Finance minister urges spending control

Wed Sep 24, 2008 6:43pm EDT
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OTTAWA (Reuters) - Canada's government must control the rate of spending growth if it is to keep within its expenditure targets, Finance Minister Jim Flaherty said on Wednesday.

Flaherty's Conservative government concedes it has not managed to keep a promise to keep the rate of spending growth at the same level, or lower, than the rate of growth of nominal gross domestic product.

Critics estimate that government spending has increased by between 14 percent and 16 percent since the Conservatives gained power in January 2006.

"We definitely must control the rate of growth of spending. A lot of the spending programs of the government of Canada are entrenched -- the pension programs and so on -- that continue on and that go up in cost," Flaherty told the National Post newspaper.

"But we have to control the rate of growth of government spending so that we can keep our commitment that spending will not grow on average over the rate of growth of nominal GDP," he said. A recording of his comments was posted on the paper's website.

Flaherty said the Conservatives were obliged to pour money into the military and other sectors of the economy after winning the January 2006 election.

"We have had to spend on priorities -- on families, on our military, certainly, which was neglected for so many years, and on infrastructure, which was neglected for so many years. And these are all big-ticket items," he said.

Prime Minister Stephen Harper -- campaigning to retain power in the October 14 general election -- acknowledged last week that "our spending is a little bit ahead of where it should be" but said he was confident Ottawa would meet its expenditure targets.

The Liberal opposition accuses the Conservatives of mismanaging the economy but Flaherty and Harper insist that despite the worsening U.S. slowdown, Canada will not record a budget deficit.   Continued...