Federal Finance Minister Paul Martin announced his government recorded an unexpected $12.3 billion surplus for the 1999-2000 fiscal year, but that all of the bounty has been applied to reduce the federal debt.

News of the surprise windfall immediately sparked criticism from those who say the money could have been better spent on social programs which bore the brunt of the government's austere deficit reduction measures in the 1990s.

"The federal government is literally awash in cash," said CAUT president Tom Booth. "The old argument that we can't afford to spend money on education or health care or on anti-poverty programs simply doesn't hold water anymore."

He noted the government has already posted a $11.4 billion surplus in the first quarter of the current fiscal year, suggesting the surplus will likely reach between $20 billion and $30 billion this year.

At a news conference in Ottawa, Martin said stronger than expected economic growth and virtually no increase in program spending pushed the final surplus for 1999-2000 well above his projections for a balanced budget.

But Booth said Martin has been deliberately adopting very conservative budget projections in order to hide the real size of the federal surplus.

"Paul Martin has consistently overshot his targets by billions," he said. "By adopting overly conservative measures, he can claim the government has little money to reinvest in education and other programs. He then ends up year after year with a bigger surplus which is automatically applied to the debt. This is debt reduction by stealth."

Booth also noted that in their so-called 50/50 plan announced during the 1997 federal election campaign, the Liberals had promised to allocate 50 per cent of the surplus to social spending and 50 per cent to tax cuts and debt reduction.

Booth urged the Finance Minister to direct a larger share of this year's looming surplus toward tackling the "growing social deficit that has emerged as a result of federal cutbacks to health, education and income assistance."

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