June 24, 2011 / 9:28 PM / 6 years ago

Canada says won't break union deals to cut spending

OTTAWA (Reuters) - Canada should be able to make the spending cuts needed to balance its budget and finance tax cuts without having to break contracts with public sector unions, the minister in charge of the cuts said on Friday.

"We made I think an important promise to the people of Canada, and that was to accelerate our plans to get back to a balanced budget by 2014," Tony Clement, president of the Treasury Board, said in an interview.

"I think it's doable in the context of the recovery of the Canadian economy. But there's going to be some difficult choices. I don't want to sugarcoat anything."

The recently reelected Conservative government has assigned Clement the job of finding C$4 billion ($4 billion) a year in savings by 2014-15 from an envelope of C$80 billion, or about 5 percent.

In the process, tens of thousands of federal jobs are expected to be lost -- some estimates say 30,000 to 40,000 out of a federal public service that's 285,000 strong. Clement said 11,000 retire or move on each year, so the job cuts would come primarily through attrition.

He said he would not go into existing labor union contracts to try to find savings. "We will operate within the realm of the collective agreements that have been signed," he said. "We're not changing those."

Parliament is currently debating government legislation to end a work stoppage at government-owned Canada Post that has shut down mail delivery across the country. Opposition parties have accused the government of kicking unions in the teeth by including in the bill annual pay raises for postal workers that are lower than Canada Post management had offered in failed negotiations for a new contract.

If the future unfolds as this year's federal budget forecasts, the government will not need the full C$4 billion a year in savings just to balance the budget by 2014-15. Currently only a C$300 million budget deficit is forecast for that year, down from the C$32.3 billion expected in the current fiscal year.

Clement said the savings would also free up money to pay for election campaign commitments to cut taxes, for example to allow couples with children to split their income for tax purposes to put them in a lower tax bracket.

The strategic and operating review he is undertaking covers 67 government departments and agencies, Clement said, a scope much larger than recent strategic reviews.

"It still involves a lot of work to come to the right conclusions," he said. "But at the end of the day when you compare what we're up against versus being in Greece or the U.K., or some other countries that are facing a lot more dire choices, ... I don't think we're facing the same depth of issues that other countries are facing."

Reporting by Randall Palmer; editing by Peter Galloway

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