OTTAWA (Reuters) - Spending cuts in Canada’s federal budget, which will be presented on Thursday, will be modest and mostly affect back-office operations rather than programs and services, Finance Minister Jim Flaherty said on Wednesday.
Speaking to reporters during his customary pre-budget visit to a shoe store, Flaherty promised the government would eliminate its budget deficit, now at about 1.5 percent of gross domestic product, in the medium term, without putting a date on it.
“We want to stay on plan. We want to get to a balanced budget in the medium term. And to do that we have to reduce the expenditures of government,” he told reporters.
“The majority of the spending review reductions relate to back office operations of government,” Flaherty said.
The prospect of big cuts to government operating budgets has taken center stage ahead of this budget, with public sector unions and opposition parties bracing for major job losses and some financial market players warning against cutting too much, too quickly for fear of derailing still-tenuous economic growth.
The Conservative government has targeted savings of between 5 percent and 10 percent, or C$4 billion ($4 billion) to C$8 billion, of federal departments’ operating budgets, excluding transfer payments to provinces and to individuals.
A report by Canadian Press said that the spending cuts would amount to 8.5 percent of discretionary spending, or about C$7 billion a year. But a senior government official, who did not want to speak on the record ahead of the budget, indicated to Reuters those figures were not accurate.
Flaherty declined to comment on the report.
“Everything is relative in this world. If you look at what the United Kingdom has done, you look at what the (Liberal) Chretien-Martin government did in the mid-1990s. These were draconian cuts, reducing spending to the provinces for health care, education, social services. We’re not cutting any of that,” he said.
It is a tradition in Canada for the finance minister to buy new shoes on the eve of the budget. Last year, Flaherty had his old shoes resoled to signal prudent money management in tough times. In one previous year he purchased construction boots to usher in a fiscal stimulus plan focusing on infrastructure.
On Wednesday, Flaherty bought new shoes that cost C$110 plus tax. When asked to explain his choice, he said, “Because things are looking up. We have a long-term plan, things are looking pretty good. We have some good fiscal numbers to report tomorrow. The budget situation is improving.”
($1 = $1 Canadian)
Editing by Jeffrey Hodgson