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Letter to the editor

Surplus squabbling could reshape government

By JIM FOX, Times Correspondent
Published September 30, 2007

CANADA REPORT

Huge budget surpluses are expected to provide Canadians with some long-promised tax relief but could push the country into a snap election.

Conservative Prime Minister Stephen Harper said the $14-billion surplus for the past fiscal year has gone to reduce the $467-billion national debt. The interest savings of $725-million is to be used to reduce taxes.

There's also a surplus of $7.4-billion for the first four months of this year.

New Democratic Leader Jack Layton said putting the surplus into debt reduction instead of needed programs makes it likely his party will vote to topple the government next month.

With the infrastructure crumbling and people struggling to pay for prescription drugs and education, some of the money should be spent on needed initiatives, Layton said.

Calling the surplus amount "ridiculous," John Williamson of the Canadian Tax Federation said it represents "overtaxation by the government and the money should go back to taxpayers by way of income tax relief."

The Liberals and Bloc Quebecois also oppose how the minority government is dealing with the surplus, which could result in a no-confidence vote that, if successful, would mean the dissolution of Parliament and an election.

Watch for rate cut

Canada's central bank might have to shift gears for its monetary policy as the result of U.S. interest-rate cuts and the soaring Canadian dollar.

Bank of Canada Governor David Dodge said "gauging the effects" of the changing conditions will be one of the "most pressing tasks over the coming months."

The bank was poised to raise interest rates this month and into the fall but held off.

Scotiabank chief economist Warren Jestin predicts instead a rate cut of half a percentage point around year's end.

Rate cuts won't be as deep as those in the United States because output growth, job gains, the housing market and consumer spending are all stronger in Canada and are "likely to remain that way," Jestin said.

In brief

-Growing divisiveness in the federal Liberals over "difficulties" in Quebec could doom the party, said deputy leader Michael Ignatieff. Divided we'll lose, he said, echoing comments of leader Stephane Dion after the Liberals' three by-election losses in Quebec.

-Public Safety Minister Stockwell Day says it's not that easy to illegally cross the U.S.-Canada border, despite a U.S. congressional report saying Canada's side is lacking in security. Senators are uninformed of Canada's aggressive antiterrorism program, he said. Canada has put $431-million into improving infrastructure at border points.

-Should the Conservatives win the Oct. 10 Ontario election, hospitals will be closed, nurses laid off, surgical waiting times will grow and there will be fewer environmental programs because of spending cuts, says Liberal Premier Dalton McGuinty. Conservative Leader John Tory said he would cut only "wasteful" spending.

Facts and figures

Canada's dollar has moved ahead of the U.S. greenback even though Statistics Canada said the economy is slowing slightly. The dollar gained one-half cent Friday to $1.0057 U.S. The U.S. dollar returned 99.44 cents in Canadian funds before bank exchange fees.

The Bank of Canada key interest rate is steady at 4.50 percent while the prime lending rate remains at 6.25 percent.

Stock markets are higher, with the Toronto index at 14,121 points and the TSX Venture Exchange 2,855 points.

Lotto 6-49: Wednesday 21, 25, 32, 35, 40 and 47; bonus 6. (Sept. 22) 5, 8, 12, 15, 39 and 47; bonus 40.

Regional briefs

-An outbreak of avian flu on a Saskatchewan chicken farm has put the industry on alert. The Canadian Food Inspection Agency said the strain found north of Regina is the same as that in a 2004 outbreak in British Columbia that led to 17-million chickens being destroyed. There is no danger to humans, the agency said.

-Drivers were seeing red across Vancouver on Thursday as left-turn traffic signals malfunctioned. Suggestions of sabotage in the 2-month-old municipal workers strike were being investigated as was the seeding of a soccer field with nails, broken glass and bits of concrete after a private contractor mowed the grass.

-An elaborate search-and-rescue exercise off the west coast of Newfoundland became a real-life event when passengers in a covered lifeboat began choking on acrid fumes from a sputtering engine. Twenty-five people were rescued by helicopter. The exercise involved 400 people in a mock disaster on the MV Leif Ericson in the Bay of Islands.

Jim Fox can be reached at canadareport@hotmail.com.

[Last modified September 30, 2007, 01:57:22]