![Newly elected Prime Minister Stephen Harper & his Tory minority government face a possible $10 billion deficit for 2009–2010, compounding the provinces’ financial difficulties during an economic downturn. Many forecast this will mean spending cuts to programs such as health care, social services & post-secondary education, among others. [Photo: Jason Ransom]](/images/default-source/bulletin/harper-web.jpg?sfvrsn=1 "Harper-Web.jpg")
Newly elected Prime Minister Stephen Harper & his Tory minority government face a possible $10 billion deficit for 2009–2010, compounding the provinces’ financial difficulties during an economic downturn. Many forecast this will mean spending cuts to programs such as health care, social services & post-secondary education, among others. [Photo: Jason Ransom]
The newly re-elected Conservative government is weighing a number of possible spending cuts in order to avoid a potential deficit, reports indicate.
During the election campaign, Prime Minister Stephen Harper maintained that Canada was well-prepared to weather the economic storm generated by the global financial crisis. But in the days following the Oct. 14 election that saw the Conservatives returned with a strengthened minority government Harper acknowledged the economic slowdown is having an impact on government finances and he didn’t rule out running a deficit for next year.
“I don’t think we’re in a position to know all of the information in that regard and I think it would be premature to speculate in that regard,” Harper told reporters at a news conference with European leaders in Quebec City Oct. 17.
“I’ll say very clearly that the government of Canada will maintain responsible fiscal policies and the government of Canada will ensure that whatever we do is in the long-run interest of the Canadian economy.”
While most economists argue that running a deficit during the current economic downturn can help ratchet up demand and aid in the recovery, it nevertheless raises political risks for the Conservatives who campaigned on keeping the books balanced.
The latest federal budget shows a $2.3 billion surplus for 2008–2009 and a $1.3 billion surplus for the 2009–2010 fiscal year.
With the economy now slowing, however, most analysts say the government is on track to post a large deficit next year and for several years after.
Merrill Lynch economist David Wolf and Toronto Dominion Bank chief economist Don Drummond both predict the federal government is headed for a $10 billion deficit in 2009–2010 and the provinces will also face difficult times ahead.
Finance Minister Jim Flaherty has hinted he’ll do whatever it takes to avoid a deficit, even if that means cutting back on spending plans, or delaying measures outlined in the Conservative Party’s election platform such as the two cents a litre tax reduction on diesel fuel.
There are indications the Conservatives are also looking at a range of other options, including a public service hiring freeze and downloading expenses to the provinces.
CAUT president Penni Stewart says a cut in services could signal a funding crunch for post-secondary education.
“The federal government has always found it politically easier to cut transfers to the provinces,” she said. “Those cuts affect programs like education, health and social services that are provided by the provinces, and the provinces end up taking the blame.”
Most observers agree that despite returning to Parliament with another minority government,
the Conservatives are likely to be able to push through their spending cuts over the objections of the Bloc Québécois and the New Democrats until the Liberals choose a replacement for out-going leader Stéphane Dion.