Finance Minister John Manley says the federal government's surplus will shrink to just $1 billion next year, an amount critics dismiss as wildly low.

In his first major fiscal statement delivered last month, Manley said Ottawa will "stay the course and stay on target" by reducing the public debt and keeping spending in check.

"We will continue to balance the budget and we will continue to see the debt-to-GDP ratio fall," Manley said.

He warned that new spending initiatives would have to be financed by cutting existing programs as the federal surplus falls to just $1 billion in fiscal 2002-2003.

He also noted that the surplus would rise to $3.1 billion in 2003- 2004.

Critics, however, say Manley has stolen a page from his predecessor, Paul Martin, by purposely underestimating the true size of the surplus in order to dampen the demands of those pressing for increased social spending.

"The credibility of federal claims that the budget is tightly balanced must be questioned, in light of experience with past Liberal budget projections," states an alternative fiscal update released Oct. 29 by the Canadian Centre for Policy Alternatives. "The federal government has exceeded the official balance projected in its budgets in every single fiscal year since it took office in 1993."

CCPA points out that Ottawa forecast a perfectly balanced budget for last year, but recorded an $8.9 billion surplus. The organization says the real size of the current year's surplus will be in excess of $10 billion, rising to as much as $17.5 billion by fiscal 2003-2004.

"Our fiscal projections indicate clearly that the federal government can begin to make important progress in addressing Canada's social deficit," the CCPA report concludes.

View the CCPA's Alternative Federal Budget 2003, Economic and Fiscal Update at www.policyalternatives.ca.