UPDATE 3-Canada finance minister to set balanced budget law

Wed Apr 8, 2015 12:47pm EDT
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(Recasts with finance minister's speech)

By Alastair Sharp

TORONTO, April 8 (Reuters) - Canadian Finance Minister Joe Oliver announced legislation on Wednesday committing the government to a balanced budget except if there is recession or an "extraordinary circumstance."

The bill will fulfill a 2013 pledge by the ruling Conservatives as they head into an October election seeking to portray themselves as the best economic managers.

Oliver has pledged to deliver a balanced budget for 2015-16 on April 21 despite the damage to Canada's economy inflicted by low oil prices.

It will be Canada's first federal balanced-budget bill, though eight of the country's 10 provinces enacted such legislation during the 1990s. Passage is assured since the Conservatives have a parliamentary majority.

Oliver said the "only acceptable deficit" under the legislation would be in the event of a recession or during war or natural disaster with costs exceeding C$3 billion ($2.4 billion) in a year.

A deficit during normal economic times would trigger an automatic freeze on departments' operating budgets. Salaries for ministers and deputies would be cut by 5 percent until budgets are balanced.

"We will never be able to keep taxes low and provide direct benefits to hard-working Canadians and their families, even in the face of an unexpected downturn, without balanced budgets in good economic times," Oliver said.   Continued...