Canadian government promises balanced budget law, sees free trade with EU

OTTAWA Wed Oct 16, 2013 11:51pm BST

Canada's Prime Minister Stephen Harper waits for the start of the Speech from the Throne in the Senate chamber on Parliament Hill in Ottawa October 16, 2013. REUTERS/Blair Gable

Canada's Prime Minister Stephen Harper waits for the start of the Speech from the Throne in the Senate chamber on Parliament Hill in Ottawa October 16, 2013.

Credit: Reuters/Blair Gable

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OTTAWA (Reuters) - Canada's Conservative government on Wednesday promised to introduce legislation that will require balanced budgets except during economic crises, and renewed a pledge to balance its books by 2015.

It also said it would soon wrap up free trade talks with the European Union, and announced that Prime Minister Stephen Harper would travel to Brussels on Thursday "with the goal of concluding the ... negotiations."

The Conservatives, who portray themselves as the only party capable of leading Canada through tough economic times, said they would cut government spending, sell off some federal assets and trim the public service.

The Conservatives made the announcement in a major policy speech designed to relaunch their mandate ahead of an election in October 2015. The party is trailing in the polls after a protracted scandal over Senate expenses.

"Our government will introduce balanced-budget legislation. It will require balanced budgets during normal economic times, and concrete timelines for returning to balance in the event of an economic crisis," said the speech, which gave no details.

Canada is one of a handful of countries with a prized AAA rating from leading agencies, and Ottawa's promise to make balanced budgets a key part of its policy stands in stark contrast with the acrimonious debates on U.S. debt financing.

U.S. Senate leaders announced a deal on Wednesday to end a political crisis that partially shut down the federal government and brought the world's biggest economy close to a debt default, but it will only be a temporary solution that sets up the prospect of another showdown.

The Canadian government repeated a campaign pledge that once the budget is balanced it would provide greater tax relief for families, and it also said it would look at ways to cut taxes for small business.

The Conservatives ran up huge deficits in the global financial crisis, amounting to 3.6 percent of gross domestic product in 2009-10, but are headed back to balance.

"They have added C$166 billion to Canada's debt and now they have the guts to say, 'We'll bring in a bill to say there won't be any more.' It doesn't have any credibility," opposition New Democratic Party leader Thomas Mulcair said afterwards.

POPULIST PITCH

Doug Porter, chief economist at BMO Capital Markets, said the proposed law on balanced budgets seemed a touch aggressive.

"It does strike me as being a tad early to be promising that on a sustained basis ... It's good to have goals, I don't have a problem with them aiming for this, but it might prove to be a bit of a challenge," he said.

In remarks to the Conservative caucus earlier on Wednesday, Harper claimed credit for the 1 million net new jobs created since the depths of the recession, which he said was the best record in the Group of Seven industrialized nations.

The Conservatives also vowed to clamp down on rail safety after a freight train disaster in July that killed 47 people and repeated the government's willingness to allow foreign investment in Canada's rich energy sector when appropriate.

Investment in energy projects has fallen since last year, when Canada barred foreign state-owned enterprises from buying majority stakes in oil sands projects.

In addition, the policy speech also highlighted a populist, pro-consumer approach, with Ottawa promising to cut roaming costs for wireless customers, give consumers more choice on television channels they receive by cable and satellite, and expand high-speed broadband networks in rural areas.

The government said in the address known as the speech from the throne it would act to ensure Canadians did not pay more than Americans for the same goods. The Canadian dollar is worth almost as much as the greenback but some products in Canada have in the past cost up to 40 percent more.

The Conservatives are trailing the Liberals in the polls, and earlier in the day Prime Minister Stephen Harper took a jab at their leader Justin Trudeau, who said over the summer he would legalize marijuana.

"Legalizing drugs is not on our agenda," said Harper, who can now expect attacks from Trudeau and New Democrat Mulcair over a spending scandal involving senators' expense claims.

Mulcair made it clear he would challenge Harper over who knew about a personal check from Harper's then-chief of staff, Nigel Wright, to help a senator pay back expenses he should not have claimed.

Senators are appointed by the government, a fact critics say makes the system open to abuse and cronyism. The Conservatives - who have long said they wish to make changes to the Senate - said the institution "must be reformed or ... vanish".

(Additional reporting by Alastair Sharp in Toronto; Editing by Jeffrey Hodgson and Eric Walsh)

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