Canada says tax hikes not needed to balance budget

Thu Aug 27, 2009 1:27pm EDT
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OTTAWA (Reuters) - Canada will return to a balanced budget once the recession is over, without resorting to tax hikes or program cuts, Prime Minister Stephen Harper said on Thursday.

"We had a balanced budget, a budget in surplus, before this recession. At the end of this recession we will return to a balanced position," he said in a televised press conference in Quebec City.

"It's not necessary to have program cuts or tax increases to accomplish that. Obviously, we will manage our finances with prudence during better times than now," Harper said.

Canada posted a budget deficit of C$12.52 billion ($11.50 billion) in the first three months of the current fiscal year.

Ottawa expects to run a C$50 billion deficit this year, which it blames largely on its stimulus spending plans, and has pledged to balance its books by 2013-14.

The Parliamentary Budget Officer and some private economists have expressed skepticism the shortfall can be eliminated that quickly without hiking taxes, particularly if economic growth recovers only gradually.

($1=$1.09 Canadian)

(Reporting by Randall Palmer and Louise Egan)