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OTTAWA (Reuters) - Tax measures for Canada's middle class should be a key part of a stimulus package the government plans to bring forward that would increase spending and create significant deficits, Prime Minister Stephen Harper said on Friday.
Harper told reporters his minority Conservative government plans to borrow money at low cost and inject it into the economy to combat a recession, but only in a time-limited manner to avoid long-term deficits.
"What we will be committed to do is to take that money, get it into the economy now," Harper said after a meeting with provincial premiers to discuss the government's January 27 budget, which will include stimulative measures for the economy.
"Those measures, spending measures in particular, will have to be time-limited," he said.
Harper said businesses, households and investors were afraid to spend money due to the global economic uncertainty. But he said "we know there's money out there" and his government will step in to spend it to jump-start the economy.
Tax cuts are also on his agenda as he prepares for the budget, expected to lay the groundwork for the country's first fiscal deficit after 12 years of surpluses.
"I did say that this government would be looking at all options, not just spending options but also tax reduction options," he said.
"It's quite essential that middle-income families take part not only because they're paying a large proportion of taxes but also because if we want to stimulate the economy it's not something we can do without giving some advantage to middle class families that form the foundation of our economic activity," he said.
Harper met with his provincial counterparts on Friday to coordinate infrastructure investments, also a central plank in the upcoming stimulus plan and he promised not to reduce transfer payments to the provinces during the economic downturn.
His government said on Friday it would move ahead on a contentious plan to create a national securities regulator on a voluntary basis -- a proposal that Quebec and other provinces have vehemently opposed.
Reporting by Randall Palmer; Writing by Louise Egan; editing by Peter Galloway