-billion boost in social program spending over two years.

"This agreement is fiscally responsible. It is progressive. We agreed to it because we want Parliament to work," Martin told reporters Tuesday.

Martin said the deal – which could enable his government to survive – will be paid for through projected budget surpluses of $9 billion.

The prime minister vowed that the budget would be balanced, adding that he is still committed to paying down at least $4 billion a year from the national debt.

Under the proposed deal, the Liberals would boost social spending in Canada and foreign aid by $4.6 billion over two years.


NDP Leader Jack Layton said the revised budget "invests in people and our environment." (CP Photo)

Promised tax cuts for small and medium-sized businesses will remain but cuts for large corporations will be deferred.

Budget's 'better',' though not perfect: Layton

NDP Leader Jack Layton had asked Martin to respond by Tuesday on whether the prime minister would scrap corporate tax cuts, introduced in the February budget, as the price for NDP support.

"This budget isn't perfect. But it's better. And it's balanced, and it includes tax reductions for small business," Layton told reporters Tuesday evening at an earlier news conference.

"But it also invests in people and our environment."

$1.6 billion for affordable housing

The deal appears to meet many of Layton's demands. The NDP had wanted Martin to reduce tuition fees, build more affordable housing, increase foreign aid and spend more to fight pollution.

The proposed deal includes:

  • $1.6 billion for affordable housing construction, including aboriginal housing
  • .
  • $1.5-billion increase in transfers to provinces for tuition reduction and better training through EI.
  • $900 million for environment with one more cent of the federal gas tax going to public transit
  • .
  • $500 million for foreign aid to bring Canada in line with promise of 0.7 per cent of GDP.
  • $100 million for pension protection fund for workers.
Layton said details were still being discussed by the Liberal and NDP House leaders.

Harper attacks deal as 'price to make corruption go away'

Conservative Leader Stephen Harper suggested the purpose of the money was to divert attention from the sponsorship scandal.

"My first response is that Mr. Martin and Mr. Layton think $4.6 billion of taxpayers' money is the price to make corruption go away, but I wonder if the taxpayers of Canada are going to think the same thing," Harper said in a statement.

If the Liberals hadn't received NDP support to push through the budget, an election call within the next month was almost a certainty.

A looming parliamentary vote on the budget has the potential to bring down Martin's administration, since it will be considered a vote of confidence in the government.

A Liberal/NDP alliance would give them a combined total of 151 members of Parliament. A possible alignment of 99 Conservative MPs and 54 Bloc Québécois MPs would add up to a total of 153 votes.

In that scenario, three MPs sitting as Independents could decide the fate of Martin's government in the 308-seat Parliament.