Canada finance minister to set balanced budget law

Wed Apr 8, 2015 12:49pm EDT
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By Alastair Sharp

TORONTO (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.

Economists have long debated whether balanced-budget legislation is effective or counter-productive in tying governments' hands.   Continued...

Canada's Finance Minister Joe Oliver stands to speak during Question Period in the House of Commons on Parliament Hill in Ottawa March 10, 2015. REUTERS/Chris Wattie