OTTAWA (Reuters) - Canada's minority Conservative government will kill off an opposition education savings plan in order to keep the federal budget out of deficit, Finance Minister Jim Flaherty said on Monday.
"We're going to protect the balanced budget," Flaherty told reporters. He was referring to a plan by Liberal legislator Dan McTeague that would make payments into registered education savings plans tax-deductible -- at an estimated cost of C$900 million ($900 million) a year.
Flaherty said the Liberals had let his federal budget -- which had no tax-deductibility for education savings plan contributions -- pass last Tuesday and then pushed McTeague's bill through the House the next day. It is now before the Senate.
In his latest fiscal plan, Flaherty forecast Ottawa would post a balanced budget in the year ending March 31 after paying down C$10.2 billion in debt. But the next two fiscal years are much tighter, with projected surpluses of only C$2.3 billion and C$1.3 billion respectively.
"I'm responsible as the minister of finance for the integrity of the fiscal plan in Canada. We are going to maintain that integrity. We will use the budget legislation to get rid of this bill so it doesn't threaten balanced budgets," he said.
Once a budget passes, the government has to introduce other enabling budget legislation, and it was that to which Flaherty was referring.
As with all budget bills, Flaherty said the government's legislation would be a matter of confidence that would trigger an election if it failed to pass. The government was elected in January 2006 but does not have to go to the polls until October 2009.
Liberal leader Stephane Dion has said over the past two weeks that he was unwilling to trigger an election at this time, and he again dismissed suggestions on Monday that he would do so over the education savings plan idea.
"I'm not speculating about elections," Dion said.
If the government did fall over this, it would face the delicate task of campaigning against a tax cut, but Flaherty pointed to the tax-free savings plan he introduced in February's budget as being available to all Canadians.
He said the provinces were also concerned about the potential loss of C$450 million a year in their own revenues should the McTeague provisions be allowed to proceed.
Reporting by Randall Palmer; editing by Rob Wilson