Finance Minister Jim Flaherty was forced Tuesday to step back from deficit-cutting projections in last June's budget and extend provisions to help employers retain workers as Canada's economic performance fell short of what was expected just five months ago.

In an economic update delivered to the Calgary Chamber of Commerce, Flaherty confirmed the federal budget won’t be balanced until 2015, a year later than he was aiming for when the Conservatives won their majority government and returned to the House of Commons.


Finance Minister Jim Flaherty says that despite some economic problems Canada's stability makes it the envy of many other countries. (Jeff McIntosh/Canadian Press)

"Canada’s key economic threats are not of our own making," Flaherty said, adding the economic uncertainty, principally in Europe, is a drag on the economy.

In the March budget rejected by all three opposition parties at the time, the Conservatives had estimated they would bring the budget back from deficit in 2015. Weeks later and in the midst of a federal election, Flaherty revised that target to be 2014.

The government still hopes to hit the 2014 target, Flaherty says.

Projections based on Finance Department numbers last month had already shown Canada's gross domestic product would be on average 0.3 per cent less than forecast in June, putting the deficit-elimination date in doubt.

Canada's debt-to-GDP ratio is projected to grow slightly year-over-year in 2011 and 2012, but start shrinking in 2013.

Numbers released last week showed Canada lost 54,000 jobs in September.  

'High degree of uncertainty'

In an interview with Evan Solomon, host of CBC's Power & Politics, Flaherty said there’s a high degree of uncertainty around the world right now.

"I think the situation has become more uncertain in the last months," he said. "Lower GDP growth, of course, means lower revenues for the government so we have to adjust our projections accordingly. I think Canadians understand the situation in the world."

Opposition MPs attacked Flaherty over his figures.

"They just are not good at budgetary forecasting," NDP finance critic Peter Julian said, adding the update should have included help for people looking for jobs.

Liberal finance critic Scott Brison said the world's economy had changed over the summer, but Flaherty went in front of the House finance committee to say Canada was on course.

"He’s missing every deficit target he’s ever set," Brison said.

Work-sharing extended 16 weeks

Flaherty also announced Tuesday the government is extending a work-sharing program that lets some employers hang onto skilled workers while they deal with money problems. Under the program, workers can drop to part-time hours and the government will top them up with Employment Insurance.

The work-sharing program is being extended up to 16 weeks for new, existing or recently ended agreements. About 15,000 Canadians are still taking advantage of the program.

Flaherty also cut in half the increase in EI premiums employees and employers are expected to pay starting Jan. 1, 2012.

EI premiums were set to increase in the new year by up to 10 cents per $100 for employees and 14 cents per $100 for employers. Those increases will now be capped at five cents and seven cents respectively.

The changes mean, for example, that companies will pay about $31 more a year for an employee earning just over $44,000, rather than $62 more. An employee earning that much will pay about $20 more per year rather than the planned increase of $40.



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Border and trade talks with the U.S. will mean more spending on border infrastructure, Flaherty said after the speech.

Infrastructure spending coming

"As I mentioned in my remarks today, that’s going to mean on the Canadian side, certainly, some very substantial spending on infrastructure at border facilities across the country," he said.

The Canadian Taxpayers' Federation said in a statement that Flaherty "has betrayed millions of Canadians who voted for a balanced budget."

"Stephen Harper campaigned on balancing the budget," Gregory Thomas, the group's executive director, said. 

The government should cut more spending from the budget so they can balance it on time, he added.