Canada's Flaherty says budget spending cuts modest

Wed Mar 28, 2012 3:15pm EDT
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By Louise Egan and Randall Palmer

OTTAWA (Reuters) - Spending cuts in Canada's federal budget, which will be presented on Thursday, will be modest and mostly affect back-office operations rather than programs and services, Finance Minister Jim Flaherty said on Wednesday.

Speaking to reporters during his customary pre-budget visit to a shoe store, Flaherty promised the government would eliminate its budget deficit, now at about 1.5 percent of gross domestic product, in the medium term, without putting a date on it.

"We want to stay on plan. We want to get to a balanced budget in the medium term. And to do that we have to reduce the expenditures of government," he told reporters.

"The majority of the spending review reductions relate to back office operations of government," Flaherty said.

The prospect of big cuts to government operating budgets has taken center stage ahead of this budget, with public sector unions and opposition parties bracing for major job losses and some financial market players warning against cutting too much, too quickly for fear of derailing still-tenuous economic growth.

The Conservative government has targeted savings of between 5 percent and 10 percent, or C$4 billion ($4 billion) to C$8 billion, of federal departments' operating budgets, excluding transfer payments to provinces and to individuals.

A report by Canadian Press said that the spending cuts would amount to 8.5 percent of discretionary spending, or about C$7 billion a year. But a senior government official, who did not want to speak on the record ahead of the budget, indicated to Reuters those figures were not accurate.

Flaherty declined to comment on the report.   Continued...

Canada's Finance Minister Jim Flaherty speaks to journalists after trying on his "budget shoes" during a photo opportunity at a shoe store in Ottawa March 28, 2012. Flaherty will deliver his budget in the House of Commons on Thursday. REUTERS/Chris Wattie