Canada pledges billions in tax cuts, spending

Tue Jan 27, 2009 6:17pm EST
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By Louise Egan

OTTAWA (Reuters) - Canada's Conservative government unveiled a two-year C$40 billion ($32 billion) stimulus package on Tuesday to help pull the economy out of recession, laying out plans for a budget deficit for the first time after 11 straight years of surplus.

The budget is a do-or-die proposal for Prime Minister Stephen Harper's minority Conservative government, which will need the support of at least one of the three opposition parties to remain in power.

Two parties, the New Democrats and the Bloc Quebecois, immediately rejected the plan, but the more influential Liberals were widely expected to approve it, though they will not make an official announcement until Wednesday.

"There are some positive sides to this budget ... but there are some things that we are concerned about," said Liberal leader Michael Ignatieff

Ignatieff said his caucus members would discuss their next move at a meeting Tuesday evening, and would make a formal announcement at 11 a.m. on Wednesday. If they disapprove of the plan, they could either force a snap election or seek to govern as a coalition together with the other opposition parties.

"Is he underestimating the size of the crisis? And have they done enough for the unemployed? ... Those are two questions that are of concern to us. In terms of infrastructure, will they really be spending that money and spending it quickly?" Ignatieff said.

Of the total package, about a third was in the form of tax cuts aimed at low- and middle-income earners and C$12 billion was in infrastructure spending over two years.

A wide-ranging set of targeted loans, worker training programs and measures to bolster the financial system in the face of the global credit crisis completed the package. The stimulus is equivalent to 1.5 percent of gross domestic product this year.   Continued...

<p>Canada's Prime Minister Stephen Harper speaks during Question Period in the House of Commons on Parliament Hill in Ottawa, January 27, 2009. REUTERS/Chris Wattie</p>