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Oil Report

Canada's Trudeau plans sweeping social welfare reform, sources say

OTTAWA, Aug 19 (Reuters) - Canadian Prime Minister Justin Trudeau is weighing sweeping changes to the country’s social welfare system and a series of economic measures that will align Canada with ambitious climate goals, according to people familiar with the matter.

The economic recovery plan to bolster the social safety net will especially help those hurt most by the pandemic and come after Trudeau replaced a fiscally cautious finance minister.

“The prime minister wants to go big,” said a government source, adding that Trudeau, 48, sees the moves as part of his legacy.

Trudeau replaced former Finance Minister Bill Morneau, who resigned on Monday, with close ally Chrystia Freeland on Tuesday. Morneau stepped down amid friction with Trudeau over spending plans, sources told Reuters.

Trudeau said the pandemic had unmasked “fundamental gaps” in society and the country needed a long-term recovery plan that addressed the issues “head on.”

“This is our chance to build a more resilient Canada, a Canada that is healthier and safer, greener and more competitive, a Canada that is more welcoming and more fair,” he said on Tuesday, after the cabinet shuffle.

“This is our moment to change the future for the better.”

Trudeau took office in 2015 and was re-elected last year, with a minority government. The son of former Prime Minister Pierre Trudeau, Trudeau has focused on boosting social programs, raising taxes on the highest earners and stressing the need to fight climate change.

Trudeau said he would seek a confidence vote in parliament over his plan when the body reconvenes in September which, if lost, would trigger a new election.

Canada’s economy has been crippled by the COVID-19 pandemic, and Trudeau’s government has spent billions on support and other measures to alleviate the worst of the pandemic lockdown. But Ottawa has so far not mapped out a sweeping economic strategy.

“The taps are really going to be turned on,” said a fiscally conservative Liberal who is concerned that spending could get out of hand. “That’s the biggest risk....”

Freeland, a former journalist who as foreign minister was Canada’s lead negotiator for a new North American trade deal, on Tuesday said she wanted a restart plan that was green, fair and inclusive.

“She is a social interventionist activist, so she believes in the power of government and also believes in the redirection of funds to those who need it most,” said one Liberal who has worked closely with Freeland. Canada’s budget deficit this fiscal year is forecast to hit C$343.2 billion ($253.4 billion), the largest since World War Two.

Trudeau said the government would not abandon fiscal sense even as it tries to balance economic inequities “because we know government needs to be responsible in building the future.” (Reporting by Steve Scherer and David Ljunggren, with additional reporting by Kelsey Johnson; Editing by Cynthia Osterman)

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